Mad money for mad men how your agency is not your best friend & how they waste your money
First Some Humor.. Or Maybe Some Reality Click the Link To See The Video That I Believe Explains My Blog….PERFECTLY http://tv.adobe.com/watch/metrics-not-myths/bs-detector/ Mad Money For Mad Men Which 50% Of Your Ad Budget Is Your Agency Wasting? Most marketers may know the proverbial saying from John Wannamaker – the father of modern advertising: “I know 50% of my advertising dollars are wasted, I just don’t know which 50%”? I’m writing this article because of the feedback, emails and phone calls I received from last month’s article: “The Death Of A Brand as We Know It”. The quote above speaks to the reality that many marketing programs are not easily justified on basic return-on-investment measures, and that advertising in particular end up being a leap of faith because it’s expensive and the directbenefits are VERY difficult to quantify, if at all….especially today!A major, top 100 retailer called me about the article and through our discussion it became “painfully self-evident” that he had no clue what was happening with his advertising/marketing strategy…except that itwasn’t working anymore like it used to. As we talked, I related to him how I thought consumers were“consuming media today”. I could tell, through his deafening silence, this was a “deer in the headlights”moment for him. After I thought about our discussion for a few days, I became quite frustrated and angrythat his agency was NOT his best friend anymore because they were pushing old strategies and tactics,making the same old MAD MONEY in the new retail world order.For the record, I owned agencies in the 80’s and 90’s. We were extremely successful with clients likeGerber, Pepsico, Ragu, General Mills and many small and large B2B clients. I have also directed the insidemarketing for several large companies, so what I’m about to share with you comes from both sides of theisle…Agency & Client side.You probably hire an agency for a few different reasons. Some of which are:
1. They have a track record of growing businesses. 2. The landscape and multiple channels for “messaging” are confusing and you need someone to help guide and direct your stores messaging 3. You just don’t have the time to learn & invest in this confusing landscape. So here are my thoughts, or should I say “RANTS” about how your agency is not your best friend anymore, if they even were in the first place. Basically, ad agencies and marketing firms are glorified salesmen and middlemen—they make their MAD MONEY off of MAD MARKUPS and Commissions. If you check ADWEEK, Advertising Age, BRANDWEEK, etc. accounts are listed by "billings" or how much clients spend on media each year…or how much YOU spent with them. When an agency takes on a client, they usually handle creative, media placement, consumer research, etc. For doing so, they markeverything up, especially the media placement—usually by about 7%- 17.5% give or take. Why 17.5%? Idunno. Maybe it’s the most agencies think they can get away with before anyone asks questions. In theold days, at my former agency, we marked up ALL “costs” 15% and then we applied an additional mark-up of 17.65% on top of that. That was then however, this is now and the “Ad” world is very,very different today!There are a couple different ways agencies get compensated for their “efforts”. These are:Retainer Relationship.This is when the client (YOU) pay the agency a flat monthly fee that covers all their internal costs andsometimes basic media and maintenance. Outside costs are billed to the client either direct, or with thatawesome mark-up I mentioned previously. This relationship and its costs usually have some sort ofclient/market exclusivity attached to it.Project Based:This relationship is what it states. The agency gives you a budget for a “project” you requested and youare billed for those “agreed upon” costs. BUT, buyer beware, because many times these budgets changebecause “you” or the “agency” made changes to the project and as such, someone has to pay for thosechanges…and that would be “You”! Agencies LOVE this, because you’re already financially vested and
