Arthur Fleischmann, Group CEO and Country Manager for WPP, has the experience of launching and growing his successful agency and managing one of Canada’s major holding company groups.
In the past two decades, we heard reports CMO tenure is getting shorter, some reporting it at less than two years on average, and agency tenure is headed the same way.
But not just the duration of these relationships is taking a toll. It is also the way they are defined. Reports of the demise of the CMO are as common as the demise of the AoR, with more advertisers moving to project-based commercial arrangements.
But what has been driving these trends, and what is the impact and cost to the agencies and their clients?
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Unfortunately, it happens right at that end, and there’s nothing you can say, when you’re under the gun like that in a defensive pitch, that’s going to be pleasing to a client.
Transcription:
Darren:
Hi, I’m Darren Woolley, Founder and CEO of Trinity P3 Marketing Management Consultancy, and welcome to Managing Marketing, a weekly podcast where we discuss the issues and opportunities facing marketing, media, and advertising with industry thought leaders and practitioners.
Now, if you think the pace of life is getting faster, then spare a thought for everyone working in marketing, media, and advertising.
In the past two decades, all we hear is reports that CMO tenure is getting shorter and shorter. With some reporting that it’s now less than two years on average, and that agency tenure has headed the same way. But it’s not just the duration of these relationships that’s taking a toll, it’s also the way they are defined.
Reports of the demise of the CMO are as common as the demise of the AOR, the agency of record, with more advertisers moving to project-based commercial arrangements. But what’s been driving these trends and what is the impact and cost to the agencies and their clients?
My guest today has experience of not just launching and growing his own successful agency, but also managing one of the major holding company groups here in Canada. Please welcome to Managing Marketing, Arthur Fleischmann, Group CEO and Country Manager of WPP.
Welcome, Arthur.
Arthur:
Hey, thanks Darren, thanks for having me.
Darren:
I was looking at our careers and there’s some parallels in that we’ve both been working in advertising for a number of decades. But particularly in the last two decades, would you agree that we’ve faced probably the biggest changes that we’ve ever seen?
Arthur:
Yeah, for sure. I mean, I started on the client side but I’m not going to tell you exactly what year, and then switched to the agency side when I moved to Canada. And the business is entirely different today. I wouldn’t even describe what I do short of the kind of client service piece as being consistent with what I did 20 years ago.
Darren:
And during that time, what would you put if you could, put your finger on as one of the major drivers of the change?
Arthur:
Wow, in a lot of ways, I think we talk about the economy and change in skill sets. But I think probably the most dramatic is the change in technology that has fragmented and fractured the media verse, the number of options.
When I started in the business, my first client was a large confectionary company. And if we did a TV ad once a year and a few billboards and took the client out for a beer, that was a big day. Was sort of it, everything was measured in GRPs, reach and frequency.
Today, communications plan alone can have a hundred items on it by the time you get through all the CRM and social, and there’s still mass media and so forth. So, all of that fragmentation has dramatically changed the job of communications of people.
Darren:
Look, I think the complexity that technologies brought — they often say that technology makes life easier, I think it’s made it a lot more complex because there’s now more channels than ever before, or competing with each other for a share of a marketing budget that’s largely stayed the same over the last few decades, or in some cases, shrunk in real terms.
Arthur:
It shrinks. Yeah, no, for sure, it has shrunk. And we went through for a little while the understanding or the belief that you could have a matching luggage-type communication campaign. We’ll go off, we’ll shoot a 30-second spot, we’ll cut it a hundred ways, and we’ll just plop it everywhere.
But we’re more sophisticated now. So, we know that one piece of film is not the be all and end all. So, there’s no way production budgets can go down and yet they have, so it creates tremendous pressure on the marketer and the agency.
Darren:
Well, we’ve been tracking outputs or deliverables. And back in 2005, the average brand was producing around 200 to 250 pieces of work in all the forms per year.
In 2019, which was the last time we got a good set of data, it was two and a half thousand to 3000 pieces of work. And all of this was being driven by social media and digital platforms, which consume a huge amount of content.
