Leah Power is the Executive Vice President of the Institute of Canadian Agencies and the lead in developing the Qualification Based Selection For Agencies. This episode picks up from the conversation with Scott Knox, the President and CEO of the Institute of Canadian Agencies. It explores the solutions for clients wanting a better way to select an advertising agency of any type.
Leah shares how as an agency finance professional, the pitch process was the thing she most wanted to change and how the Qualification Based Selection (QBS) process, used in the USA for the selection of engineering, architecture and other professional infrastructure services, became the basis of the ICAs solution.
We discuss the principles underpinning the QBS process and the pitching myths it addresses and busts in developing a process that works better for agencies and, more importantly, for their clients.
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You don’t send 300 agencies a 30-page RFP that results in a 90-page deck because the team will not read it.
Transcription:
Darren:
Hi, I’m Darren Woolley, founder and CEO of TrinityP3 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.
In our previous episode, we spoke with Scott Knox, the President and CEO of the Institute of Canadian Advertisers. And we discussed many of the innovations that the ICA has brought to the industry around pitch watch and the qualification-based selection process.
But this week we get to talk to, who Scott has told me was the mastermind behind this new approach to selecting agencies, Leah Power. Leah’s, the Executive Vice President at the ICA, has had a deep involvement in developing what I consider probably the best direction that we could take pitching in the future.
So, Leah Power, welcome to Managing Marketing.
Leah:
Thank you. Great to be here.
Darren:
I don’t think I’m overstating this because the pitch process as people are inclined to define it, has been around for at least five decades. And considering the amount of change that’s happened in the industry even in the last two decades, it’s ironic, isn’t it, that we still maintain the same approach of speculative creative, media buying exercises, long RFPs as the way of selecting what is potentially an investment rather than buying a commodity.
Leah:
Right. And I think you hit the nail on the head. They’re talking about investment versus commodity, and I think asking for speculative creative and strategy is like asking to look at a pencil. And that’s fine if you’re buying a pencil. Sure, you want to see that it’s yellow and that it’s a number 10 and that it’s eight inches long and it has an eraser on the end.
But that’s not what you are buying when you buy creative professional services. You’re buying a credence good. And you’re buying someone that you need to collaborate with to get to great work that works.
Darren:
That’s such a great point. I think many marketers forget that the quality of the output of that relationship is as dependent on them as it is on the agency they choose.
Leah:
Exactly. And I can’t tell you how many times I have that conversation with marketing procurement to remind them that not everything needs to end in an RFP, in a pitch situation. That you are often throwing good money after bad, and sometimes you need to fix what is the structure and the environment that your own folks are working in, and the way that they’re working with the agency. Because if the problem exists in the marketing team, it’s just going to be offloaded into the new agency.
Darren:
It immediately brought to mind I quote a friend of mine said. He said, “I’ve been married five times and the problem is, it’s always because I married the wrong woman.” And if he had even a little bit of insight, he’d probably start to realize that perhaps the problem was closer to home than the person he was choosing.
Leah:
There’s a common denominator there, and it’s not the wives.
Darren:
So, it is ironic, isn’t it, that here you’ve got a business function, marketing, which is funded as a cost of business because it’s given a budget, a very specific budget to spend and then goes through a procurement process that is largely cost-based.
Leah:
Exactly. And I think that oftentimes procurement through no fault of their own, I mean, I take a view that procurement is just not taught how to source creative professional services. It’s just not something that they’re ever taught.
Darren:
It’s very specialist.
Leah:
It is very specialist. And it is an investment, but it’s more than an investment. It’s even more than that.
Darren:
It is, but the procurement process, because when we work, many procurement people say to me their performance is measured on how much they reduce the price.
Leah:
Exactly. That cost savings. And I understand that, and I get it, but I always push back on that and say, is cost savings the only thing? Is it so specific to cost savings? Because aren’t you working with your CMO, and you’re supposed to be helping them? Guess what they have? They have a growth mandate.
And I think that wanting things to be efficient, listen, my background is finance and operations, so I totally understand where a procurement person’s coming from. I understand where the CFO’s coming from, but only if it works to help with that growth mandate. And that’s where that investment is. You’re not just trying to get ROI; you’re trying to get into the hearts and minds of people so that they buy your product or service.
