Inside brand-agency relationships with more account reviews expected in 2024

Relationships in the ad business are everything—and will be more important than ever this year. The widespread agency layoffs, restructurings and leadership shuffles, as well as high chief marketing officer turnover and staff cuts on the brand side that occurred last year, are all signals that more accounts will shake loose in 2024. Industry insiders predict more reviews to come as clients fiercely loyal to the people working on their accounts get fed up with the high turnover at agencies that imperils those jobs. Meanwhile, CMOs jumping to other companies are prone to launching a review, and agencies they’ve successfully worked with in the past often have an upper hand in winning their business. Super Bowl commercials Tracking the latest brand and agency plans Enter here A survey from marketing matchmaker Setup last year predicted an influx of agency reviews this year as it found a rising number of brands are unhappy with their current roster of shops. One former holding company agency executive who was recently let go as part of a restructuring said a client took its business from the agency after her departure. The executive said she was a key part of the client’s team and one of a string of departures on that account. A second person at the agency confirmed this move to Ad Age (both executives spoke on condition of anonymity out of fear of retribution). “I was the straw that broke the camel’s back, after a series of some folks left on their own,” the former holding company agency executive said. “Client’s tolerance for change has become a lot less than it used to be; they can’t afford it.” Marketing-side changes can bring just as much uncertainty. CMO tenure is only getting shorter as turnover rises. New business executives know to closely watch a CMO who changes companies. New CMOs, trying to prove themselves, will often kick-start an agency review, if not necessarily to change the company’s agency roster, but to at least make sure everything is working as well as it could be. “Oftentimes when a new CMO comes aboard, quick wins need to happen. It’s a launch, it’s a turnaround,” said Kerri Martin, who is currently the co-founder of Austin, Texas interior design firm Heartbeat Design ATX and a former marketing executive for brands including The Clorox Co., BMW’s Mini and Volkswagen of America. Martin said new marketing leaders need to know they have the right capabilities and agency team in place when they come aboard to handle such overhauls. Agency-side shakeups People are shuffling around so much right now on the agency side, whether it’s because of layoffs, rebrands or just the typical comings and goings. As a result, some marketers are introducing clauses in their contracts to safeguard them against all the change, said one search consultant who spoke on condition of anonymity. The consultant said marketers are saying: “‘Look, your agency churn is maybe 20%; we don’t want the churn on our agency team to be more than 20%. If the agency [account team] flips 30%, then maybe you give penalties,” which can include withholding bonuses, this person said, noting that some clients actually award bonuses to shops that keep their account teams intact. When “account team churn is high, then that often does cause issues that may lead to a pitch,” said Simon Francis, executive chairman of marketing consultancy Flock Associates. “With churn as high as 40% in some agencies, some entire client teams have changed in a year; [sometimes] 100% of the team. For any agency, it is really hard to manage a great service, continuity and deliver great work if an entire team changes.” “We know accounts will move around in the first quarter and industry layoffs might be a big reason,” said Jonathan Schoenberg, executive creative director and partner of TDA Boulder. Check out the latest account moves here The anonymous consultant said he had seen a few accounts go into review when an executive creative director left an agency. But more likely, this person said, a client will put its marketing account in review if there are a lot of changes on the overall team, versus one person. “There’s an acknowledgment that to get to great work you need a great team, not just a singular individual,” said adam&eveDDB New York CEO Caroline Winterton. “Although it can be unsettling when great talent leaves, I’ve also seen it create opportunities to unlock new ways of thinking and working that spark higher levels of innovation and creativity. Ultimately change, along with positive new talent and energy, is more likely to fuel business results.” Simone Mandel, founder of new business consultancy NBZ Partner, said the various agency mergers and restructurings that are causing a shuffling of executives are especially resulting in some clients rethinking relationships. “As the holding company agency brands increasingly become diluted by commercially driven mergers, clients know they are buying the specific constellation of talent that exists at the agency at that time versus a well-defined creative vision at the highest level,” Mandel said. “If that chemistry starts to fundamentally shift, the reasons to believe in the partnership will diminish as does the loyalty and will see accounts becoming vulnerable.” Not just top to top It’s not only high-level executive departures agencies need to worry about, Schoenberg said. Ten years ago, TDA Boulder lost an account after taking a key mid-level media person off that particular business, Schoenberg said, declining to name the client. “The client loved her, saw the media spend as the biggest allocation of resources and wanted the person to remain on their business,” Schoenberg said. “The client was neurotic, which did not help, but even after putting much more