• by Tig Tillinghast , August 16, 2002

Too many agency management people hold that an ad agency can’t afford to turn down any business, and that the agency must change its philosophy to reflect the needs of its eclectic clients. If an account director comes with a client request to redo advertiser’s roof, the general manager is apt to heartily accept the project and ask if they can charge a commission on tarpaper.

Agencies that fail to stick to a specific value proposition, however, become opportunistic parasites on the marketing industry. There’s no real management in managing such an agency – instead it’s just sales and more sales.

Agencies need to get a handle on the clients they do have to determine if they’re the appropriate partners to help the agency develop its identity and an economy of scale in the skills it values most.

These are some questions agencies need to be regularly asking about each client.

If you were the client, would you hire your agency? If not, what are the relevant factors that need to be addressed? Eventually, most clients figure out agency deficiencies, no matter how dense the client may seem at the present. Managers need to anticipate what resources need adding or replacing, and they need to keep at least one step ahead of the client.

This can be difficult when the staff running the account have a vested interest in making affairs look wonderful. Not only do the managers need to have a cynical eye, they need to incent account directors to be blunt.

If you bring a brilliant idea to the client, does their staff have the imagination and managerial clout to approve and fund such an endeavor?

This can be a great point of frustration – for both client and agency – if one or both sides aren’t honest about the objectives. Very commonly, clients will say that they want innovation, yet they only will approve slight variations of existing marketing ideas. Some agencies have problems keeping staff on these accounts. They run around eating up a lot of overhead, only to have their efforts lopped off to where they’re indistinguishable from previous efforts.

The causal disconnect is often the difference in the desires of the manager in charge of the agency relationship – a position a lot lower on the corporate ladder than it was 15 years ago – and the person running the company and funding the campaigns. Agencies must be very blunt about their concerns over this potential problem. They need to gain assurances from the middle manager that their efforts will be sufficiently compensated, if not appreciated.

A word of warning: the complaints of a spurned agency media or creative person, who just might not have the talent necessary for the task, will sound identical to the symptoms mentioned above. Agency management has the tough task of figuring out if the advertising was truly good enough to warrant the client taking a risk on the innovation.

When will the client’s business outgrow your agency’s scale?

Small- and mid-sized agencies seldom anticipate the reality that once a client grows to a certain size, they will seek partners with greater resources. In rare cases, the agency can grow in tandem with the client – like Leo Burnett through the 50s and 60s – but this is not the norm.

That inflection point, where the appropriateness of the agency begins to diminish, is worth anticipating. While it seems insane to management at the time, a more rationale course than waiting for the inevitable account review, is to use a parent or partner agency to take on some of the management. It is far better to transfer the account in an orderly and pitch-free manner, where the incumbent agency can continue to financially benefit.

What can the agency do that the client’s staff cannot?

A trap agencies often fail to anticipate remains the infamous “scut work reversal.” In this scenario, the client begins to put more and more run-of-the-mill marketing task work on the agency’s list of responsibilities. The account director thinks she’s brilliant because she’s “growing the business.” She hires a few new account executives, perhaps some more media people. But then, realizing that they’re paying a high overhead for administrative and clerk functions, the client, a couple years later, takes that work back in-house.

The disquiet caused by this process is often enough to bring about a full-fledged review. The client – often with a new marketing director – takes a hard look at the value the agency adds and concludes, “Hey, we can do that better.” At best, they take back the scut work. At worst, they find another agency that seems to offer a better value proposition.

When to Cull?

Aagencies must learn to cut their losses. We are very, very bad at this. I don’t know of an agency that fires clients with the regularity everyone probably should. Optimally, we would have client relationships that would allow us to talk to a client and tell them that the two partners should part ways in an orderly fashion over the period of three to six months. That would make the industry a much more stable place.