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What Matters Most When Selecting An Agency?
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Is The Super Bowl Bad For Advertising?

Another thought about that Advertising Age story which I posted on yesterday. The CEO of Groupon blamed his company's offensive Super Bowl commercial on his agency, saying "We placed too much trust in the agency."

Aside from being an unprofessional and childish sentiment, it sheds perhaps an unintended light about how agencies toss away good judgement when developing advertising for the Super Bowl. Most pre-Super Bowl advertising chatter is about the price - is $3 million for a 30-second commercial worth it. That's questionable and often the decision is not based on business needs but on vanity alone. What's pretty clear, though, is that sinking that much money into one spot and the pressure of the Big Game alters the way agencies, and clients, behave when it comes to Super Bowl advertising. Business prudence gives way to mindless entertainment. Egos, inflated organs ordinarily in the ad business, get out of control. The chatter inside the echo chamber is how people watch the game for the ads. Perhaps those who believe it should heed the late S.F.'s adman Howard Gossage warning, "The real fact of the matter is that nobody reads ads. People read what interest them and sometimes it's an ad".

Somewhere along the advertising development process good judgement is tossed away, and selling becomes secondary. Too many commercials try so hard that they not only fail, but they turn out to be offensive as the Groupon commercial was, or insult the viewers intelligence with low brow humor. It is as if the advertising brief is to get the commercial to the top the USA Today post-game popularity poll, a totally irrelevant measurement. And of course, when the advertiser is a new one, or one that will blow the entire budget on one spot, the pressure to hit a grand slam home run is magnified - to reach out to another sport, as a metaphor. And why is it necessary to create "special" Super Bowl advertising? Do clients really let their agencies produce lesser advertising year round and only ask for greatness Super Bowl time?

Considering the quality of the advertising in the last few Super Bowls, perhaps agencies should root for the NFL strike to be a long one.




Groupon Is 100% Off

Advertising Age reported today that Andrew Mason, the CMO of Groupon, told Bloomberg Business Week that the company's disastrous, offensive advertising during the Super Bowl came about because he trusted the agency, Crispin, too much. You remember that commercial, right? The one in which Timothy Hutton reduced the experience of an entire religion and the suffering of Tibetans, to a $25 off diner? Makes you wish for more Go Daddy commercials on the Super Bowl.

But what's really offensive here is Mason's willingness to throw Crispin under the bus without taking any responsibility, saying "We learned that you can't rely on anyone else to control and maintain your own brand". This reminds me of Flounder in "Animal House" being told, "You F@%ked up, you trusted us". Crispin certainly showed bad judgement, but so did Mason. He can add bad manners, and lack of professionalism, to bad judgement.

I wouldn't want to be the next agency that has to present work to them. Will be brutal.


Do Clients Make A Difference?

In 2003 I was Managing Partner of a creative boutique called Berlin Cameron. Later that year, after winning Coke, Pfizer and a slew of other accounts we were unanimous choice for Agency of the Year by all the trade magazines. Earlier that year  a small, semi known Miami agency called Crispin, Porter, Bogusky wiped the floor with us during the Ikea pitch. We got even later that year beating them for the Silk Soy Milk account, but you could tell that those guys were special. Crispin went on a national one  powerhouse when they won the coveted Burger King account.

Crispin had some success with the MINI and Ikea but Burger King was a different story. It was a huge account, much bigger than the entire agency at the time, and immensely complex. It also had a history of  frequent agency churn. Advertising agencies are not known as charitable to each other. Madison Avenue gleefully anticipated that this will be Crispin's demise. Yet Crispin did not only survive, but until last week at least, when it was fired, it thrived - creating breakthrough advertising and giving Burger King an identity. It also fashioned itself into one the better agencies in the country, certainly the most hyped. But hype aside, its work for clients other than Burger King, like VW, an account from which it was also fired, was inconsistent. 