Arthur:
And have you seen what average production budgets are? Because I can tell you from my experience, and I’ve worked with a lot of large Canadian manufacturers, beer and bank and retail; our production budgets have not gone up tenfold.
Darren:
And one of the reasons for that is this obsession people seem to have with the idea of working a non-working expenditure with media being working and production somehow being non-working, which is ridiculous.
Arthur:
I don’t know who made that up, but I’d like to slap them.
Darren:
Well, and in fact, I was having a conversation with let’s say, one of the big consulting firms that was working for a client. They were trying to introduce zero-based budgeting, and one of the things that they were working on was this idea of working a non-working expenditure.
And I said, “Well, how does that work for owned media?” And they go, “Well, what, or shared media or earned media?” And they looked at me and I said, “Well, none of those have significant media budgets, it’s all content, and it’s all incredibly valuable.” So, it’s completely out of whack.
Arthur:
Well, and if we look even in the entertainment and film world, if production costs were the sole driver, how would we have ever had matrix or avatar? Could a storyboard just be shown to people in a cinema, and they would’ve gotten equal enjoyment out of that? Of course not.
So, I don’t think of the production as a non-working piece, of course, it depends on what we’re talking about here. If we’re talking about end of funnel digital print, so to speak, sure, that can be simple and inexpensive.
But if we’re talking about trying to create some sort of differentiation for your brand and some sort of attraction for the brand, how is it that the quality of the output shouldn’t be considered a working investment?
Darren:
Exactly, because it’s not just technology making the channels more complex, consumers have now got a higher expectation than ever before because they’re being bombarded with large amounts of content that is of very high-quality.
Arthur:
Agreed, agreed. I mean, I’ve seen some recent statistics of TikTok, and I won’t admit to you what my personal TikTok habits are, but I probably watch it more than one would think given my age. But I do understand that it’s about 90 minutes, I think it could be up to 90 minutes a day.
And I think I heard that over 30% of the TikTok audience is now over 35, which means there’s a lot of stuff on there that’s keeping our attention. And I think part of that is technology, you can do a heck of a lot with an iPhone now.
So, the quality’s gotten better, we’re accustomed to seeing a lot more, a lot quicker, and that also puts a ton of pressure on brands.
Darren:
So, there’s all these pressures, and yet we’re seeing the turn — and the reason for the conversation is we’re seeing this turnover of particularly, well, let’s start with CMOs. Because I think the last one I read was one of those big recruitment companies was saying CMOs were turning over every 22 months. And yet I know CMOs that have been in their jobs for three or four years, so clearly this is a range.
Arthur:
And some for too long actually.
Darren:
Well, this is a range, and they’re picking some sort of midpoint or average, let’s hope. But we have seen CMOs not having the same tenure or longevity that perhaps CEOs and CFOs have in organizations.
Arthur:
Yeah, I understand that the CMO is one of the shortest tenures in the C-suite. And I did a little digging on this when I knew that you were going to put me in the hot seat, and I didn’t want to look like a complete fool.
And I looked at a couple of different sources of data, and what I saw was that the CMO tenure, which as you say, two to three years, is roughly the length of a client agency relationship, which is now down to about two to three years. It used to be about seven years when I got into the business.
And it’s also roughly the same number of years the average executive stays at an ad agency. So, all three data points line up to about three years. I don’t know what the magic is, I don’t know if it’s restlessness, and we can chat a bit about that. But what is it about this three-year itch that’s happening across all three parts of the relationship.
Darren:
The three-year itch? And it’d be interesting if you could actually determine cause and effect here. Because I know people say to me all the time, every time the CMO changes, they say, “The new one seems to change agencies.”
And while that can be common occasionally, I don’t think as a general rule, every CMO that comes into the role immediately pitches their agencies.
Arthur:
It actually has not been my experience, thank God. In truth the agencies that I’ve been responsible for have been through — I can think of two or three cases where we went through four CEOs, three or four CMOs. We actually had more tenure on the brand than almost anybody in the marketing function.
