The Jaffe Report: Highlights About Agencies and Brands

July/August 2003 | Archive

Ballester Report Documents Widespread Client Dissatisfaction with Agencies

A Ballester executive the results of a recent study of 273 top U.S. advertisers with the AAAA New Business Summit in New York in June. The results are disquieting, to say the least.

Highlights:

- 39% feel their agencies are missing expectations. “Still not enough focus paid to the brand,” says one client.
- Those who recently put their account for review were asked for a reason. 40% said they outgrew their agency or the “thrill was gone.” 26% reported “general dissatisfaction.”
- A solid majority [70%] said they conducted their own recent review without the aid of a consultant.
- Of those who ordered a formal review, only 20% retained the incumbent.

Some recommendations from respondents:

- “Demonstrate how you can move my business….Show me that you have looked at and understood my business.”
- “Agencies should bring consumer insights [to the pitch]. [Demonstrate] experience and preparation.”

Note well: 60% of respondents thought a 10%-15% profit margin was reasonable. Another 22% said it could go as high as 20%. And 5% thought it was reasonable for its agency to make more than a 20% margin. So you can see that, despite all the teeth-gnashing by agencies about fees, all but a handful of clients regard their agencies as for-profit enterprises and want to see them prosper.

Final note: a majority (57%) did not think it important that its advertising agency offer fully integrated services. Said one: “I am not a believer in one-stop shopping. I want (my) agency to be able to create a core idea and I will have other agencies use it and do what they do best.” For more information, visit www.ballester-consulting.com or call 646-282-0045.

Another Survey Shows Even Worse Client Dissatisfaction

It gets worse. A poll conducted by Continental Consulting Group in Stamford, Connecticut, in March-April and reported in Adweek shows 81% of clients think their agency is overpaid and its people stretched too thin; 78% feel the agency’s services have deteriorated in the last year; and 71% are plainly dissatisfied with their agency’s performance.

What is going on here?

- It’s normal for clients to express some dissatisfaction with their agency –- because the road to producing great marketing is a twisted one, especially in a time of great expectations and narrowing budgets.

- Agencies could be doing more to delineate strains and to improve their own ratings. There should be a serious “audit” once a year – and I’m not talking about a compensation negotiation. Even if the agency is not paid a performance bonus, which mandates such an audit, agencies should pressure clients to honestly rate them and then address stress points.

- If the irritation persists, it may be helpful to seek the services of an outside counselor. An objective, insightful, experienced third party can often help the parties negotiate their way to a better place.

- Clients will seldom tell you straight out what’s wrong with your people or your work. No one likes confrontation. But they send signals all the time, which often the agencies can’t hear. Separately, if your client is piling on so many new projects the original fee is stretched too thin, then speak up.

- Money isn’t a five letter swear word. But you don’t want your hand out every quarter. Find ways to tell clients that they are asking for more than was originally budgeted – without making it seem that you aren’t flexible or eager to help.

- Most of the clients I know are intimidated by the creative process. They ask me, “What can I do to get better work out of my agency” The obvious answer is to “just ask for it.” But incredibly many clients are shy about doing that – and are afraid of angering creatives or losing their enthusiasm. Encouraging clients to talk about their general feelings about the work need not cross over into giving clients the right to art direct ads or write the copy. Make it clear you want topline signals not micromanagement.

- Both sides need to find ways to talk candidly to one another without leaving such deep wounds the relationship unravels. Managing these relationships is an art – but it’s learnable and doable. So if you are frustrated, get help from an objective, qualified, third party.

Now Here’s the Only Time a Sometime Search Consultant Will Give You A Straight Answer

I just finished moderating a panel for the AAAA’s New Business Summit in New York. Some complained that speakers hedged their answers. So let me take a crack at providing more candid responses to some of the yellow cards left over from my session.

Q1. If I have a reason to be put on the list after publication of a search in the trades, does it hurt my chances to call?

A1. My mission in a search is to assemble the right universe for my client to consider. So sure, I take the call, and if a pitch from an un-included agency makes sense, I send them a RFP. In fact in one recent pitch, the agency that called was not only added – but, in the end, prevailed. The problem is that by the time the trades catch wind of a pitch, it usually has moved from the RFP to the shortlist. In that case, it’s very awkward to add a new name to the list.

Q2. You’ve talked a lot about what agencies make or “should” make – what does a search consultant make on a pitch?

