Commentary

Strategy Vs. Tactics: An Issue Of Compensation

by Cory Treffiletti , Featured Contributor, June 16, 2010

Does your agency focus its attention on tactics, rather than strategy?

Many people talk about the agency model being "broken," and the primary reason is that most agencies are compensated by their clients based on tactics, not strategy. When you compensate your agency partners for the tactical side of the business (the media plans and the banners or websites they create) rather than the strategic side of the business, you get what you pay for.

The marketing landscape is littered with agency reviews that stem from the age-old bait-and-switch phenomenon, where the agency pitched the business with "the A-team" and the client ended up being serviced by "the B-team." This happens because the pitch is when agencies put their best foot forward, showing strategy to demonstrate their approach to business and provide an example of the work they're capable of providing.

Unfortunately after the pitch, when the agency wins the business and it comes down to the day-to-day, the budgets go tactical, the work gets less strategic and the team changes. Of course, both sides are at fault when this happens. The agency is at fault because they should never even have a B-team, and they should always be strategic in nature. The client is at fault because nine out of 10 times, their fees are being paid to the project management team (also called "account management") and the tactical team, with very little being applied to the senior, strategic team that should be driving the business. A quick calculation of the fees that most clients pay their agencies will show that, on average, about 10% of fees go to strategic work while around 90% go to tactical execution. In that equation, how come everyone is so surprised that they get the B-team and lose the strategy they fell in love with?

This is why client/agency relationships last about four to five years now, vs. the 15 to 20 they used to last. The business has gotten more efficient, but the fees aren't recognizing this fact.

To make matters worse, the structure that sets up agencies to focus their efforts on tactical needs vs. strategic needs also creates a situation where most agency employees aren't even trained to be strategic. The majority of staff within major agencies are woefully under-trained in the art of marketing. Some agencies have training programs in place, but most of these take a back seat to client business (as well they should, since that's where the revenue comes from).

Of course this creates a self-fulfilling prophecy -- because if your team isn't trained in the art of strategy (and, yes, it is indeed an art), then you won't retain the business in the long run. Too many agencies are focusing their efforts on owning the client's data in order to make them reliant rather than adding strategic value. Data can be a very important tool, but data can be aggregated from almost anywhere these days, so just owning it is not a strategic benefit.

So what can be done about this, other than complaining about it?

If you're an agency, you need to charge for strategy. You have to find ways to monetize the senior team that can lead your client's business, and you need to maintain a focus on strategy if you ever hope to retain your clients. Agencies are hired because of their people and approach; the right people with the right approach can be a very difficult relationship to unseat. If you lead with strategy, and your client recognizes and pays for that work, then your relationships will last longer.

If you're a client, you need to buck up and start paying for strategy. Agencies are full of smart, ambitious people who want nothing more than to help you build your business. They are creative and strategic thinkers, even if they don't all know it yet. Of course, if you're going to pay them for their strategizing, they should be willing to risk part of their fees on performance and "put their money where their mouth is." We do it in our shop -- and many other agencies have started to follow suit. Strategy is an art, and in some cases it can be a gamble, but it's an educated gamble.

I'm something of an idealist when it comes to the agency business, so that's why I'm sharing these thoughts in this column. I want the business to succeed for everyone, and strategically I think sharing the solution will make everyone better. Don't you agree?

advertiser-agency relationship

8 comments about "Strategy Vs. Tactics: An Issue Of Compensation".

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Al Haberstroh from MontAd, June 16, 2010 at 9:41 a.m.
This is why most true innovation comes from smaller agencies. The small shops don't have a "B" team, at least mine doesn't, and the accounts are serviced by smart, seasoned professionals who never take their eye off the strategic ball. We are faster, smarter and far more client focused then the big shops. Oh, and clients pay less for this superior service because the small agency overhead is much lower.
It is the big agency model that may be broken. In my opinion, it's been broken for quite a while.
Reply

Scott Lindberg from American Website Company, LLC, June 16, 2010 at 10:13 a.m.