So, I don’t think it’s necessarily true that a CMO goes, and the agency will go especially if the agency has done a good job demonstrating value across the chain. The CMO will come in if they are that truly relationship-based, I hate to say it but shame on them.
But a good CMO will come in and try to figure out what’s working. A good leader will try to come in and figure out what’s working, what’s not working, so they don’t throw the baby out with the bath water. And if an agency has done a good job building a deep bench with a client, they shouldn’t really be at the whim of one person’s career change.
Darren:
And look, I have a theory that it’s actually been caused by procurement. Do you want me to share it with you?
Arthur:
I’d like to hear that, are we bashing procurement?
Darren:
No, I think they’re being put in a position where they need to prove their value. And one of the things that they’ve latched onto is this idea that at the end of every contract period. Now, contracts are typically two to three years with a couple of years extension. So, they could be between two years and five years.
But as soon as you get to the end of a contract, procurement will mandate, or the company will mandate that you need to go to market again with a competitive tender. And people would say, “Well, that’s fine, because it’s an opportunity to actually make sure that you’ve got the best agency in the marketplace,” which would be fine if it was actually fair.
And we looked at the data available, and that’s through COMvergence and RECMA and the other sources of pitch results, including I have to listen more’s pitch report each year. But what we found is the incumbent has a one in four chance of actually retaining the business in a competitive tender.
But what we found was it’s because first of all, the incumbent’s up against a few obstacles. One is they have to maintain the business while they’re pitching. Secondly, they know the client and they know the limitations because they’ve been working on the business. And thirdly, the client’s going to market where agencies can offer something new and different and fresh.
Arthur:
The shiny bobble. No, the incumbent position is unenviable. Not had the one in four chance, but that helps support my notion that if you’re in this situation and you’re defending, generally speaking, I won’t do it.
And one of two things happens, either the client says, “We saw something that was new, fresh, and different, why don’t you bring it?” And it’s like one of those awful questions like, “Have you stopped beating your dog?” You can’t answer that. Like, “Why didn’t I bring it?” Either I don’t have it, I don’t have that new technology, I don’t have that skill set. Or I have it, and I held out on you, and I never brought it to you.
So, you’re in this unenviable position. And I think as you would probably know, the more interesting work happens a little further up the funnel, if you’ve got good conversation with the client, and the client early on says, “Hey, agency president, I’m feeling like the team and strategy isn’t bringing us the latest and greatest of this, what do you think?”
And you work through it together long before you get to the divorce court. I think it’s much less disruptive for the client relationship, it’s certainly obviously much less disruptive for the agency. But unfortunately, it happens right at that end, and there’s nothing you can say when you’re under the gun like that in a defensive pitch that’s going to be pleasing to a client.
Darren:
Well, I’ve even heard of and encountered situations where the incumbent was doing an incredible job, but it was mandated that they would go to pitch.
And what I mean by that is the agency said, “Well, our TRR scores were in the nines,” effectively, like a net promoter, they’re getting nine. But they were still taken to tender because it was mandated that that was the process that would have to be undertaken.
Arthur:
So, can I interrupt you? Can I ask, and maybe you can’t say this, but I’ve always sensed that procurement’s job, like a good finance partner, is to help the client get great value out of whatever they are procuring.
I never really believed that procurement made the decision that a client is going to go with this agency or that, I always believed that the buyer of the product, the marketing team largely or the CEO, would come in and see the value of the team, the value of the relationship, feel the chemistry.
They would then turn to procurement and say, “I want to work with Acme Advertising, help me get the best value in this relationship.” And I support that the way I would do it in my personal life. But I would never have a third-party financial partner make all my decisions for me. I would never go to a financial partner and say, “Pick a house for me, or pick a spouse for me.”
Darren:
Yeah, you’re absolutely right on one level, which is that the marketers will invariably choose the agency they prefer to work with. And marketers will go into a tender if they’ve got a good relationship with their incumbent, and think that the incumbent should be the best because they know them better than anyone else. But invariably, you’re attracted to the shiny new thing.