Darren:
And the problem with the whole system is that pitching or changing agencies or renewing contracts is the single point in time where you can do the biggest measurable reduction in cost.
Leah:
Of course.
Darren:
Because I’ll often talk to procurement about what we should be doing is eliminating the waste that’s built in me, the reworks and when we are benchmarking an existing relationship and saying to them, “If you weren’t doing an average of 27 versions of the creative before you made decisions, you would have increased speed to market and reduced cost of resource as part of that, and probably come up with better ideas that are more effective.”
But the challenge of process improvement is so much harder, so much more time-consuming that, well, we’ll just run a pitch and see if someone can do it cheaper.
Leah:
It’s very daunting and I think there’s this idea that they forget that the agency is a business, and they need to be a going concern as much for themselves as for you. Your job is to have a healthy supply chain as a procurement person. And you need them to be there the next day and you need them to be healthy.
Darren:
But Leah, I’ve seen, and I’m sure you know, that there are agencies that also seem to forget that they’re a business and that they need cash flow, and they need profitability. Because we’ve seen, because of the construct of the way this is set up and price being such a dominant, even one-dimensional view, agencies will fall into the trap of cutting their own throats-
Leah:
Absolutely, they do.
Darren:
As trying to win the business. Because their mandate is to grow the business, well, growing it without additional profit in some organizations passes as growth. And that also damages the overall industry because if someone’s always willing to do it cheaper, that undermines all of the work we’re doing.
And one of the reasons we use benchmarking is we had a situation where two agencies were 20% above our upper benchmark, and the incumbent came in at 60% below the benchmark because they were trying to win the business through price.
And I had to keep reminding the client that, your whole purpose here was you didn’t want to stay with the incumbent, you only kept them in the process as to string them along, which we disagreed with. But how do we overcome this?
Leah:
I think that’s a really interesting question. And I think it goes to what we are trying to do with QBS. We very intentionally took the tact that this was not a report or a guide or a document for agencies. It is a guide for clients. And it is to specifically help them achieve their objectives. And they want good work that is going to help them with their marketing growth mandate. And they need to find the best agency that can do the things that they need the agency to do for a price that they can afford.
We do not promise through this guide that you’re going to get the lowest-priced agency with the most CAN Awards or Effie Awards. That’s ridiculous. There is a price matching there that has to happen, and you don’t get everything that you want.
And I think that’s the one thing that I would remind agencies, and I try to remind procurement people you can ask for something but it’s incumbent on the agency to say no when it isn’t going to work.
Darren:
I personally, as a pitch consultant, respect an agency when they say no to something.
Leah:
Yeah, absolutely.
Darren:
I can ask the question, and I want them to push back-
Leah:
It’s a free country.
Darren:
Yeah. But I want them to feel that they’re respected in the conversation, that no doesn’t mean I’m not going to do business with you.
Leah:
What kind of relationship is it that gets started if it’s the other person, the other group always thinks that they have to say yes? And I think that is essentially what you brought up a few minutes ago, where agencies will cut costs at any length to their own detriment. But I would say more importantly, to the detriment of the client, because at the end of the day, the agency does have to continue on. They do have to be a going concern.
And so, if you’ve allowed in the … and let’s not mince words here. Agencies often don’t price, they cost. We’re trying to get agencies to price professionally. But if you haven’t allowed the agency to put the requisite number of senior strategy hours and senior creative hours, they’re going to find a way to make that up. Because you were going to take that time, that campaign is going to need those resources. They’re going to figure it out on the back end. And that’s not going to be great for you as a client.
Darren:
And one of the worst things is to go through a process and then six months later having the agency turn up with all the Excel spreadsheets, with all the hour utilizations and it becomes this pointless exercise because it was failed in the first place.
Leah:
It didn’t start from a great place that could be successful.
Darren:
So, let’s call it QBS, which stands for Qualification Based Selection because one of the things I love about it is the principles. Rather than having, here’s a process and here’s how you do QBS. You actually defined principles that would underpin that process. Where was the starting point for the team in developing this?
