Let’s get serious about alternate ways to get paid, try to figure out what fair looks like and identify all the ways in which the financial health of both clients and agencies are inextricably linked.
Agencies should invest in their own data and analytics to help clients correlate soft metrics like brand likability to hard outcomes like sales and market share. Clients should experiment with variations on their media mix in the real world, a range of brand-versus-promotion scenarios to see which formula optimizes growth market-by-market. That kind of real-time intelligence will not come from pre-testing—the nemesis to creativity—because truly actionable insights are a combination of common sense and in-market observations.
Trust your gut and open your eyes.
For agencies, the post–holding company business model has always been a leaky bucket. Rather than act—and charge—like the creative consultants they are, agencies fall into the client-service trap of charging for billable hours. Why did no one ever realize that charging for hours is a backwards incentive that hurts both agencies and clients? An agency that puts more senior (expensive) talent on a problem and cracks it quickly is disincentivized from working faster and smarter. From a financial point of view, far better to fire your senior talent to lower overhead than have junior talent take longer to solve a problem by adding more research, process, meetings and PowerPoint to every stage of campaign development to extend the scope and squeeze more hourly dollars from unsuspecting clients.
Pretty soon the agency looks like a funhouse mirror image of its clients, rather than what it was meant to be—an island of misfit toys where magic happens.
Agencies can do two things to right the ship before we all drown.
The first is to stop keeping timesheets. Instead, charge your client a set percentage of their overall budget, say 10%, and call it fees for creative consulting services. How you work is up to you, the modern equivalent of charging media commission, which worked fantastically well for decades as 15% of media spend. It’s no coincidence that during those years agency-client relationships lasted decades, not months, everyone made more money on both sides of the fence and campaigns were consistently stronger creatively.
The second critical move is to own your intellectual property. If an agency develops a campaign, design system or tagline, they own it, period, and a client pays for its usage. If a client moves their business to another agency, they pay a royalty on the use of any IP carried forward. This is the Hollywood model, yet for some reason advertising agencies lack the confidence to go there. You think James Cameron doesn’t get paid every time someone makes another “Terminator” movie, with or without him? You bet he does.
Unless we’re all—clients and agencies alike—healthy financially, the marketing industry as a whole will continue to struggle. We all know marketing is an investment and not an expense, just as we know a killer brand idea can change the fortune of an entire company. That kind of creativity should be worth a lot more than it costs today.
Let’s see if adding value to both sides of the equation makes the math work for a change.
What have we got to lose? From where I sit, that sounds like a lot more fun than begging for change.