No matter what they claim about added value services or "exciting" research tools, with more than 80% of advertisers using the services of media auditors to monitor relative buying performance, the fate of the agencies usually rests on the discounts they can offer clients against media procurement.
So, of necessity, new-business pitches are a dirty business and, as the influence of the procurement directors and media auditors has increased, so has the importance of the agencies' finance directors.
In order to offer the levels of discount required to attract prospects on the auditors' books, agencies are forced to indulge in creative accounting with existing business. In short, the level of discount obtained by one client from a media owner is usually sacrificed in order to bring new clients through the door. The rationale is that having a healthy new-business record is indicative of a buzz about an agency and will attract further new accounts. And, at the end of the day, as long as the books balance, in the form of the agency deal with the media owner, who is really going to notice?
Well, therein lies the problem. Because the influence of the auditors is now so pervasive that they act as gatekeepers to the majority of clients, they know when an agency has been forced to offer a deep discount to a new piece of business.
So when a further piece of business comes up for review, they will also know that that agency has no spare discount within its portfolio in order to win the account. They will also know, by looking at the pool prices, which of its clients' rates was sacrificed to achieve this and is therefore propping up the whole agency edifice.
You can't blame the clients for wanting to get the best possible prices, nor the auditors who are providing the service. But the system means that inevitably prices will continue to be driven downwards and agencies forced to cut costs out of their businesses. Something has to give.
While this is not a new complaint, it's rare that an agency will actually make a public stand. So it was brave of PHD to resign its long-standing Pizza Hut account after the client called its second review in as many years, not least because its new-business effort and client retention rate has looked distinctly lacklustre of late.
PHD took the view that it was not prepared to go any further down the auditor's ratchet or sacrifice any of its existing business in order to retain the account. While it is undoubtedly an honourable thing to do, if other agencies continue to opt for the easy route of perpetuating the current system, it may ultimately be futile.
If you have an opinion on this or any other issue raised on Brand Republic, join the debate in the Forum here.