Leah:
Well, we worked with a really fabulous author of QBS. So, it has been utilized in architecture and engineering and that was really where we found it. This is nothing new, it had already been adopted by, I think it was 47 states in the U.S. Was brought in by a senator named Brooks, a Texan senator. And what they found was that price was determining who was going to build infrastructure projects.
And so, when you think about that. There’s a quote that says, “It’s not the earthquakes that kill people, it’s the building falling on the people that kills them.” So, it’s the poor construction, it’s the engineering and the architecture.
Darren:
So, it’s the risk, it’s the risk profile.
Leah:
It’s the risk profile and it’s those professional services where someone’s doing the proper geology reports, really looking at the engineering that you need for the different areas of the country. And what they realized was that what was happening for public infrastructure was that it was price. So, they said price cannot be a determinant because it was a race to the bottom.
Darren:
The cheapest quote. In fact, I remember Space Shuttle Columbia, they interviewed one of the pilots before it tragically exploded. And they were asked, “How do you feel about this?” And he said, “How do you feel about getting onto an explosive rocket that was built on the lowest possible quote?”
Leah:
Right.
Darren:
The irony of that is tragic.
Leah:
It is tragic.
Darren:
Yeah. This idea of always balancing the risk and price with the worst-case scenario.
Leah:
Exactly. So, when I came to the ICA, I was agency side and finance and operations as I said, for about 20 years. And what always deeply disturbed me was the pitch process, the new business, the way that we approach new business and onboarding clients. And I had always wanted to change that or affect that change.
And so, when I saw that this existed out there, but just needed to be tweaked for our industry, so that a marketer and a procurement person could understand it. And we wanted to write something that was for them, that they could scale, that they could affect themselves, they could use help if they needed it. But it was something that was simple enough principle based so that they could manage the process themselves or at least figure out what was important to them before they slapped the word marketing onto a template and sent it out to 300 agencies.
Darren:
Exactly. And look, even their standard MSA will have things like — because we get them as well, we have to tender to run the pitch. And it’ll say, what are your redundancy programs in case of catastrophe? And I feel like, what? If I lose my computer? That’s how standardized many of these procurement processes are, that they’re not even considering the reality of the service that they buy.
Leah:
Yeah. And I was responsible for filling out a huge portion of RFPs and I would often look at it and think, “They’re not asking me…”
Darren:
You’ve got no idea.
Leah:
I don’t know, I don’t know the answer to this question. It’s not related to my business. It’s not related to this industry, and it’s not related to what it is that you’re ultimately going to be selling. So, it’s very templated.
And certain things were being done in RFPs that I felt we needed to explain to marketers and procurement why in this industry and for procuring these professional services, you either want to ask this question and not that question, provide this information, this information isn’t necessary, and why it was beneficial for them, in them meeting their objectives.
Darren:
Now, it’s interesting the principles and a lot of them make sense, but there are a couple I wouldn’t mind pulling out. Obviously, you talking about; the first one is disclosing the budget. I think that’s so-
Leah:
Don’t you love that, that’s first? Because that stumps people a lot I think.
Darren:
I know and I’ve had marketers and procurement go, “Well if we give them the budget, that’s what’ll end up costing us.” And I go, “Yes, but that also gives them a view of the scope of this project? What’s the level of financial importance?” Because there’s a mentality going into it that we want to get the lowest price, not what we’re willing to invest.
Leah:
Exactly. And I think from a behavioural science perspective, it does a really important thing. And that is provide context to the people that are reviewing and potentially participating in your RFP. And fundamentally, that’s what a benchmark is supposed to do. It’s not something etched in stone, it’s to provide some context-
Darren:
I’m so glad you said that.
Leah:
It’s to provide a jumping-off point.
Darren:
Benchmarking actually came from surveying in England. They would go into a village, and they’d mark the benchmark of height above sea level, which all other buildings were measured against.
Leah:
That’s interesting. I didn’t know that.
Darren:
They didn’t put a benchmark, say on the church or the town hall and then chop all the other buildings down to that height. They actually used as a reference; benchmarks are meant to be a reference point. And then that’s the way we present them to our clients. We say, “Here’s the upper benchmark.”
Now if someone’s 10%, 15, 20% above that price point or resource point, does that represent the value that you are seeing in this relationship? Not to drag it down, because that just means you won’t get the people that you want on your business.