So, they then say to procurement, “Well, here’s the agency we prefer to work with, the shiny new thing.” Now, you’ve got to remember, many in procurement have to prove their value. And their value is measured on how much they can reduce the cost of any particular service.
So, shiny new things says, “Well, we’re the shiny new thing, and we want to charge 120% of what you were paying.” So, procurement tried to negotiate with them, and they go to the incumbent and the incumbent’s realizing that they’re now on a slippery slope out of there might say, “Well, we’ll do it for 20% less than we used to do it as a way of just wanting to keep the business.”
Now, procurement can play 80% off 120 and get shiny new thing down under what was paid-
Darren:
To a hundred.
Arthur:
Yeah, a hundred or even less. And this is the danger because first of all, shiny new thing may have proposed a whole lot of things that the incumbent hadn’t offered previously, and then not be able to deliver them because the pricing actually meant that they would have resources to be able to do that.
Arthur:
That they won’t now.
Darren:
Just to pick up on that, before when you said, as the incumbent, the most frustrating part I’ve seen is where the incumbent says, “Well, we actually did offer that to you, but you rejected it flat.”
Arthur:
Because you didn’t want to pay for that.
Darren:
Yeah, or you didn’t want to pay it, or you didn’t want it, or you didn’t think it could be integrated, but now, you’re telling us that, “But yes, now we want it for free and at a discount.”
Arthur:
At a discount, yeah, it’s interesting. And I know this isn’t all that you wanted to talk about today, but I have heard that agencies will often undercut themselves long before they have to. I mean, they get into this situation, and they think this decision is going to be made solely on price, so they just start dropping their price even before they need to.
All of this though, does come back to the question you wanted to talk about, which was the more transient nature of relationships. And I don’t think the industry has done itself any favors by doing what we just talked about, undercutting prices. And I don’t think procurement has done the industry any favors by the 120/80 rule you just talked about.
Because if we can’t pay our people well, and believe me, those in advertising, maybe there was some reputation that we’re extraordinarily well-paid. I mean, I live in this colossal mansion where my office is my dining room table at the moment.
We’re well paid, but there are much higher paying industries. So, I don’t think that agencies make an inordinate profit margin.
Darren:
Well, particularly …
Arthur:
Salaries are enormous. And I think that does put a lot of pressure particularly on younger people who say, “If I’m going to work killer hours, you’re either going to pay me incredibly well, or I’m not going to get paid that great. And I’m going to have some flexibility and I’m going to travel, or I’m going to do whatever the heck I want.”
And I think that all of this is related. I do believe that everything — we could talk for hours because pricing and what agencies get compensated is absolutely directly related to the tenure and the ability to keep staff, train staff, promote staff, give them a career path.
If you can’t give them a career path and you can’t add value to their professional life, they will leave. And now, we’re back into the cycle of chicken and egg. Did the client get dissatisfied because the staff turned over? Did the staff turnover because the client was … it doesn’t really matter which it is chicken or egg, it’s just the paradox.
Darren:
Yeah, it just happened. The problem is the outcome is still the same no matter what the cause and effect.
Arthur:
That’s it. So, I think that is one of the things, I think that the tenure of relationships has dropped because — so money, I think is one of the reasons there’s a lot of pressure on budgets.
So, clients are saying, “Well, do I really want to have a retainer with this flat fee every month when one month I may not need a lot of service, and one month I may need service. And I’m not really quite sure because the economy is up and down, and I don’t know what I’m doing with that AI thing and this new technology.”
So, they don’t want to necessarily make these big annual monthly AOR commitments. But again, I think this somewhat exacerbates the problem because the funny thing about staff is they like to get paid every month.
And so, it’s not like a machine that you can turn up, turn down. I started my career in the client side making cereal, and literally you could let the cocoa pebbles machine run a little extra longer, if demand was higher and we could make more boxes.
