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Why paying your agency for being ‘nice’ to you is flawed

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For advertising agencies, “a happy client means a happy agency CFO”. Because when the client is happy the agency makes money.
So it got me wondering why so many clients use financial incentives to encourage their agencies to be nice to them, when a bigger financial incentive is already built into a positive relationship?
I hear and have seen account management people turning themselves inside out looking for a few extra points on the latest client relationship survey because it will mean they will get a few thousand more in bonus.
Behaviour Economics Professor Dan Ariely has shown time and again the distorting impact monetary incentives has on human behaviour.
So is that really the purpose of having a relationship management process? To have the agency fixate on the bonus and how it is calculated?
If the relationship is strong, then the marketers will give more work to the agency and the agency will increase their revenue.
This has a positive impact on everyone in the agency. There is more work for strategy, creative, production and account management, making for a happy agency CFO.
But lets look at the alternative.
Having some sort of regular structured feedback system is a positive step. I think all major advertisers should invest in managing their agency relationships. And that’s all of their agency relationships.
But what about the money?
How much is a good relationship worth?
How big does the bonus need to be? 5% of revenue? 10%? Is it 40% of the bonus? 50%
And what score does the agency need to get the bonus? Points above the global average? Points improved?
Suddenly it gets so murky and petty. And the agency becomes more interested in the score than improving the relationship.
Suddenly the score and the bonus is more important than the relationship.
But important to whom?
Well that is usually only the senior management team at the agency, because almost no one else working on your business gets a benefit from this bonus.
So who is it really incentivising?
If you want good agency relationships, you need to manage them, measure them and look for ways to maximise them.
But It is impossible to simply just pay for them.

TrinityP3 – Strategic Marketing Management Consultants

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