Leah:
I think someone should just have to prove or to explain the value that they’re providing for that extra amount that they’re over.
And I think personally, listen, we do this every day of our lives. It’s just human beings living in the world. Boy, that asparagus is really expensive. Why? It’s November, but I really want to have asparagus tonight.
Darren:
And that’s fine.
Leah:
Okay, then that’s fine. And so-
Darren:
Benchmark has become this tool to commoditize everything, the average price, well, if you pay average, you can only expect average.
Leah:
Exactly.
Darren:
It’s also blended rates. This idea of blending rates. How do you feel about it as with your finance background?
Leah:
Well, I don’t like blended rates. And listen, I think that hourly rates and then the even worse horrible cousin blended rates came about because it’s simple. It came about because we started costing things. Cost plus is the nemesis of our industry.
And I’m the first one to say I was probably a huge part of those blended rates, but now I’m on the other side and I would like them to die a very quick death. I think it’ll be a slow death. And I think it is on the side of dying and going away because they make no sense.
Darren:
They make no sense, and it actually creates all sorts of misaligned expectations.
Leah:
Absolutely.
Darren:
But if you don’t mind me asking, because I have this bug bear, I have formed the view that finance people working in agencies are particularly lazy. And the reason I say that, let me explain why, and then I want you to respond to it.
The reason why is the cost recovery model (which is I have so many resources, they cost me this much. I have an overhead cost that I can factor, and then anything extra I get is profit), is the laziest way to actually manage a group of resources, particularly professional resources.
And it also drives the most negative behaviour is if I can pay you a salary for 40 hours a week, or 35 or 37 and get you to work 60, all of those extra hours are potentially just straight profit to me. So, it, to me is evil. As a creative person, how do you respond to that accusation?
Leah:
I mean, you’re not wrong, but yeah, absolutely. And I guess that’s what I’m saying when I say it’s a very simple process because there’s a little bit of laziness in it. And listen, there are a ton of better metrics to look at how your business is doing and determine whether you’re on the right track.
Darren:
Because I’m a big fan of pricing-based outputs. “Yes, we can do this for you.” And even not just one price. Doing a TV campaign or a campaign shouldn’t just be one price for every client because there are some clients that it’s worth more to them.
Leah:
Absolutely.
Darren:
And even within one business, there could be some divisions that they should be paying more for it because it’s worth more. And others that they would pay less because there’s less upside for them.
But I get so much pushback from network agency accountants that go, “Yeah, but how can I work out my resource utilization and whether I’m covering my costs?” And I go, “I’m sorry, I don’t run your business, I’m just telling you what the client wants to pay for those, now you work out how you’re going to fix it.”
And look, I’m only bringing this up not to belittle or demean anyone, but these are the industry’s challenges.
Leah:
Absolutely. I mean, utilization reports were the bane of my existence because, at the end of the day, I think it’s garbage in garbage out. I mean, how many time sheets would you say that you entered accurately? I mean, it’s either too many hours being put through or insufficient.
I remember seeing people’s time sheets that were 8, 8, 8, 8, 8, 8, 8. And I’d say, “Well, I saw them in here on Saturday while closing the month. I was late on Tuesday until 10 o’clock, and they were still here. Where’s all this time?”
So, it’s fundamentally not accurate, we’re running our business and pricing or costing what we’re providing to the client. So, the client really fundamentally shouldn’t like it either. And from my perspective, I think output-based pricing and outcome-based pricing.
Darren:
The outcome’s the ultimate.
Leah:
That’s fabulous.
Darren:
But we need clients to start linking investment to return, to get there. At the moment, many of them are not doing that. And once they do, that opens up a whole new way of contributing to growth as the basis of paying the agency.
Leah:
Well, think about it from an innovation perspective, it gets people looking at your business with a different mindset.
There are brilliant minds inside of agencies that if you would allow that to be opened up to them, they’d be thinking about it.
But if you’re going to put campaigns and executions into a little box, and it’s based on how many hours someone’s putting towards it, and I’m a senior person, but I only have two hours budgeted on this campaign, how am I going to do that? It’s not how you want your agency thinking, and it’s not how you want creative resources and strategic resources thinking about your business.
