The Fiscal Cliff And Agency Reviews

Like all of you, I’ve been following the news about the fiscal cliff negotiations in Washington, DC. Not because I can do anything about it. Not because it is riveting storytelling and drama. Rather, I’ve been following this news because whatever is decided will have a significant impact on me, my family and my industry.

Oddly enough, I kind of feel the same way about the recent spate of media agency reviews. As much as you hear statistics today that the average tenure of a head of marketing is 22 months, you are now hearing that the average tenure of client and agency relationships is shrinking from its historical 10- and 15-year relationships to something closer to those marketing executive tenures.

Virtually every week, you read in the trades that another agency is being put in review and another 10-year-old relationship has been terminated. As a start-up executive, I am by my nature a fan of disruption in industry. However, as someone who depends on a media ecosystem that is well-functioning, rational and willing to take risks, I also am quite cognizant of the downside of all of these reviews and their disruptions of both clients’ and agencies’ ability to conduct business as usual.

What is behind all these reviews? Certainly, many of them are just part of the ordinary course of business, with companies being diligent about getting the most value for their media investments and contractor payments. I am sure that a big part is to reprioritize digital, data and emerging technologies as part of the agencies’ remit. But I think more and more of these reviews are being driven by a desire to cut cost, margins and to get more for less. This is natural; the U.S. economy is still in a bumpy recovery and everybody needs to be thinking about costs. However, might some of these reviews actually be hurting marketers’ interests, instead of advancing them?

With massively fragmenting audiences across content, channels, media, devices and day-parts, marketers need their agencies -- media agencies particularly -- to help them transition their advertising and marketing activities to a fast-moving, technology- and data-driven future. They need this transformation to happen at the same time they keep all of their existing advertising and marketing programs from skipping a beat and losing sales, momentum or market impact while new approaches are being created.

Basically, marketers need agencies to change the tires on the car at 80 miles an hour. Imagine now that, at the same time, you want the driver and mechanic of that car to simultaneously drive, change tires and, given the review, resell you on all of the car’s features and value. Not easy. Even harder when the best that the driver and mechanic can hope for – if they’re permitted to still operate and transform the vehicle – is a 5% reduction in their pay and an increase in their workload.

In a perfect world, marketers and their agencies would be able to step back, share their visions of the future, recognize that operating and transforming is going to be hard, expensive and risky and that they will adjust their engagements to perfectly align their interests and motivations, hoping (imagine that) that they both do so well at helping each other that they each make massive, extraordinary profits.

I know. That’s not how it works in the procurement-driven world today. However, just as I hope and dream of rational, long-term thinking and action when I read about fiscal cliff negotiations, I hope the same for marketers and their agencies when they think about putting their relationships in review. Maybe I’m naïve. What do you think?

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6 comments about "The Fiscal Cliff And Agency Reviews".
  1. Eric Porres from Rocket Fuel Inc , December 6, 2012 at 6:35 p.m.
    Good article Dave. I hope and believe that enlightened brands will think about the difference between building a home vs. renting an apartment. CMO tenure stats get a bad rap! The latest study from Spencer Stuart pegs it at 43 months. (http://www.spencerstuart.com/about/media/72/)
  2. Paula Lynn from Who Else Unlimited , December 6, 2012 at 7:22 p.m.
    A rather taste of their own medicine in the way of training everybody for everything in the necessity of immediate gratification. Results of campaigns need to be immediate.
  3. peter levitan from AB2 , December 6, 2012 at 11:32 p.m.
    The bottom line is that it is a freaking mess. There is no way that changing agencies at this pace benefits clients. Agencies do not have the time to learn, plan, execute and measure and then repeat. I am beginning to think that the issue really isn't procurement (or that one smart media buying agency is that better than the next) but the serious lowering of the quality of CMO's. Just like advertising's difficulty in getting the cream of the crop... wouldn't the best marketers want to work at an internet start-up vs. selling Twinkies?
  4. paul debraccio from expedia.com , December 7, 2012 at 10:30 a.m.
    Great insight Dave, but I wonder if their may be a silver lining somewhere down the road. Maybe marketers and agencies will eventually sync up fore the new ecosystem. Maybe they will both see that this is a new era more than the technological aspect and that they will both benefit if they take the longer view. Who knows, I still believe in Santa Claus too.
  5. Juan Miguel Monterroso from Resourcing , December 7, 2012 at 2:52 p.m.
    Great article Dave, congratulations. As a fellow entrepreneur in the media ecosystem but coming from a market that differs in size and culture from yours, what struck me the most about your writing is how similar the circumstances are in both our markets. In Central America we have the top 15 mayor Agencies to service the top 20 Global accounts working in our region, the local and mid size companies are attended by more than a 300 medium – small size agencies, as simple as this looks, for the last 2 years clients have been shifting from both big and small agencies, its kind of "the way things are". In my experience starting up this new venture in such a limited market, what I've come to learn is that disruption may also have to come in terms of the way us (agencies) and clients do business, I think we also should evolve in the way our services and client-agency relationship are built. I still don’t have the right formula but that’s my personal strategy for withstanding this environment.
  6. Dave Morgan from Simulmedia , December 7, 2012 at 5:36 p.m.
    I agree Juan. I do think that it relates fundamentally to the way clients and agencies do business and doesn't seem to be unique to any one market.