A2. The going rate, according to my sense of the industry, is from $25,000 to $75,000 per search. The difficulty in being precise is that when most clients first approach a search consultant, things are all out of whack. The client is not only angry with the agency, management has lost confidence in the power of advertising. And on the agency side, there are complaints about the client’s failure to give clear direction and ante up reasonable fees for the services demanded. So the search consultant’s first job is to do a “needs assessment” and determine what caused the relationship to go off the rails. Sometimes that can be done in a day – sometime it may take a couple of weeks. So helping the client to define the kind of agency it seeks and what it wants the advertising to accomplish may be more time-consuming than first realized. Other issues affecting the cost of the pitch include whether the client wishes to make agency visits alone or in the company of the consultant, what kind of test assignment will be given, how many meetings are necessary leading up to a final decision, and whether the client wants the consultant to help negotiate compensation issues.

Q3. Fully 2/3rds of the agencies represented [at the 4As meeting] are small to mid-size. What are they doing better than the big guys?

A3. The advantage of going to a smaller agency usually involves speed, cost and sometimes knowledge of a local or niche market segment. Agencies can specialize in regions, or niches in ways that sometimes the big networks can’t equal. And they always bring plenty of enthusiasm to the process. A big agency can bring more different disciplines and points of the compass to bear on a problem. And usually can make connections for the client with other partners way beyond what smaller agencies can do. As for creative, that to my way of thinking, does not depend so much on size as to the quality of the teams working on the problem and the culture of the agency.

Q4. Can agencies really be expected to deliver a highly customized RFP reply with over 20 questions in only five business days?

A4. Probably not. But life is not fair. Sometimes the client is pressuring us to get going. Hence the short deadline.

Q5. Why would you jeopardize your reputation by representing a client that prevented the agency from having a face-to-face contact with the client prior to the Big Day?

A5. Well I wouldn’t. But I have had clients who didn’t want, partly for reasons of time, to give competing agencies access to their whole management structure. As long as clients don’t give one agency more access than another, at least they are creating a level playing field. All pitches are somewhat artificial. All you should demand is that the rules be fairly enforced and that you get enough access and information to answer the assignment intelligently.

Q6. We’ve heard you [panelists] say that agencies shouldn’t talk about themselves when talking to perspective clients. Isn’t talking about ourselves relevant when “pitching” a consultant?

A6. There is talk and there is talk. What I think consultants mean when they warn agencies to leave some of their credentials time to listening to and “interacting” with the client is that it is important to try to get the client to reveal what kind of agency they want and what they need from the advertising right now. Clients will give you 90% of the insights you need to do well in the pitch – if you can get them talking. And in a pitch you should be talking to the client, not the consultant. But otherwise, many consultants do welcome the opportunity to get to know agencies better and they often make visits and ask for credentials presentations. In that case, there is really no other agenda for the consultant than to hear the agency show off its wares – and there’s no reason to hold back “talking.”

Q7. What’s the best way for smaller agencies [under $50 million] to get on your radar screen? How often are agencies of this size relevant to your business?

A7. In general, consultants like to be hired by clients with budgets over $10 million – because smaller clients usually can’t afford our fees. In that case, clients with larger budgets generally don’t want to see any agency smaller than $50 million – unless its people have specific experience and credentials that make the agency competitive despite its small size. But sometimes the assignment is reversed. I recently was asked by a global Fortune 100 client to find a “creative boutique” in the U.S. that was smaller than $50 million for a specific assignment that required special abilities not normally found in the major networks. Anyway the best way for an agency to get on my screen is to [a] do great work that gets noticed; and [b] develop special credentials for doing work in certain fields or regions that make them stand out regardless of size.

Q8. As integrated pitches have become more valued by clients, do you actively encourage the pairing of above- and below-the-line shops?

A8. I urge clients to separate pitches to be sure they are getting “best of class.” The usual practice is to select the advertising agency, and if it is a networked firm, take a look at its below-the-line cousins before making a commitment. But the trend is to separate accounts in order to maintain high standards and reasonable fees.

Q9. You say agencies are a sea of sameness and need to differentiate. How can agencies differentiate themselves from competitors?

A9. This question needs a much fuller answer than I can address in this session. Suffice it to say, that to search consultants like myself, every agency is unique. If you don’t see your agency that way –- with a clearly defined set strengths and weaknesses, a special capabilities and a unique culture –- then you probably need a new mirror. The problem is that agencies like to hide their eccentricities. They’re always afraid that by emphasizing their special abilities, they will run off a good piece of business. Agencies should hire a psychiatrist to help them with this identity crisis.

Have a good summer. Watch this space for a new Jaffe Report in September.