getting more for the project, especially if it’s your idea, creates incremental income. This is what we referto a “plum” assignment.A combination of the above:This is where you pay a monthly fee which covers the basics; open communication, strategy discussionsand some basic creative and then you pay for the tactics as you agree to them….Yep that 17.65%+ thing Here’s my problem from the discussion I had with the retailer. His agency was still selling him on traditional media. TV commercials radio commercials and print – ROP or circulars. They had a website, but the agency did not help manage that or offer any “new media” advice or strategies…OUCH! This is a MAD MONEY approach to marketing for the MAD MEN. Ok, I agree that we need to maintain some sort of a presence with traditional media channels, but NOT as a primary marketing medium anymore. Did you know that print advertising revenues today equate to what they were in the 1950’s? Why you ask? DUH, no one reads newspapers anymore in this soon to be extinguished marketing medium. The same is quickly becoming true with traditional TV/Cable. Have you read the articlesabout consumers “disconnecting” from cable?In June Netflix streamed 1,000,000,000 shows with NO commercials. My Cable lets me “catch up” onmissed shows with minimal or no commercials. My DVR lets me skip through commercials….so whomakes out here? The MAD MEN armed with all that data that promotes Reach & Frequency, butincreasingly, these numbers, in my opinion, are becoming much more curious/dubious than fact.Now what really gets me about this is WHAT agencies are doing to our retail base. I would say the mediamessages for Home Furnishings are as creative as dirt; Yep, or worse. Anyone can create a 50%-70% offeverything, maybe change out the graphics with some Presidents, a Turkey, New Year Hats, or anAmerican Flag. Add a Shamrock, some Fireworks, some Holiday Themes along with a Back to SchoolProgram and you have your “years marketing plan”…and I just gave it to you for free!Now we add to that some Dude screaming to Buy Now, Save Now…yada, yada and you have a recipe forsameness and irrelevance. Come on people, if you yelled at your girlfriend or wife to “Do somethingnow”, etc., please write back to me with: How that works out for you…don’t bother, I already know!Yep that’s what you’re paying for; a tired, overdone pedestrian tactics with no new strategic ideas justrecycled everything for every day. BUT what really upsets me is some of these agencies have multiple
clients in multiple markets and guess what? They/You are paying for this agency’s services: retainer, project, etc., and guess what they/you are getting for your investment? The same strategy, same creative and the same lame results they sold to their Client “A”, but with a different voice over and end tag. Why, because each client is in a different market (MSA) and they don’t see the recycling. I call that “churning & burning”, more MAD MONEY for them, need I explain more? I could make an ugly “price off” commercial with moving pictures, copy and voice on PowerPoint and it would be equal to or better than what you’re paying these agencies for! (I have a PowerPoint presentation with all of these attributes on my LinkedIn profile. It took me 3 hours to make - HERE) So, have I hit a nerve yet? When I was in the business, our platform was to “teach our clients” everything we knew, as weexpected them to teach us everything they knew. By doing this, we created a true partnership. The freeflow of ideas andcritiques forced us to think smarter, be different and very relevant just to keep theirbusiness. We always challenged pedestrian ideas…always. We believed that our customer and ourbusiness with them would get ambushed with better ideas, better creative and better results if we didnot consistently “Set the standards by which the competition competes”.Today, in our industry it’s not the case. MAD MEN are comfortable because their clients are NOTinformed or educated as to changing consumer dynamics, the changing media dynamics and so muchmore that is happening at lightning speed in retail today. They want it this way! Why, because theyhaven’t invested in learning the new paradigm and they’re comfortable with what they know and how ithas consistently delivered MAD MONEY to their bottom line. If this was not the case, they wouldn’taccept “pedestrian” as your brand’s messaging strategy. I know this to be true, because 90%+ in thisindustry have no strategy or tactics as it pertains to the internet because the agencies and the marketingpeople don’t’ want to get out of their comfort zone for their clients.NEW PEW Research (10-15-2012) Substantiates My Position As To How Consumers "CONSUME Media!Read It HERESo, you still don’t believe me? Check out your agencies internet/web presence. This is the client’s “firstface” of an agency, and it’s their primary calling card to potential new business opportunities. It showsthem who they are, what they do, how they do it and who they do it for; with case studies and more. I’ll
