Agencies have got their pitch wrong
A view from Nick Manning

Agencies have got their pitch wrong

The needs of advertisers have changed dramatically and media agencies are failing to keep up.

Advertisers want radical change from their media reviews. They have become increasingly frustrated by the gap that is widening between the promises agencies make at pitch stage and the reality of life afterwards.

First, there was "mediapalooza" in 2015. Then came an Association of National Advertisers investigation, which confirmed some agency groups boost their profits by ensuring any additional income they earn from a client’s activity falls outside the scope of the contract.

Some also negotiate hard on the advertiser’s right to discover what is really going on by limiting access to the relevant data.

Advertisers report that they are weary of having to identify for themselves the mechanics that media agencies deploy to drive additional revenue for the agency group, the growing prevalence of "undisclosed" trading arrangements that cannot be audited and the mysterious "service level agreements" between agency groups and media owners.

Online advertising raises several questions. For example, where is the independent, validated research that proves audience delivery? Also, what resources can an advertiser provide itself and how easy is it to in-source programmatic? Does it still need a media agency? This last question is partly an expression of the lack of trust many advertisers feel but it is also symptomatic of a market full of choices.

Advertisers need to approach the selection of their partners differently. The question is no longer "which media agency should I hire?" but "what external resources do I need to achieve my business objectives and match my internal organisation?"

The right answer might not be to change media agencies but to challenge the incumbent to adapt to the advertiser’s new needs. Focus on solutions, not just resources.

The question is no longer "which media agency should I hire?" but "what external resources do I need to achieve my business objectives and match my internal organisation?"

Media agencies have great capabilities and these can be tested as part of the tendering process. The actual pitch meetings should concentrate solely on how the agency can improve the advertiser’s business performance.

Advertisers should also implement the gold-standard contract templates issued by ISBA and the ANA. They should insist on full transparency in all aspects and agree remuneration terms that reward the agencies proportionately for their effort and their contribution to business success – with tangible measures.

Once this is done, advertisers must insist on verification of contract compliance in every dimension. This should not be negotiable.

Of course, media pricing matters and advertisers will want to know their agency has buying power. But it is no longer tenable for agencies to offer low headline commission rates and hope to negotiate enough contract limitations to get away with unseen income.

They should propose compensation based on full transparency and with the right balance of base fee and variable reward structure with no hidden earnings. Agencies often say this is unrealistic but advertisers should make this a pre-condition of appointment.

Contract negotiations are a two-way street and take time but agencies should expect their final position to be close to their undertakings pre-pitch.

The needs of advertisers have changed but the way that media agencies pitch has not kept up. The pitching process needs to adapt to address this mismatch of expectations.

Advertisers are already starting to review alternatives to the "usual suspects" and smart agencies will change their behaviour to achieve competitive advantage.

Nick Manning is the chief strategy officer at Ebiquity, which advised on the ANA review