A couple of years ago, I wrote an article entitled, “The Race To Zero” and the British Government’s ludicrous e-auction process for their prestigious creative roster. Their process was a shortsighted, misguided attempt at lowering costs without any consideration as to what constituted value. It was a dim-witted idea, devoid of common sense, conceived by idiots.
Yes. I said idiots. (Perhaps the same lot that came up with Brexit, I don’t know).
The British Government is by no means alone in being dim-witted when it comes to coming up with daft ideas that end up treating agencies poorly. Marketers across the world frequently seek unreasonable discounts, free work, payment terms that extend beyond 120 days and then complain when the relationship falls apart.
The tougher the marketer pushes, the tougher agencies have to be with their services because services, resources and profits have to come from somewhere. Beat your agency over the head hard enough or too often, and here’s what can happen:
Provide fewer resources
Like any other business, your agency(s) need to make a fair profit and your scope of work or requirements are typically based on staffing plan to deliver those requirements. Cut costs or fees too far and the agency will likely be pulling resources from your business to compensate.
Provide less senior resources
The other way agencies make up the difference in a shortfall in fees or remuneration is by substituting senior resources for less pricey and less experienced resources. One of the first symptoms of squeezing too hard is the marketer complaining their resources are too junior.
With fewer or more junior resources to manage and maintain your business, the chances of your agency teams getting burned out is much higher. And burned out teams typically don’t deliver inspiring strategies, great creative or solve difficult problems.
The agency quits
If your agency quits – it’s more than just embarrassing – it’s expensive, time consuming and disruptive to go find another agency. Even if your agency doesn’t quit – it’s likely they’ll be fishing for a competitive vertical business to replace your unprofitable account (even if you don’t know it).
Everything starts to cost extra
With costs cut, or payment terms extended, goodwill erodes quickly and you should be prepared for additional estimates, change order requests, contingency budget requests and invoices for anything that isn’t part of the original scope – all of which may cost more than you’ve actually succeeded in cutting.
You’re handed an (unpleasant) year-end surprise
Even if you succeed in cutting costs, reducing fees or extending payment terms and you think you’re out of the woods, the chances of the agency coming back to you at the end of your fiscal year with a nasty surprise are high. Trust me. Agencies keep track of the work they do, who’s working on what and how much your business really costs to service (even if it doesn’t always appear as if they do!)
Even on the global stage, marketing communities are typically quite small. And whether it’s a poorly run pitch process, industry events or resources leaving one agency and joining another – people talk. And no matter how much protection you think you have in place, word will get out that you have unacceptable business terms and worst of all – you’re a cheap client.
And while your brand may be enticing, there’s a limit to what marketers should ask and what agencies should expect.
Stephan Argent is Founder and Principal at Listenmore Inc offering confidential advisory to marketers looking for truly independent insight and advice they can’t find anywhere else. Read more like this on our blog Marketing Unscrewed / follow me @StephanArgent