OPINION: Going for a cheap deal can prove bad value for clients

Neil Muffitt believes the creative work of agencies deserves to be better rewarded, and that clients should understand the need for changes to the payment system

Neil Muffitt believes the creative work of agencies deserves to be

better rewarded, and that clients should understand the need for changes

to the payment system



There was a time when many clients didn’t worry about how much their

agency made, but I can’t remember that far back.



Nowadays, it’s commonplace to discuss remuneration alongside the

creative rationale as a further justification for the client to give its

business to the agency.



This is a terrible state of affairs for two reasons. First, a client’s

decision to choose agency A over agency B should not be based on price.

A client isn’t buying a pallet of sugar, and marketing services can’t

realistically be considered commodities.



Second, as soon as remuneration goes on the agenda, the client

automatically thinks the agency is paid too much. I can’t recall a

client saying: ‘Oh, is that all you get out of it?’



Perhaps agencies have only themselves to blame. If a client raises his

or her eyebrows on your suggestion that he gets a 2.5 per cent

commission rebate, stick to your guns. Don’t cave in and offer a bigger

rebate. Convince him on the quality of your thinking and creativity.



The above scenario is very frustrating, but there is another which is

even more so. Why are agencies so keen to give away their core product?

In other words, why do they charge a standard media commission and mark-

up on bought-in costs, and then throw in free creative, planning and

account handling?



That beloved media commission subsidy makes it impossible to measure

whether any part of our service is value for money to the client.



I would much rather we charged the going rate for the creative,

imaginative business advice part of our expertise and charged a much

smaller amount for the mechanical side of the job. After all, you

wouldn’t expect a lawyer to mark up your stamp duty and throw in his

legal advice for nothing.



One way of trying to change the established rules is to involve the

client’s finance director at the stage where you talk money. Most will

be experienced buyers of professional services - legal, banking, audit

and insurance - as a matter of course.



Any finance director worth his salt will recognise value for money and

won’t just buy on price alone. But if you don’t involve him in the

choice of agency it may be hard for him to see the benefits and he will,

instead, concentrate on the costs. It’s no wonder if he then pushes the

marketing director to try for a further 2.5 per cent back on the deal.



There has been much talk over the past ten years of radical changes in

the way agencies earn their money, but in practice not a great deal has

altered.



Payment by results is still a difficult concept because nobody has yet

come up with a formula, acceptable to both client and agency, that can

genuinely isolate the effectiveness of a campaign.



Of course, the main barrier to this is that it represents a change and

is, therefore, outside some individuals’ comfort zones. After all, any

change in the method of remuneration will make comparison with the past

difficult.



It’s a shame that, after successfully pitching for a piece of business,

the agency often can’t persuade the client to alter how it will pay for

marketing services.



Commission and fees still prevail but the system is fundamentally

flawed.Traditionally, the more successful an agency is in negotiating

lower rates, the less it earns. What chance of negotiating a deal with

the finance director (who may not be tied to historical thinking on

remuneration) for you to earn a commission on the amount saved rather

than the amount spent?



Now that would be a first - both client and agency benefiting from a

commission deal.



Neil Muffitt is finance director of advertising principles



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