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A Cure For Ad Agency Blues

Advertising is a mystery to most company owners -- which may explain why so few get their money's worth from their agencies.
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If you ever want to see a glazed expression or a look of utter frustration, just ask an entrepreneur about his advertising agency. Most chief executive officers think the budget heading "advertising expense" might just as well be called "mystery expense" or, worse still, "rip-off" expense. You can make book that CEOs, especially in small companies, think they're being had by their ad agencies. And for good reason: they are. But not by crooks or thieves or dummies. For the most part, they are dealing with bright, honest, dedicated professionals. So, why the dilemma?

The answer is simple. The average CEO doesn't understand advertising agencies. He knows that they somehow create advertising and then place it. But he thinks of them as outsiders, who spend most of their time brownnosing him and everybody else in his company. He resents their continuing effort to get more money for advertising, regardless of whether it produces sales. His life is made even more miserable because while the agency is hounding him for more advertising money, his sales executives are telling him to spend less on advertising and more for field sales. It's no wonder that CEOs throw up their hands. But they're wrong. Advertising is an area that desperately needs a CEO's personal involvement. And that's particularly true in small, or not-so-small, companies, where the future of the company may depend on the CEO's making the right decisions.

Since I have been on both sides of the fence (I once owned an agency, and I've spent tens of millions of advertising dollars through outside agencies), let me try to shed some light on how you can make the advertising world work for you.

Let's begin with the account executive, who is, or should be, your principal contact with the agency. This is a good place to start because if you miss here, there's no way to win. The account executive's job description says that he is responsible for coordinating all of your requirements with the appropriate people within the agency. In fact, his job is: (1) to keep your account; and (2) to get your ad budget increased. His job is political, both with you and with the people at the agency. So you shouldn't be surprised if he spends a lot of time currying your favor.

Don't think for a moment that you can change the character of account executives, because you can't. What you can and should do is be sure that you get the best the agency has to offer. A word to the wise: don't try to get any of the top dogs. Agencies are like any other company -- their top management is snowed under. This means you won't get the time you need when you need it. On the other hand, if the agency people try to palm off some junior person or the owner's brother-in-law, give your old tried-and-true CEO silent stare until they try again. What you want is someone who is bright, who knows the agency like the back of his hand, and who isn't loaded down with 50 other accounts. Keep staring until they produce someone who gives you a warm feeling.

Once you're satisfied, help your account executive to be a better politician within your company. The more he knows about you and your key players, the better he will function. Understand, though, that all account executives are expected to spend money on accounts that the agency wants to keep. So if you won't let him pick up checks, buy your spouse gifts, furnish hard-to-get tickets, and so on, then his management will assume that you don't like him or that he's doing a lousy job. If you're not careful, you may lose a good account executive and get stuck with the brother-in-law, or go back to staring again. It may sound silly, but then the whole business is silly. Remember, you are playing by their rules. Don't try to change the unchangeable. And remember, too, the account executive is going to be spending your money on something you don't know a damned thing about, so ask questions, be demanding, and don't get conned.

Now, for the creative department. You'll have no trouble recognizing them, because they never look normal. Don't act surprised to meet some weird-looking thing, with hair down to his waist if it's a man, or a crew cut if it's a woman. Expect them to treat you like a worm and to laugh at all your ideas -- they don't understand brownnosing very well. If they remotely resemble someone you would hire, you've got the wrong agency. If the agency tries to keep the creative people hidden, insist on meeting them; first, because it will make your day, but more important, because they are the reason you are hiring the agency in the first place. (You may be told by your agency that creative represents only 10% to 20% of the agency's work, which is true, but that's the same as saying that your lungs are only 10% of your body -- it's hard to breathe without them.)

Let the creative people show you their work. What you are looking for is something that is fresh and different, even outrageous. Contrary to the advice you may have received, you are not looking for practical or solid creative ideas. Hell, you can think of those -- that's exactly what they were laughing at. What you are looking for are new and exciting ideas that stir the imagination. Who knows what the final ad or commercial will look like, but it's vital that you have the talent available to start with something truly creative. What you don't want is warmedover copies of past efforts, or, even worse, something that was designed to please you and wouldn't sell grits in Georgia. So keep your nose out of the creative sessions.

