What Agencies Need To Do To Stay In The Game

Michael Farmer, who has been consulting for advertising agencies for 25 years, sees the industry trapped between “fee-cutting clients and profit-hungry owners.” Its woeful state, he believes, can only be reversed by intrepid agency CEOs overturning the current agency culture by tracking workloads to better negotiate fees, repositioning their raison d’être from “big ideas” to “results,” and instilling a strong sense of accountability throughout their organizations.

Farmer lays out the details of how agencies have steadily fallen from the height they held 40 years ago and lays out a compelling argument for how they can best regain relevance and appropriate remuneration in a new book, "Madison Avenue Manslaughter." It will be available in September; I read an advance copy. At a time when some marketers question whether they need a traditional advertising agency at all to achieve their objectives, I posed a few questions to Farmer about the impact and role of content marketing in the current brand ecosystem.



in a world where marketers seem to be moving toward junior staff handling more content and engagement marketing for less money, what do agencies need to do to make money?

Farmer: The case I make is that agencies need to document their workloads and charge appropriately and systematically for the work they are doing.

This is not the case today. Across an ad agency office, there are 4:1 differences in what an agency charges its clients for the actual work. This is because “fees and costs are negotiated; workload ‘just happens.’” No agency can afford such an undisciplined approach for the determination of fees and resources.

Once they have these workload disciplines under control, they need to up their game and become more proactive in the proposal of scopes of work, saying “this is what we think should be done next year — we can show that it has the highest probability of strengthening your brands” (or giving growth, or whatever).

When an agency gets good at proposing scopes of work that actually move the needle, they can expect to be paid at rates that exceed the current industry average of 2.2 to 2.3 times direct cost. The management consultants earn a five-times multiple.

These workload disciplines are essential, even in a marketplace that is moving to more content marketing. The content marketing may involve having junior agency people create a steady stream of messages, but there is nevertheless a messaging strategy behind this. It is not just a steady stream of noise.

What can agencies do about marketers taking more of their marketing in-house — particularly social media interactions and branding — on the theory that they know the brand best and can jump on opportunities faster?

Farmer: Competition from in-house marketing is indeed a problem. Agencies, having dug a “commodity supplier” hole for themselves over the past few years, have to win back credibility with their clients — showing through disciplined SOW practices and pro-active SOW planning that they are valuable strategic thinkers and partners. This gives them a shot at retaining content marketing responsibilities, but it by no means assures that they won’t lose to some in-house people.

Should agencies also be worried about publishers’ content studios — the Times’ T Brand Studio, Condé Nast’s 23 Stories, CNN’s Courageous — taking their business away?  

Farmer: Yes, absolutely. In-house competitors were unleashed as a natural consequence of the rise of content marketing. But who provides the best thinking about content marketing strategies and messaging? Who is the most credible source of content strategies that are proven to deliver improved results? That remains an open question. Good strategic thinking and planning can generate fees as well.

You maintain that agencies themselves should be producing more content marketing on their websites. To what end?

Farmer: What I maintain is that agencies need to demonstrate, as have the management consultants, that they have credible ideas about how to improve brand results through the use of the different marketing tools that are available.

What I complained about was the vast wasteland of agency websites — lots of information about creative awards, examples of current client work, but no ideas whatsoever. There is little on the typical agency website that would lead a client to say, “These folks seem really smart about the use of content marketing to achieve brand results."

Where are the “think pieces” and published agency experts who seem to know a lot about complicated subjects? It’s not at all evident on their websites.

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