Darren:
The principles are on the website, aren’t they?
Leah:
Yes, they are.
Darren:
For the ICA, because I don’t think … they’re terrific. I think they’re a great framework to get people thinking of how to restructure or approach their selection process.
I have to say I love the myths. Where did the inspiration come directly to confront these myths?
Leah:
That came from a meeting of our new business leadership group where it was one agency CEO said, “I think that people just don’t know any better. There’s these myths that if I do A, I’m going to get B.” And they’re like, “There’s no correlation between those things; we need to bust that myth.”
And the biggest myth is spec work and speculative creative and strategy. And I make a big point of saying strategy because I think sometimes the request for strategic insights also wheedles its way into RFPs. And I’m like, “Listen, anything that an agency would normally send an invoice to you for, if you’re asking for that, then that’s spec work.”
And the myth is, “Well, I don’t know what I’m looking for until I see it.” Well, but that’s not how you get great work.
Darren:
Except that’s how many of them work with their agency. They put the blandest brief in and then, “Oh, I just keep coming up with ideas,” and oh no, when I see it.
Leah:
Yeah, exactly.
Darren:
That iteration I saw as a creative director made me go, “This is madness.” Like madness.
Leah:
Yes, it is madness. And it’s not collaborative. It’s asking for people to devise a solution to your business challenge in a dark room separate from you.
It’s not the way that we solve problems. It’s not the way that anybody solves problems. And fundamentally, if you were buying art, absolutely, the artist goes away and creates something, and it’s their vision, their soul, what they want to do. But that’s not what you’re buying as a marketing person. You’re not buying art. You’re buying a solution to a problem.
Darren:
The only time that metaphor works is when you commission an artist to do work for you. Right?
Leah:
Sure. And I’ve commissioned artists to do work for me; the best art you get back is where you allow them to create.
Darren:
Of course. But what I’m saying is the selection processes, you look at all the work that they’ve done previously, you go, “I like that style; here’s what I’d like you to do.”
Leah:
This is the space I’d like it to fit in.
Darren:
And now go off and do it.
Leah:
Yeah. Now, you go off and do it.
Darren:
You don’t actually say to them, “Could you do the painting? And then I’m getting three other artists to do the painting and the best one I’ll pay for.”
Leah:
Exactly. We don’t do that. And I think definitely, that’s the point. It’s not “You create it and I’ll decide whether I like it.” And I think, there are a lot of agencies who have seen such a huge hit to the mental health of their people. And it would be best if you had the mental health of your folks to be tip top in order to continue on, in order to do this work. And you as a marketer need them to be tip top as well.
Darren:
I’m so glad you brought that up because, in the UK, the ISBA and the IPA have launched the Pitch Positive Pledge.
And one of my concerns is that people keep thinking about the cost to the agency of doing pitches. And I keep pointing out that the real cost is to the staff, because very few agencies have people sitting there waiting to respond to a pitch.
It’s almost invariably landing on the shoulders of people already dedicated to working for their existing clients. So, all of this pitch work is unpaid overtime, weekend work.
This is why our mythology about the pitch is beer and pizza as you burn the midnight oil or work Saturday and Sunday because you have to get your existing paid work done.
Leah:
Absolutely.
Darren:
And so, while I understand the call for paying for pitches is good, from the perspective of it gives value. Suppose I have to pay each agency to participate in a pitch. In that case, I don’t think it solves the problem because that money goes to the bottom line of the agency and doesn’t actually reward the staff who have worked unpaid overtime and incurred those health and mental health impacts.
Leah:
I think there’s two things there. Number one, thank you, no agency has a secret closet full of just senior folks waiting around to see what spec creative you’d like to have out of a pitch.
And two, I think this is another myth: “Well, if I’m paying for it, it’s okay.” Fundamentally, it’s not okay for the client because it will still not tell you what you need to know about the agency. And what you need to know is, “I have this problem, I think I need these things. Show me what success you’ve had on other jobs and then tell me how you will replicate that success for me.” That’s what you want to know.
If someone comes up with even the most fabulous creative campaign for you to solve your problem, how do you know that the next time that they have to do something for you? Because you’re never going to work like that again. You are never going to brief that way again. How do you know they’re going to be able to replicate that?