Now that you know what to expect from the main characters, let's talk about media buying. The principal source of income for agencies is the 15% commission they receive for placing clients' advertising in magazines and newspapers, on TV, radio, billboards, and so forth. The system has been going on since Moses was a boy, and it made sense back when only agencies bought media space or time, but that was long ago. Today, there are media-buying firms that buy hundreds of millions of dollars' worth of ad placements. By combining the buying power of a number of accounts and by making long-term buying commitments to TV and radio stations, the media-buying services can offer substantial savings on placement. While there are agencies, particularly the very large ones, that still make their own buys, others find it more economical and more efficient to leave the purchases to the media-buying companies. Since agencies can pass the job of placing advertising along to someone who will probably do it better and cheaper, does it make sense to pay them 15% of billings? That's one problem with the system, but it's not the only one. Since the billing percentage is the principal source of income for the agency, they are under pressure to spend as much as possible in order to collect more in commissions; they may even be tempted to spend too much at the wrong time. Also, it's more profitable for the agency to use the same ad or commercial over and over again, avoiding added creative or production costs. The whole billing system is antiquated, and I, for one, think it's wrong. At the very least, it sows the seeds of mistrust.

There is a better way. Suppose you tell the agency that in the future you want all advertising to be billed to you at net cost -- no commissions. Instead, you agree to pay the agency for the services it performs; pay by the hour, as you pay for most professional services, but by all means let them make a profit on the account. Why not even give them an incentive kicker, based on sales results? I'm not suggesting that you try to save money, but rather that you try to get more bang for your bucks.

Here's another idea for you to consider. Tell your agency to authorize its media-buying service or department to make what are called "opportunistic" media buys on your behalf, to be limited by whatever dollar, seasonal, and demographic requirements you may have. There are times when TV and radio stations, along with other media, are unable to sell a particular spot or space, or they may have last-minute cancellations. Like every other business with excess inventory, they want to get rid of it and are willing to deal. You'll be shocked at the buys that can be made. As an example, two years ago, when my own agency was taking a client's product national, our media buyer was able to get a prime-time spot on a major network for $40,000. The spot normally sold for $200,000, but there had been a last-minute cancellation. Such fantastic buys won't happen often, but they will happen, and you'll want your agency's media buyer to be right there when spots open up.

While it may go against your grain, at least consider making long-term commitments to your agency. The owner is trying to build a business, too, and he has a lot of accounts vying for his attention. A long-term commitment by you may be just what it takes to make him light up. I had an experience a few weeks ago that shows how important a long-term commitment can be. I am a consultant to a small company that has developed a dynamite consumer product. What they don't have is money. They desperately need a lot of start-up creative work, such as package design, copy and layout for sales kits, print ads, as well as radio scripts and story-boards for TV commercials. Obviously, they need an advertising agency, but no money, no agency, right? Wrong. We met with top management of one of the largest and best agencies in the South, who liked the product and the people. When the meeting was over, we had an agency that was willing to bet on the future and to invest their creative talent to accomplish all the in-house work at no cost. We, in turn, had agreed to a long-term commitment. Not only do we have an outstanding agency, but we're getting top management's special attention.

Which brings me to my final, and probably most important, point: your personal relationship with the top management of the agency. You need their involvement and they need yours, which does not mean living together. But there will be a few times each year when you'll want to sit with them and their key people, usually when you are in the planning stage of a new campaign. That's when you really need their professional input. Have an understanding right from the start that you won't ask for many of these sessions, but that when it's your time, you'll want their full and undivided attention. If you respect the people involved and listen well, these sessions can make a hell of a difference to the success of your campaign.

So get rid of the glazed expression and the frustration of hating your agency. Get involved. Work out fair financial arrangements that pay your agency for its services; give them a retainer if necessary; pay them more, if they produce. Set specific goals to which they agree. Be sure you have the right account executive. Let the creative people have their head. And be willing to make long-term commitments. Advertising is in your budget as an expense; it's time to make it generate some income.

Last updated: Oct 1, 1986




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