This, I think, points to the importance of the client in creating great ads. Crispin's brilliance on Burger King would not happen without the support of Russ Klein, the CMO who hired them. Agencies often are quick to take credit for the great advertising they create, but it often comes down to clients willing to take the risk and "buy" that advertising. Klein, apparently, was such a client. Other clients of Crispin, less so.

Client-agency relationships are personal and complicated. And sometimes, not transferable. When Klein left a little over a year ago, Crispin was dead man walking. Yet, they had a good run, and 7 years in the fast food business is a lifetime.

Here's wishing that they find their next great CMO.


What Is Martin Sorrell Up To?

Sir Martin Sorrell is an interesting guy. An innovator, in many respects, as when first to establish a foothold in China (successfully), or creating holding company solutions for some big clients, like Dell (largely unsuccessfully). Now it seems that he is tinkering with the structure of his company, WPP, again. AdWeek just highlighted a stellar financial performance in 2010, but also noted, "In an interesting detail to the earnings release, WPP underscored its strategy is to continue to have variable staff costs—incentives, freelance and consultants fees—as a “significant" proportion of total staff costs and revenue in order to have flexibility in dealing with revenue volatility, economic slow-down and recessions. In 2010, there was a significant increase in the ratio of variable staff costs to total staff costs, rising to 13.4 percent and as a proportion of revenue, rising to 7.8 percent, representing the highest ratios for the last 10 years. Even as profits rose 16 percent, headcount declined in 2010. At the end of the year, on a like-for-like basis, the average number of WPP employees fell 4.2 percent to 101,387 from 105,849 in 2009."

Is WPP easing itself into a business model that would rely more heavily on freelancers? As agency compensation is declining it is quite likely that agencies will attempt to control their biggest expense - their labor cost.


Back To The Future

If previous recessions are guidance, the end of the current recession, now in full bloom, will have implications for CMOs and agencies.

During the recession, the average tenure of CMOs, the now infamous "23-months", started inching up. The rush to change marketing leadership came to s standstill. The likely reason: CEOs were reluctant to change leadership during the recession, concerned that if such a visible figure as the CMO left, investors might think that the company is coming unglued. With the economy recovering, CEOs may be a lot less hesitant about CMO turnover, especially if marketing does not yield quick results.

I predict that we are also going into a 24-month cycle of agency volatility. A new CMO often means an agency search and a new agency, especially if the new CMO comes into a weak business situation that needs "fixing". Since companies are now compared to competitors on proxy statements, there's heat on the board to push for change, any change, to get results. That change often impacts the agency.


A House Of Cards

Somebody asked me today what do I think of Jaguar pulling its account from Euro RSCG. (Full disclosure: I am a former executive at Euro RSCG, and I pitched Jaguar while at another agency). Two things surprised me about the decision. The first, Euro's tenure seems to be a quick one, lasting about 6 years. Even in these days of rapid hiring and firing, automotive accounts seem to be more stable. The car business is more complex, and multi-layered. That makes it more difficult for an agency, and paradoxically, more stable.

But what really shocked me was Jaguar's decision, its unconvincing denial notwithstanding, to take the account in-house. With very few exceptions, notably in the fashion business, Advertisers do not take account in-house. Going in-house immediately limits the quality of the creative resources. Creatives are attracted to working on a variety of accounts, to mixing it up. Working on the same account day after day, year after year can be a numbing experience. And sidestepping a cross-fertilizing multi-brand environment will dull creative instincts.

I doubt that the in-house solution will give Jaguar what it needs to build the brand and its business.


If It Doesn't Sell, It's Not Creative

The Super Bowl delivered once again. Great game and 110 million viewers. And at $3 million a pop per commercial, the "national holiday" also delivered a nice profit for Fox, which broadcasted the game.

But like in the game itself, there are winners and losers. The losers? Almost all of the Advertisers and the ad agencies that took part in the event. Advertisers were actually two-time losers. First, by letting themselves be convinced that $3 million is a fair price. It is not. I know that there are Advertisers who claim "we got a bump in sales the Monday after the Super Bowl". The question is how long does that "bump" remains bumped. The theory of recency requires repeat engagements. Watched among intervening information (how many car commercials were there?) and interruptions (how many noisy people at your Super Bowl party?), how effective was the Super Bowl advertising?