senior people on the business to show our commitment it did not work. We parted ways six months later and that was a key reason.” That should be concerning for agencies, considering several shops underwent quiet layoffs of mostly mid-level staffers last year. Also read: Why ad agencies are restructuring Schoenberg said TDA Boulder “learned a valuable lesson” from what happened a decade ago and still thinks about it when staffing accounts today. “Clients are loyal to specific people on their businesses who they see as irreplaceable,” Schoenberg said. “People bond in the trenches and folks who are truly on the business day-to-day are often the ones who are most appreciated. Hire junior and mid-level people that clients can take seriously, and they will. As the people at the top of the agency pyramid it is easy to think we are crucial, but we have to realize that a mid-level creative team, or account person managing the day-to-day needs is very possibly going to have a more tangible relationship.” While restructurings and mergers have drummed up a lot more leadership changes at holding company agencies, small shops are also concerned as they kick off the new year. One independent agency owner who spoke on condition of anonymity said “relationships always matter” in the ad business. And while that’s not new, they’re especially critical now—as well as hard to maintain—for small shops like hers because clients are forcing them into project-based contracts versus retainer-based ones. “That means nobody’s gotten married,” the agency owner said. “You’re in a period of protracted dating. Imagine being constantly in the dating period with your partner. You have to keep the relationship super strong. If there is a change in team, you are more vulnerable.” CMO turnover The rise in CMO departures and other changes in the marketing suite are also causing anxiety among agency leaders. “When a CMO leaves, there is always a concern about what’s next for the relationship,” the independent agency owner said. “It absolutely affects accounts.” Some recent examples of CMO changes include: Walgreens CMO Linh Peters was let go last month as part of a round of layoffs at the drugstore chain, only a year and a half after she took up that role; Etsy CMO Ryan Scott also left last month following an 11% reduction in the company’s workforce; Anheuser-Busch InBev U.S. CMO Benoit Garbe recently left the company amid its continued Bud Light sales woes in the wake of the Dylan Mulvaney influencer controversy that began last April; and Verizon recently named former Peloton exec Leslie Berland its new CMO to replace Diego Scotti, who announced his departure last May. When Simon Mouyal became CMO of information security company CyberArk last May, he took his agency, creative shop Colossus, from his previous company (cloud-based health care platform AthenaHealth, where he was CMO) with him. “Account reviews have always been a significant part of the process for new CMOs to assess and re-architect the marketing capabilities required to make their company successful,” Mouyal said, noting that an agency that a CMO has worked with previously has an edge over competitors. “They definitely know you better as a CMO—your style, your preferences, your expectations and your vision for marketing. The key question becomes how the agency team can get your new business and translate it into a distinctive identity and story. Can they get excited about your brand and products the same way they did before? All of that shows during the RFP process. And it’s not only you that [they] have to impress, it's an entire team.” CyberArk didn’t have a previous agency of record and Mouyal launched a review when he landed there, inviting Colossus. The shop had a proven track record, having helped Athenahealth “revitalize the Athenahealth brand,” he said. “Colossus helped the teams to develop a new visual identity and a new campaign showcasing athenahealth's expanded platform for doctors and patients. That campaign was clearly distinctive with a visual expression and tone in tune with the brand,” he said. “It's not the agency, it’s the people at the agency that make a difference and will go above and beyond for you,” Mouyal said. “And as CMO, it’s our responsibility to inspire agency teams to do so as they become an integral part of your extended marketing organization. It’s the account team, but also the experts across all functions—strategy, creative, content, production and media—who become essential to the alchemy between a brand and the agency. Hence, stability on the agency side is critical to keeping that balance.” Back in 2005, when Martin left Mini—where she was the senior director of marketing, head of brand, product and launch marketing for the U.S.—to become CMO of Volkswagen of America, she fired its agency, Arnold Worldwide, and brought on Crispin Porter & Bogusky, a hot shop at the time which she had worked with at her former BMW brand employer. Although VW ended up revising its marketing strategy with Martin leaving after only two years in the role, it’s an example of the type of shakeup that has historically happened when there is new marketing leadership. For Martin at the time, she said she trusted CPB as a true marketing partner, having not only delivered several standout campaigns for Mini such as 2004’s “Always Open” for its convertible but also helping it across all consumer touchpoints including how it showed up in showrooms. CPB ended up delivering campaigns including a series of jarring car-crash ads, “Safety Happens," for VW, which the company said in 2006 helped it generate showroom traffic. “Mini was an incredible success for me; we went from virtually zero awareness to 82% [awareness] in a few years,” Martin said. “[CPB was] truly our brand advocacy partner. They truly