The problem is, if all the client briefs come in in February, and nothing comes in in March, I still have the staff. And not everyone wants to work freelance and gig, and certainly not the most senior people and the most sophisticated people.
I’m not pointing fingers. I think agencies have hurt themselves by allowing their product to become commoditized, by allowing their people to become commoditized.
And I don’t think clients are helping by running it through a procurement model that looks at the denominator of the ROI fraction. The numerator is growth, and the efficiency is the denominator. And if you only look at the denominator, then it’s a race to the bottom.
Darren:
And I also think it’s not just the commitment but also the way that traditionally retainers were positioned, that is actually … to pick up on two points that you’ve shared just now.
The first is that retainers were always people-based. In that you are retaining these individuals, and particularly at the higher levels, the more senior levels, those individuals had names and reputations and careers and clients were often buying into working with those teams.
But then when you had any sort of churn, because whether the person wanted to work on a different account or maybe the spend had dropped, and so you couldn’t sustain them, or the business had grown, and you moved those people. There was always this sense of, “But this is my team, why are they turning over? Why have I got a new account director every six months” was the question.
And then the other question was, “Well, this team’s retained, yes, I get that, but are they doing enough for the money that I’m paying?” So, it wasn’t so much that I’m paying it every month, but am I fully utilizing?
And in actual fact, in almost every case we were asked to benchmark, the client would be over utilizing those resources because the fear of not utilizing them meant that they were giving the agency every single job, including do my PowerPoint presentations for me.
Arthur:
That’s it, and sometimes it’s make-work, was that actually productive work. No, I think that maybe the answer to some of this churn and burn is, it sounds fairly complex, and it probably is in terms of a compensation plan.
I think agencies do need to have some base retainer because we have some base costs that have to be met. And then I think some performance incentive because clients work that way as well.
But I like this idea of a good chunk of the compensation being deliverable-based. So, yes, I know I’m going to need to have a core staff. There needs to be someone to be there when the client calls, someone who is thinking about their business, looking at the competition, that’s not a big team of people. It’s a few smart people and a project manager.
And then when projects ramp up, you’ll pay by deliverables. It’s a little bit hard to quantify a deliverable, but we’re getting better at it. And then some sort of top up for bonus. But the first two are more important frankly than the bonus.
Darren:
Just to change the focus a little bit, I’ve also noticed that agency tenure seems to vary dramatically by category of advertising. And consumer packaged goods companies with their discipline and their planning process often have very long-term relationships.
We see the Unilevers and the Procters of the world having agency tenures of 20 years or even longer. I remember the J. Walter Thompson company having Kraft before it was merged and then spun off with Heinz, but yeah, for 50 or 60 years in some markets.
So, it’s interesting that category where you get other categories, particularly, sometimes financial services, telcos, where there’s a much higher churn of agencies. And I’m wondering whether it’s something about either the demands of those categories or the culture of those categories that’s driving the churn.
Arthur:
That’s really interesting. It could be that or the business need. If there’s within the funnel, short-term or long-term brand building and short-term acquisition, and as those industries that you’re talking about, package goods tend to be very stable.
Like growth, you’re never seeing 10, 20%-year growth in cereal, pasta, and detergent. Those are pretty slow and steady; the deliverables are slow and steady.
In things like banking, automotive, we’re looking at acquisition constantly. And I think maybe that pressure on the CMO to deliver a long-term brand, but more importantly, deliver this week’s results puts a lot of focus on, “Do I have the best available to me to drive this week’s acquisition target retail, kind of the same way.”
I think most retailers didn’t even have AOR relationships. They did a lot of it in-house and brought in partners to help them “fix a problem” or optimize an opportunity.
So, I think maybe it could be a dynamic of the client business. And I think the more that they are affected by technology, the more that they’re affected by getting into new markets, it makes them a little bit more hungry for the new, the next, the never been done.
Darren:
Because it could also be the company culture. Let’s just choose quick service restaurants or fast-food, people call it. But I know the industry likes to call it quick service restaurants.
Arthur:
They do, but it’s fast-food.