Darren:
That’s right. And because of the issue of the agency not having staff just sitting around waiting for the pitch, they will often be forced to resort to having freelancers.
So, it may not have even been created by the agency. I mean, there’s so many things wrong and on any logical sense. So, what is it that’s driving people to continue to replicate this same behavior over and over again?
Leah:
I think it’s just that they don’t know what else is out there.
Darren:
They don’t know what they don’t know.
Leah:
Exactly. And the principles are great, and we’ve simplified them so that folks can see what those principles are. There’s a guide that powers these principles, and it has all the templates you need.
I mean, listen, even there are a lot of procurement people that think issuing an RFI is a waste of time. Well, but for creative professional services, an RFI is a really good use of your time, but it can’t just be a renamed RFP, it has to really be an RFI.
It has to have like, I’m going to ask you to write 250 words. I want these five pieces of information. It’s a one-pager if you want to go out to 300 agencies because you’ve never dealt with a digital agency or social media influencer agency before, and this is something completely new for your brand. Absolutely, do an RFI, we have those templates.
I’m totally on side with that. But you don’t send 300 agencies a 30-page RFP that results in a 90-page deck because the team will not read it. The marketing team will never read it.
Darren:
Of course not. And in fact, we have clients that say we want an RFI. We will put limitations to guide on the number of pages. We often have to put limitations on the point size because agencies will want to tell us more than we actually need to know, only then to have the client ask us to read them all and give them a one-page summary for each. So, we actually encourage them not to do an RFI.
I think there is increasingly, and I would love industry procurement because there is compliance that is driven by the United Nations sustainability goals. So, things like environmental sustainability, the modern slavery act and the like has filtered from that original launch to most western democracies and are becoming part of the supply chain compliance.
If we could almost get a standard form that every supply, every agency, including ourselves, can fill it in once and that becomes our standard. “Yes, we comply with this.” Because that really is just purely compliance.
Leah:
Absolutely.
Darren:
If there could be a standardization, that would be brilliant because you’d fill it in once and not have to do it for every …
Leah:
Exactly. And, to me, that’s what an RFI is. It is ticking those boxes that procurement and that compliance side of things needs to know that you have this base ability to do the work or to-
Darren:
And to risk profile. And one of the other frustrations I have is when they start asking for your P&L and your balance sheet for the past three years, because that is biased against smaller, independent agencies who aren’t part of a big publicly listed global company which is seen as low risk financially because an independent operating here in Canada doesn’t have the financial size, but does that make them any more of a risk?
Leah:
Yeah, and I would say a lot of that information is never even reviewed. And I don’t think anything’s ever done with it. And let’s be honest, I’m going to call out that most marketers when they embark, unless it is, as I said, “We’ve never used an influencer agency. I have no idea about the landscape.” Most marketers know who they want to work with. And they have someone they think will rise to the top in their mind’s eyes. And I’m not suggesting that the RFP or the pitch process is biased, but-
Darren:
It’s not pre-decided.
Leah:
It’s not pre-decided, but I think they understand who they want to work with.
Darren:
I read a consultant about a year ago, did some research and came out with over 80% of pictures are predetermined. And I went, “I find that really … because it’s not my experience, I agree with you.
Leah:
I think the word predetermined is pretty strong. That suggests all kinds of dirty dealing and underhandedness. And I don’t think that it’s that. But I think that if you’re reading the trades and you’re looking at the work, which hopefully CMOs and their brand managers are doing, you have an idea of the landscape. That doesn’t mean that there can’t be a dark horse. Of course there can be.
Darren:
Now myth seven, I really like it. Pictures and spec creative are just the cost of doing business if you are in the agency world.
Now, the reason I really like it is, I’ve also had many conversations with procurement when we’re talking about agency overhead, and they go, “New business is a cost of business,” and yet they’re trying to pull that out as another way of getting the agency cost down.
It’s like you want them to pitch, but you won’t let them charge onto their clients the cost of pitching. Who’s going to pay for it in the end?
Leah:
Right. I always thought that that was an odd thing because when I think about when I buy my snicker bar from the grocery store, I don’t think that the only thing I’m paying for is the items inside the wrapper.