The other issue has to do with the quality of the ads, or lack thereof. Much was written about advertising reaching nadir during the broadcast. I agree. Little discussion was around the WHY. Most ads did not have a benefit, they did not have an IDEA, they did not try to sell you. They were simply executions, trying to entertain. Their ambivalence about selling was obvious. But techniques don't sell products, they simply are momentary attention grabbers.

David Ogilvy famously said, "If it doesn't sell, it's not creative". Just because you spend $3 million on media, and probably another million on production, doesn't make it creative either.


Snatching Defeat From The Jaws Of Victory

Popular belief (mostly clients') is that agencies are bad negotiators, exhibiting softness, and giving up too much in fee negotiations and contracts to marketing procurement executive on the Advertiser side. Yet, this is far from the truth. Actually, agencies, and the people who handle their negotiations, primarily the CFOs, are in fact excellent negotiators. They are very knowledgeable about their "product", labor hours, and they know how to price it. They are clever calculating overhead and indirect multiples, and maximize their margins. They also know where, and how, to hide unbillable expense, and how to structure their incentive in an advantageous way. Procurement executives often are not familiar with agency scope of work (SOW) requirements, and with how many full time employees (FTEs) are need.

Yet, despite starting from a position of strength, agencies usually end up in a much worse position as times goes on. Interestingly, clients have little to do with it. It is self-inflicted. It is a reflection of the agency culture as a service organization, and a willingness to provide many additional services at no extra cost, even after signing the contract.

Instead, to thrive as business organizations, agencies should replace a culture of service with a culture of profit.  


How Pitching Hurts Agencies

The pitch is the way agencies win most of their business and grow.  In the pitch, the end prize for the winner is to eventually get paid for the work done, with the promise of more to come. Yet, they act irrationally, in complete opposite to their economic self-interest. Agencies incur enormous expense pitching for new business, which ultimately impairs their ability to make a profit on the business. Worse, in the pitch they give away for free their highest value product - their strategic counsel. Attempting to make up for the financial gamble that participating in a pitch entails, some agencies inflate the fees of their implementation work. The results are that as time marches on agency margins drop, their cost of doing business goes up, and client relationships are at risk.

Maybe it's time to  for agencies to get pitching right-side up.  


Into Thin Ice

These are no ordinary times. There is no “aha” moment when marketers realize “we need a new agency”.

It is more like a “aha” transformation. It starts with the realization that the agency is losing the passion for your business. You are not as important to them as you once were. You are not getting the smart ideas that are needed to drive sales.

Selecting an ad agency requires an unbelievable amount of knowledge about agencies. Knowledge about their strengths and weaknesses, their vision, and their standards. Chances are, when it comes to managing a review, sales, research, and procurement just aren’t going to cut it. Neither will a CMO who does a search every ten years. Instead, smart marketers hire an expert.

Agency selection is one of the most important decisions a company makes. For many companies, advertising is among the top indirect expenses. At a time of a New Normal, there is increased pressure on marketers to make the right decision. Partnering successfully with the right agency is more critical than ever. Engaging an experienced agency search consultant to assist in the agency search allows for an inside perspective of the agencies, their capabilities, and resources. Trying to climb the review Everest by yourself is unlikely. Better engage an experienced Sherpa. 


Is Unbranding Good For Your Health?

My first reaction to this story in Ad Age about a proposal in Europe to ban cigarette branding was outrage and amazement. It seemed to smack of the old Soviet Union. A case of government regulators overstepping the boundary of free speech, right?

And yet.

This is not a giant leap over the barrier of free speech. That was taken by all constituencies, including the tobacco companies, when cigarette advertising was banned. Label design influence purchase decision no less than advertising, perhaps more. Procter & Gamble recognized it for "the first moment of truth" for interacting with a product. Thus, eliminating the package design is the logical next step to banning advertising (although, leave it to those cunning advertising people to figure how to brand through the name alone, the only thing that's allowed on the package).