bet you their web and internet presence is old, tired, boring and non-inspiring. I’ll bet they have notinvested in their own business to bring it into the last decade, much less today, using all of the awesometechnology afforded to businesses today. This is the first flag, for if they don’t take pride in their ownbrand, how can they justify taking your money for your brand? Ask them that hard question…why theyhaven’t lead by example? (I’d love to hear the excuses and secretive rationale they would have for this)I’ve written tons on the changing consumers; Generation “X” & “Y” and how they consume information,where they get it from and how they interact with it. The problem is that this industry isn’t adapting to itand I believe the protection of the Mad Man’s Income has a lot to do with it. OK, you, their customers arealso responsible because you allow this to happen because you are not educating yourselves!The fact is: Mad Men want to keep you hooked on “Outbound (Traditional) Marketing” when in facttoday it’s about “In Bound (New Media) Marketing”! They don’t want to change, because they don’twant to invest in the paradigm shift. That costs money and takes away from their comfyrevenues/profits. As such, by not leading by example, they only provide and recycle “what they know”stifling new ideas, new revenue streams and new brand opportunities for your retail business.OK, you’re saying you have Facebook, Twitter and Pinterest. I bet your agency charges you between$500.00/month to $8,000/month to manage these for you. I don’t even want to talk about this, thestrategies & tactics implemented on these platforms infuriates me and I’ve already written a ton on thesesubjects in this magazine or in our retail blogs.So, Now what do you do? (Step – 1) Get a marketing person “on-staff” that is a “REAL” marketing person, not a furniture person that came up through the ranks, for that’s all they know: furniture! This person must have knowledge, experience and the creative expertise to manage and direct the efforts of your brand and the agency. Yep, this will cost money to do, especially if they are good at their job. But, if they are reallygood, you will save a ton of money by not paying all that money to the agency. A great marketing persondirects the creative, the copy and the execution…saving those many hours that the agency previouslybilled you for. Soon, you’ll find much of what you paid the agency for can be done in house, limiting youragency to great creative and strategy on demand.Make sure this person’s success and failures are tied to the agency’s success and your lift/profitability.This person should be extremely knowledgeable about how old media is bought and placed as well as
new media and future “trends”. They should spend their time “focused” on inbound marketing, thecreative, the channels and the results. Knowing the product is NOT a requirement, that’s for the buyersand merchandisers. Knowing how to get the product to the right consumer and create leads to yoursalespeople is their job description. Their compensation should be tied to your business success and notlimited, but open ended. The more you succeed, the more they should succeed.(Step – 2)Demand transparency.Know what everything costs, how you are billed, what you are billed, their mark-ups, everything. Theyknow your profits/margins, it should be reciprocated. All concerned should be fully vested in eachother’s success and profitability. That’s what a partnership is.Yes your agency, if they’re any good, needs to make money. They should be paid for creative, brandplatforms and copy. If they do it right, they should be paid handsomely for it. If you’re paying for strategy,you should pay them for a strategic plan and its results. A strategic plan should have everything in it. Itshould be a complete landscape with the S.W.A.T & P.E.S.T analysis. This should be reviewed in everyquarterly meeting and updated immediately after those meetings with any changes relative tocompetitive environment, the economy, new products and more. A strategic plan is not about mediabuys, the media schedule, costs and placements. That part of the plan is about tactics, NOT strategy.Strategy is NOT everything is on sale…that platform is a cop out and if that’s all they’ve got, fire them.Their compensation should be tied to your business success and not limited, but open ended. The moreyou succeed, the more they make. Yep, it’s sort of like piece work in furniture, the more you make themore you make.There is so much more I could RANT about here, but we have a limited space to do so. We have manytools available to retailers to help educate them to develop a strategic plan and they are free on ourwebsite: http://www.social4retail.com in the About Us & Our Retail Blog.I could write a book about this for I am passionate on setting those standards by which the completionmust compete….and you should be too! Back To Blog Page About Bill Napier: Bill is a specialist in creating, guiding and deploying successful marketing B2B & B2C solutions integrating traditional marketing strategies with the web and social media. He has worked in the home furnishings industry for over 12 years, as the chief marketing officer for some of the industrys largest manufacturers and creating some of the largest promotions ever launched within the industry. Contact Bill at email@example.com, (612) 217-1297or www.social4retail.com.