Darren:
You’re paying for the marketing.
Leah:
I’m paying for you to distribute it, market it, get it into the store, go through. Like I’m paying for a ton of other things. And it always used to flummox me. When I had to take that new business line out, I was like, “And do you take research and development and ANM out of the cost of all of your products?” I cannot imagine that you do that.
Darren:
Yeah, the other one, myth five. You can see I love this. Myth five, price is the only objective determining factor. Well, was it Oscar Wilde? “They know the price of everything and the value of nothing.”
Leah:
Well, that’s the way I feel right now. I don’t know, I’m sure everybody listening to this podcast has probably had the same conversations with their friends. I have no understanding of what the value is of money right now. I don’t know how much anything is supposed to cost and it fluctuates so much.
I think at the end of the day as soon as you start evaluating price, that is like in flashing lights for the agency, the second that you’ve put a grid in your RFP and asked someone to put a rate in somewhere, they don’t look at anything else, they go right to that page and there, you’ve asked them to forget the innovation mindset that they came into it with. You’ve asked them just to cost and price something.
And that you’re asking them to go to the lowest common denominator. And why would you want your agency to do that? You want them to stay above, you want them to stay innovation mindset throughout the whole process.
Darren:
Absolutely. One of the reasons I left advertising and started this consultancy was, I was sitting in a client meeting as a creative director, and they were sharing a problem and I just shared an idea that came to mind. They liked it. We went off and did a proof of concept. It went global and the agency charged for the idea $500.
And the reason they charged $500 is it was a one-hour meeting, and my agreed rate was 250 an hour at the time and they could charge two hours. And I said, “Well, what should I have done?” They said, “Not shared the idea, gone away, two or three weeks later, we’d go back and say, you’d been doing nothing but think about it for the last two or three weeks.”
Now, that’s when I realized that there was something wrong.
Leah:
Something’s wrong. And that’s not — we do have to have our clients’ best interest at heart. That’s what we’re here for. We are here to advise and consult and sometimes to advise and consult, you have to say no, so I hope agencies figure out how to use their no muscle. But we’re here to help them solve problems and that’s what we’re supposed to do.
But I think something happened along the way in our relationship with clients, agency and client, where we thought we had a very reciprocal relationship. Somehow a couple decades ago with the inception of a certain department, that relationship started to morph and change.
And something that we thought was an implicit, I’m going to do something for you. You are going to do something for me. That’s how a relationship works. We don’t keep score, we don’t keep track, but we’re here for each other. That changed and agencies didn’t realize it.
Darren:
And you’re absolutely right because I saw it personally in the recession of 2007/8, clients came to us and said, “Our budget’s been slashed by 30, 40%. Could you help us determine how we can get the work we need done for that 30% less?”
And we’d say, “Sure. We need to work out what’s essential and what isn’t.” And then we wouldn’t hear from them, and they’d come back, and they said, “It’s all right. We spoke to the agency, they said they’d do the same scope of work for 30% less.”
Now, they did that because agencies have always operated on goodwill. And I scratch your back and you scratch mine. In the world of procurement after that there was no payback, there was no payback because procurement basically said-
Leah:
It set the bar down here now.
Darren:
Basically, they could do all that work for 30% less. That means they can do a 30% less forever.
The fundamental agreement, which has always been … it’s the reason we call it account service or account management, is because we are in service and reward the servants with a tip. And people always say to me, well, how do management consultants get away with it?
Because at the very front of the conversation, this is a commercial relationship. We are here to provide a service and here’s the fee. We don’t do things for free. We don’t scratch your back if you want a hand. And I think it’s a valuable lesson, except it will fundamentally change the relationship between clients and agencies.
Leah:
Yeah, I think one way that we are different from consultants, and we have to remember when we started off the conversation talking about this, is that we’re here to collaborate. That innovation is a collaborative endeavour.
Darren:
Yeah, absolutely. Yeah. Leah Power, this has been a fantastic conversation. I really appreciate you taking the time and having this chat.
Leah:
Thanks for having me. It’s been great to talk to you.
Darren:
I have got a question before we go.
Leah:
Sure.
Darren:
So, you’re in the finance departments of agencies, do you have favourites when it comes to signing off expense accounts?