Darren:
So, you’ve got the McDonald’s of the world, which pretty much globally has had very strong relationships for many years with DDB and Leo Burnett in different markets. And I think KFC traditionally, had Ogilvy as of long-term partner in many markets.
But then in recent years, even in those categories, we’re starting to see more of this churn happening as this thought about, “I’m looking for something fresh and different, and the only way to achieve that is by changing agencies.”
I’d love to get your perspective on how easy is it for the agency to change when that’s needed rather than changing the agency.
Arthur:
Oh, wow.
Darren:
Look, and I know it’s a tough one, but I’m really interested because I think for me, that is one of the solutions is, have honest conversations with your agency and see if they can change to meet your changing expectations.
Arthur:
And I think some agencies are a lot more agile and nimble and change the services they offer. I mean, I look at some that are within our group that started out with quirky design driven ideas, that was kind of their thing. And today, now, they have car companies, and insurance companies, and their ideas are more platform based all the way down to CRM.
So, I think if you have a visionary leader, I do believe it’s harder in a big global network for them to change. It’s like turning a ship versus a powerboat, it’s certainly doable.
I mean, the way we try to manage that challenge at WPP is if we see a client changing dramatically, I have different levers to pull. In fact, I just got a call this morning, a client who needs some help with more thought leadership type content for an environmental initiative.
The agency that’s working with them doesn’t really have that expertise, and we’re not going to transform them overnight to do that. But I have a group sitting right here that I can just add three people to the table, and we can solve that problem.
So, I think some agencies are more agile and can pivot. I think some agencies have additional resources they can pull in. And I think there are some that will struggle because they do X and that’s what they do best, and it’s very hard to turn that around.
But you asked a pointed question, which is, is it in the culture of the client to be a little bit more promiscuous? And I do think that’s true. I do think you see McDonald’s, which has had longstanding relationships — although didn’t they do a trade out last year or a few years back with Widen.
And so, I think everyone’s under pressure and looking for the new, the next. But no, for sure, P&G has been quite stable for many, many years, so I think there’s cultural things there. And then there are companies that don’t value the retained knowledge and history. It’s always about, “What’s in it for me today?” I don’t really have an opinion on what drives that culture.
Darren:
I guess it varies from company to company, from category to category. Look, most of this conversation, we’ve both realized, entered into it on the basis of thinking that tenure and longevity is actually a benefit. So, let’s just explore that a little bit.
From your perspective — because you can see the benefit for an agency of having a long-term partnership with their client. But what’s the benefits that you see for clients when they actually invest in a long-term productive relationship?
Arthur:
I think it comes in two places. So, one is the one you would expect me to say, and that is, “If you’re trying to build any semblance of brand and brand consistency, a constant churn of staff means every time someone comes on to the business, they’re going to be cooking their first meal.”
Every single time they’re going to be trying to figure out the tone of the brand. “Can I push it here? Can I push it there?” And there’s going to be a lot of missteps. So, that a couple of things, either the brand becomes confused and messy, or the cost go up because it takes three or four swings at bat before you finally connect.
And I think that’s where I see the most difficulty in the variability you get. You bring in teams who don’t really know the company, not just the brand though, but even the process. Like, “Oh, did you realize we have an approval process that works like this?” “Oh crap, no, I didn’t.”
So, that’s going to take an extra four weeks and then how does that work? Or, “Did you know we use this research methodology? Do you understand that methodology?” “Nope, never used it before.” “Did you think about this?” Or the CEO doesn’t like it. And every time, it’s like Groundhog Day.
Darren:
And Arthur, it’s getting worse and worse because there is more, especially legislation, there’s rules that vary, governance, privacy rules, particularly for telco financial services, anywhere where you’re collecting customer data — that agencies have to be aware of, and if they’re not aware of, have to learn really quickly because there’s huge implications for both the advertiser-
Arthur:
Advertising knowledge drives either error in pharmaceutical, we do a lot of work in pharmaceutical, and those mistakes can be lethal in many ways. So, there’s efficiency, there’s consistency of the brand, there’s accuracy and risk.