helped us make every touchpoint magical. It truly goes to show the agency people are the backbone of the ideas, creativity, institutional knowledge. At the time when we made the switch, Volkswagen was in need of all of those things we did at Mini.” More recently, agencies are not just dealing with having to justify their worth to a new CMO; sometimes they’re having to prove themselves to an entire organization as companies completely shift marketing direction. “Most leadership changes I’ve seen at the CMO level are driven by the company’s CEO, who expects to shake things up,” Mouyal said. “With today’s elevated role for CMOs to drive revenue growth quickly and to help pursue new product categories or markets, there is more pressure to get it right faster—to build the right brand identity or campaign faster.” The CMO role itself is in question right now, the agency owner said. Many companies are hiring chief brand officers, “which is convergence of performance and brand,” over CMOs and, with the new direction, they’re completely rethinking partnerships, the agency owner said. Read more: The rise of agency chief marketing and brand officers “The role of the CMO feels like it is undergoing an evolution, given the importance of data and technology,” said Michael Miraflor, chief brand officer of venture capital firm Hannah Grey, noting how some brands have built more customer experience duties into the job. “There’s an expectation that marketing leadership is fluent in brand, performance, technology (especially with the rise of AI) and digital transformation.” What could benefit agencies are CMOs moving into CEO roles, the independent agency owner said. In the past, the typical CEO had a background in operations, but now companies are hiring executives with marketing backgrounds to take the helm, this person said. Some examples of that include Tesco CEO Ken Murphy, who used to be chief commercial officer and president of global brands of Walgreens Boots Alliance, and Kristin Lemkau, CEO of J.P. Morgan Wealth Management, who was CMO of JPMorgan Chase. TDA Boulder’s Schoenberg said he’s seen some of this as well. “CMO turnover is partly because CMOs are becoming CEOs at their companies, which is good for agencies,” he said. At any rate, “in our experience, new CMOs give the current agency a chance. Often the agency knows as much, historically, and currently, as the marketing department. We had a major CPG account where the [client’s] team moved off to another brand every 11 months, so we were always onboarding the new team,” Schoenberg said. Of course, “six months into the year the agencies that are not meeting a new CMO’s expectations will likely see a review,” he said. Agencies that will be in a better position to retain—or grow—business on an account when a CMO shift does happen are those that have deeper relationships with the company that extend through to the top of the organization. General Motors Corp., for example, is conducting an audit of its media operations, currently housed at Dentsu’s Carat, and its creative agencies, IPG’s Commonwealth McCann and Publicis’ Leo Burnett, with the help of Medialink. While there is currently no agency review, industry watchers are betting that Publicis will have a leg up if that does happen, given a history of relationships throughout the French agency up to and including Chairman-CEO Arthur Sadoun. GM’s new Senior VP and CMO Norm de Greve came from CVS, which worked with Publicis on creative and CRM. SnapPoint, the marketing consultancy tasked with examining the automaker’s creative agencies, is headed by Tony Weisman, a former Dunkin’ CMO who named Publicis media agency on the account during his tenure. Weisman is also a former Burnett and Digitas LBi executive. And it goes the other way around: The anonymous pitch consultant said the CEOs of major advertisers know their agencies, at least in North America. This person said relationships between CEOs and agencies are sometimes just as close as they are between CMOs and agencies. “If it’s a high advertising business, Mars or Unilever or Ford, you have a close relationship,” the consultant said. Check out the latest Ad Age events and award programs Making new relationships Some say that holding company executives typically have closer relationships with CMOs, compared to other competitive organizations, such as consultancies, which start their partnerships off at the CEO level. That could ultimately hurt holding companies in 2024, according to Hannah Grey’s Miralflor. “Big losers out of this industry CMO reckoning might be agency holdcos, whose relationships are at the CMO level,” he said in a tweet. “With marketing being distributed to other Board-level C-suite, big consultancies w/ marketing services and ad buying arms have an advantage. Or not. $$$ chess game.” Big losers out of this industry CMO reckoning might be agency holdcos, whose relationships are at the CMO level.With marketing being distributed to other Board-level C-suite, big consultancies w/ marketing services and ad buying arms have an advantage.Or not. $$$ chess game.— Michael J. Miraflor (@michaelmiraflor) December 20, 2023 In an interview, Miraflor told Ad Age that with the growing importance technology is playing within companies, chief information and tech officers are increasingly gaining prominence and agencies need to establish relationships with them. “It’s more important than ever for senior agency leadership to establish connectivity and develop relationships with decision-makers across client C-suites, especially as the role of marketing during these macro economic conditions emphasizes budget accountability and the bottom line,” he said.

Inside brand-agency relationships with more account reviews expected in 2024

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