• by Rachel Spiegelman , Columnist, November 11, 2014

Here we go again. That buzzing in my ear. Can you hear it too?

At the Advertising Age CMO Summit in San Francisco this Fall there was a presentation called “Trimming the Fat.” The point made: clients should bring in procurement teams, force agencies to cut fees and presto! The “waste is chipped away, and it’s all reinvested in marketing.”

I am going to make a radical proposal that’s not radical at all. I would like to propose that our industry rally around and support creative work, and not just leave that job up to the creatives. And I’d like to propose that we all acknowledge it’s a free market. Clients practice enough due diligence to make informed decisions about hiring an agency, or firing one. 

After all, we’re a performance and people-based business. 

I have no idea how much money my mechanic makes or how much rent he pays for his garage, yet that’s entirely a people business. I just like how well he services my car. His shop is clean with just the right amenities, and his employees are friendly. And if I don’t like it or if they underperform, I leave and find a new garage. 

Many agencies have underperformed and lost clients. If our customers don’t like our work or our amenities, if we aren’t providing them a value they have every right and in fact should leave.   

Allow me to quote a famous music artist who was interviewed by the Wall Street Journal in a recent article: “In my opinion, the value of an album is based on the amount of heart and soul an artist has bled into it, and the financial value placed on it in the marketplace.” 

This should be the calculus of creativity - the blood, sweat, tears and heart, and the money people are willing to shell out for that. 

As an industry we let the pendulum swing from creativity ruling all and brands paying an inordinate amount of money for the few and famous shops, to the exact opposite side. We are now negotiating our worth with procurement teams, and the value of our creative through spreadsheets. A process fully removed from the service, the product and in fact the people we are working for. 

Look, there has been a ton of waste. We’ve all seen it, and sometimes we’ve been on the receiving end of the bounty, so we didn’t speak up. And now, as with any cycle, that’s waning. In the pages of this publication, the new CMO of Nationwide Insurance, which has reduced agency fees by more than 20% in three years, stated: “This is not a margin extraction game.” Ad Age likened the Nationwide program to a “waste reduction game.” 

Now that’s a game I’m ready and willing to play. 

The game I’m ready to drop-kick is the “hourly fee” charade. Because I’m losing. Because I know that in order to be a successful agency, I’ll spend way more in that model then I am being paid. And clients get a bum deal too. 

As Avi Dan in his Forbes column once noted: “This model is tremendously flawed in that it doesn’t separate the sheep from the goats. By negotiating upfront for hourly fees and percentages, not ideas, clients are paying equally for bad ideas as they are for good ones.” In fact, as Avi points out, the bad ideas are the most expensive ”because it takes more billable hours to get a bad idea revised before its market ready.” 

Yet another reason to get out of this place, if it’s the last thing we ever do. 

So what do we do? The big brands and clients are settling into a comfortable procurement zone, and now the little guys are following the pied piper. I’d be lying if I didn’t say sometimes we just have to take it. Hell that’s the mantra of our entire industry. 

But what if we all made small steps every once in awhile? What if we implemented a shift over time by sticking with it, but tweaking the trajectory? What if, as an industry, we agree to do the following: 

Before we negotiate fees, let’s take the time to ask in very deep specifics what the client is looking for versus focusing so totally on winning the business. 

Let’s inform smaller paying clients we’d be happy to work with them (if it’s a good fit) but that we won’t do it through a competitive RFP.

Let’s remind our clients’ procurement teams that we were selected above all other agencies at the table; so clearly this isn’t a commodity and we need to find a middle ground, and that’s not at or near the bottom. 

Let’s remember we are often in control of the creative process. Let’s remember we’re totally worth it. 

To conclude, allow me to quote Sheryl Sandberg, COO of Facebook: “Taking initiative pays off. It is hard to visualize someone as a leader if she is always waiting to be told what to do.” 

Rachel Spiegelman is President of Culver City, CA-based ad agency Pitch