So, I do believe that bringing fresh thinking onto a client business is critical. But I think there are lots of ways to do that in terms of having a fixed team that’s your retained knowledge, and then rotating through some specialty, getting some new perspectives on things.
I mean, the one thing that’s true about agencies, we are probably one of the most collaborative, creative industries out there and say what you might, we do across teams, bounce ideas off each other.
“Hey, I got a client that’s struggling with this, has anyone worked on anything like that?” “Oh yeah, in fact, we just did a study …” So, we share thinking, we don’t share confidential information of course, but we do share approaches and thinking.
And that kind of thing keeps a client output fresher without having to disrupt everything by changing agencies.
Darren:
It’s interesting that you raised that because one of the other things that’s impacting agency tenure is the rise of the in-house agency. Because you’re basically recruiting people to only work on your business and your brand for a long period of time.
And what they’re not getting is that cross pollination that happens naturally in agencies working across a whole range of clients in different categories, but still, that there’s lessons and learnings that get shared within the agency, correct?
Arthur:
Yeah, and I think the interesting thing about an in-house agency — I do believe in a large corporation in certain industries; banking and retail, there’s absolutely a role for an in-house resource. But a client will never invest in that department the way an agency will because it’s a cost center for them, and it’s a profit center for us.
They’ll never have the latest technology, they’ll never have the best creative people or the best strategists because inherently, we do want multiple challenges for our career to grow. You’ll never go from being a mid-level person at an in-house agency to the CEO of a bank.
So, your career is inherently somewhat limited because the business they’re in is not advertising, the business they’re in is banking. So, I think there’s limits to the capabilities of an in-house agency. And I think clients are starting to see that, which isn’t to say there isn’t value there.
One of our businesses, Hogarth, actually helps set up in-house agencies and arm it with fantastic technology, and create some of that denominator part of ROI, creates the efficiency. But I think that clients who think their in-house agency can guide the broader thinking, I haven’t actually seen it yet.
Darren:
Look, we’re big supporters of clients, if they have the volume of work. Actually, bringing in an external agency to build and manage their in-house agency for a number of reasons.
One is you don’t have the headcount. Secondly, the actual savings that people report are actually overstated because often, there’s many costs associated with building your own in-house agency such as exiting people when you need to.
And thirdly, choosing the right partner to bring that agency in-house means that they’ll also design it so you get a rotation of people so that you’re not giving up that …
Arthur:
You don’t get the burnout.
Darren:
Yeah, not getting burnout, but also, still getting that freshness of those people coming through as they work on other clients in the rest of the agency.
Arthur:
Well, we take the headache of the career progression. So, if somebody stays in an in-house agency for two years, they’re either going to quit or they want to be promoted. If they’re placed there by an agency, they could be rotated back to a different role somewhere else and rotated.
And then we haven’t even touched on the technology suite, which as AI rolls out, very few companies will be able to invest in the tech stack for the kinds of generative AI and technology that an agency network would be able to.
Darren:
Yes, but they’ll just get it from your friends at Google and Meta, they’ll happily hand over the technology they need. No, I’m just joking.
So, I want to share with you my perspective, talking to clients that are inclined to change their agencies regularly. They will say to me, “Yes, we just need a whole new fresh approach, we’re very unhappy. The agency doesn’t seem to understand that we need a fresh approach. So, we’re going to go to market.”
And one of the things I point out is, first of all, you’ll have between 8 weeks and 12 weeks of disruption as you’re running the pitch. And then you’ll have around six months, which luckily, is called the honeymoon period, so people are inclined to overlook it.
But you’ll have six months of actually needing to invest around 20% more time on every meeting with the agency, because there’ll be a major component where you’ll be upskilling them to understanding your business in the same way and on a superficial level that your incumbent understood your business. And yet, that’s a hidden cost which no one seems to account.
Arthur:
No, that’s right. And what if you invested that time sitting with the agent or client sitting with the agency saying, “We’re going to use the next 12 weeks in a structured, systematic way to get the fresher thinking and work we need.”