Spot on, Cory. 90% of the value is in the strategy. Tactics are the commodity here.

“Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.” – Sun Tzu

Ronnie Battista, June 16, 2010 at 10:13 a.m.

Great article Cory, and spot on. The challenge is often one of semantics as well. Unfortunately, what sells as "Strategy" often isn't more than some ideas that agencies spin up in a whiteboarding session, that have no evidence-based research to support it, and when the PowerPoint that memorializes those ideas hits the desk of the client paying for it, many times it dies right there. The "Strategy" (kept in quotes for good reason) has no tie to business outcomes, no ongoing measurement or governance model in place to make sure it actually works. Companies are littered with these decks, and it denigrates the true strategic work that many of us do.

The other challenge is balancing the fact that there typically is a mix of strategic and tactical work that comes with a project, but it's difficult to draw that distinction sometimes, both internally and externally. Where does the idea through build of a new portal strategically end and tactically begin? Is it when the coders arrive? Is it even linear (i.e. strategy is an umbrella service throughout, separate and distinct from the tactical)? Of course it depends, and I certainly can argue my particular point of view, but my point in bringing it up is the need for us to be better at talking to what this means.

Because, as you so well point out, everybody loves strategy, it's just that when the check comes to the table it's the uncomfortable moment of who is picking up the tab.

Thanks,
Ronnie

Myles Younger from Canned Banners, June 16, 2010 at 10:16 a.m.

Great analysis. I had never thought of the agency-client relationship this way. However, unlike the author, I'm not an idealist. I think the classic concept of "strategy" has eroded quite a bit since the advent of the internet, IM, email, smartphones, and all the other technology that has breeded endemic short-term thinking (on much of the client side, it's all fire drills 24x7...no time or incentive to think strategically). Might be best if the agencies simply accepted (along with the client side) that their work will be demanded on a tactical basis, and figure out how to re-work their business processes to accomodate this profitably. I'm not a fan of ultra-short-term thinking, but I think it's gonna be around for awhile at this point--workers are still adjusting to technologies that are at this point still in their infancy (even the internet in its present form is only about 15-20 yrs old).

Ted Rubin from The Rubin Organization / Return on Relationship, June 16, 2010 at 10:20 a.m.

Unfortunately with the majority of agencies, and in my opinion with all traditional agencies, it is all about the tactics, only their ideas, and low hanging fruit. Really a sad set of circumstances for most brands... especially when approaching social media/marketing.

Christopher Korody from ckwrites.com, June 16, 2010 at 11:45 a.m.

I think you were very kind to the clients... Hard to develop effective strategy for a customer whose own culture doesn't value it...

Fair to ask what happens to all the senior people from the client side who also leave after the pitch.

Ruben Dario, June 16, 2010 at 12:06 p.m.

Great! Although you wrote about Mkt agencies, it applies very well in PR and Communications Agencies. I will share it with some peers and customers through my Twitt account.

Best regards!
Rubén Darío
Mexico City

Lela Cocoros from Brunswick Street Advisory, June 16, 2010 at 12:17 p.m.

Great article, Cory. As a small PR/communications consultancy, we don't have a "B" team either, yet I still find it increasingly difficult to get clients to stay focused on strategy - and some prospects I've talked to are pretty blatant about just wanting a succession of "quick hits" without even discussing the big picture in any meaningful way (we try to steer clear of these engagements). It's similar to the majority of public companies only thinking short-term because they have to make their numbers to satisfy investors and Wall Street quarter to quarter.

With all the fantastic new technologies and tools we have at our disposal in this shiny digital age, one would think that strategy and innovation would go hand-in-hand with tactical execution to make for an abundance of excellent work out there. Sure, we can all point to some successful examples of enlightened clients paired with talented agencies, but it's not nearly as much as it could, and should, be. It's too bad when you think of all the missed opportunities.