I don't share the view that this is the first step to eliminate advertising for other products. Fast food and sweets are not addictive, while cigarettes are, and therefore in a special class.




When I ran Business Development for Saatchi & Saatchi, we had a rule of thumb: we never pitched an account with less than $10 million in billings. It wasn't smugness. While smaller agencies, with a flat structure, can make a profit on a $5 million account, it is next to impossible for one of the big agencies, with their multi-layered structure and high overhead to eke out a living from small accounts.

That is why I was astounded that Y&R picked up the Butterball Turkey account. Butterball spends $300,000. That's not revenues. Billings!

There is another reason that chasing a $300,000 account for an agency of that stature can be harmful. It can damages the agency brand and is likely to be counterproductive for fighting parity, or at least the perception of parity.

Happy Thanksgiving.


A Veterans Day Rant

Exploiting the sacrifices of soldiers for commercial purposes is as low as one can get, this side of Don Draper writing an anti-tobacco ad a nano-second after his agency lost its cigarette account. Yet this is exactly what MillerCoors and JCPenney are doing as reported in this blog by Stuart Elliott in The New York Times . Stuart and the Times should have stayed away from this tasteless manipulation and phony story, and actually hold these companies', and Madison Avenue, feet to the fire. How many companies, or agencies, actually did a meaningful thing for veterans today, like giving their staff the day off to work in a VA hospital? No matters what your political beliefs are, the vast majority of us don't sacrifice at all while the very few stand guard so we can sleep peacefully at night.

Instead of "celebrating" our soldiers, here is an amazing story about sacrifice and patriotism that appeared in AdWeek four years ago by and about two people that I greatly admire.


Procurement Is The Rodney Dangerfield Of Marketing

There are various opinions of Procurement, which started emerging as a strategic marketing tool 7 or 8 years ago. Agencies blame all of their ills on Procurement, whether fair or not. Even their counterparts in the client's marketing department don't hold Procurement in high regard. Procurement, to quote Rodney Dangerfield, "Gets no respect".

At the root of the problem are dollar and cents. During the two years of the recent recession, Ad Age found that the 100 Leading Advertisers maintained their margins. Agencies, on the other hame, lost almost 2 margin points, from 12.6% to 10.7%. Much of it was a result of clients renegotiating compensation. Yet, focusing solely on fee renegotiation is a mistake. Agency fee is only a small portion of working and non-working budgets -- media, production, and research.

Further, improving the brief process, reducing duplication, and ensuring the senior management, from both sides, gets involved in creative development, can help save 20-25%.

The bottom line is this: despite the wishes of agencies, Procurement is not going away. We might as well make sure that it adds value, not just cut fees. 


Death By Power Point

I spent the past week with a group of 30 search consultants, mostly international, meeting with about top 15 agencies in NY. The visits were part of the Adforum Summit, and were intended to give us a glimpse into the agencies. Here is a quick observations: most of the agencies presented to our group on power point. One long, tiring slide after another. A couple of the agencies, the smaller ones, were more relaxed and chatty. They won, by a mile. Agencies, hypothetically verbose, need the PP crutch. The big, multi-national agencies seemed more concerned with not making a mistake and stuck to their teleprompters. The smaller agencies came across as genuine and more friendly. This is a business that depends on personality. PP commoditizes personality.

The second impression has to do with the number of presenters. Generally speaking, the bigger the agency, the more presenters. It is as if they were trying to prove that they are big by having everybody in the conference room. Sometimes those presenters had only a line or two. Literally. Sometimes some of the agency people in the room did not even get to present. They were just sitting there, nodding and smiling. It was unnerving. It is a mystery to me why an agency, even the big ones, cannot have a meeting by putting forward 3 or 4 people. It will make for better conversation and better intimacy with clients and prospects.