“And yes, agency, that might be a little painful for you because we might ask you to make some big changes in staff or what have you. But at least the business continues along, the basics can get done while we’re making this innovation.”
Because once an agency knows they’re losing a business, how do you keep people motivated to work for 90 days? Most of them are looking for their next job. And so, to your point, you got three or four months of subpar work while you’re going through a pitch process, and then you’ve got subpar work while you’re onboarding the next agency.
Darren:
It’s just lucky that when they appoint a new agency, the endorphins are flowing, and everyone’s feeling loved up and nothing …
Arthur:
They didn’t notice.
Darren:
Yeah, but nothing the new agency can do to ruin that even missing a deadline.
Arthur:
Well, you know what’s funny because I’ve seen, and this isn’t sour grapes (although I am prone to devouring sour grapes). I did help one of our agencies unsuccessfully pitch a piece of business, we didn’t get it, it went to another agency.
Their last year of work, I’ve seen it and I am judgmental but in this case, I’m trying to be balanced. I don’t get it, I don’t understand what they got. In fact, I think their old campaign, which was not our agency, it was a completely different network.
That work, was it great? No, but it was a consistent campaign. You knew it, it was clear, they went to this new agency, it’s been a year now this summer. I don’t understand what the brand is, they’ve had a few false starts.
It’s a bit of a mess, I know they’ve spent a fortune in production, and will they get there? Probably, the agency they picked is an excellent agency, but I don’t know what’s happened to the brand over the last 12 months. I won’t believe anything that anyone tells me that it’s great work because it’s not.
Darren:
Well, that’s one of the things that we’re very aware of, is the number of clients that come to us and go, “We’re looking for the best agency in the marketplace.” And I go, “No, you’re looking for the right agency in the marketplace.”
Because not every client is in a position where they can actually get the best work from the best agencies.
Arthur:
That is true.
Darren:
And the number of times we’ve seen pitches not run by us, but where they’ve appointed one of the supposedly hot creative agencies only to then part ways shorter than you expect because it just didn’t work.
And that’s why this whole process is so important to get right. Because losing a year in your marketing program of growing your brand can be catastrophic.
Arthur:
So, what do you think the magic is to a long, happy marriage?
Darren:
Oh, look, and it’s not a secret, it’s open communication and based on mutual respect, clear definitions of roles and responsibilities, and being able to reward the agency for the value perceived or measured that they bring to the relationship.
It’s the same as managing any relationship, if people have their boundaries and are able to talk about what they like, and what they don’t like, what they expect and what’s required to deliver that, then you’re able to flex with the changes and the demands that come along.
Arthur:
So, wouldn’t it be interesting if procurement departments all went to school for therapy and actually became internal therapists? Might they not drive more efficiency, greater numerator and denominator of that ROI because like you do in a relationship, it seldom breaks up because you don’t like your partner’s cooking, it breaks up because of poor communication.
Darren:
You couldn’t tell them that you didn’t like their cooking, so you’re eating bad food every night.
Arthur:
I’m a pescatarian and you’ve been serving me pork for the last year. You just don’t even know who I am. I know I’m getting a little philosophical for a Friday afternoon, but it would be interesting if as much attention was paid to the interrelationships between key people, client and agency, as to the cost-efficiency and the research.
I mean, we spend millions on copy research, and I have never seen it correlate to higher sales.
Darren:
Arthur, that’s a whole separate conversation.
Arthur:
Another day.
Darren:
Yeah, another day. Look, we’ve run out of time, but this has been a fabulous conversation. I’m really grateful to you for making time for having a chat.
Arthur:
It was fun, that was my pleasure.
Darren:
Look, and all the best with continuing to manage the WPP Group in Canada.
Arthur:
Thank you, it’s been a lot of fun, I really appreciate the time.
Darren:
I have one final question for you. We’ve been talking about longevity of relationships; are there any clients that you really wish didn’t hang around that long?