PERSPECTIVE: Top agency chiefs must fight against the client squeeze

I’m grateful to one of adland’s genuine luminaries for this column.

I’m grateful to one of adland’s genuine luminaries for this

column.



He called to lament the failure of agencies big and small to see the

long-term trouble the business is in, and how no-one has the balls to

stand up to clients and fight adland’s cause. Of course, he couldn’t say

any of this himself - well, maybe when he retires. People don’t like you

pointing out the spot on the end of their nose.



The argument is familiar: margins are being squeezed ever tighter by a

generation of MBA-toting clients who don’t really value advertising and

who insist on testing their judgment against that of the so-called

experts through research. The work, therefore, becomes sanitised and

doesn’t have the desired effect, contributing to a vicious circle that

includes discouraging the brightest talent from joining the industry

because the idea of being kicked around by clients for little job

satisfaction does not stack up against, say, management consultancy.



That argument has raged on for nearly as long as the above sentence.



It’s curious when viewed against our recent Agency Performance League,

which revealed how well many are performing. Can business really be so

bad when most agencies are turning in increased turnover and

profits?



This, of course, ignores the long-term malaise in favour of the

short-term quick fix.



I can’t remember who it was that said long-term profits are just a

succession of short-term profits strung together, but they’re only half

right.



In the short to mid term, agencies will continue to grow and produce

more profits. Ironically, the downturn that began the client squeeze,

and the accompanying suspicion that agencies had been milking clients,

have forced agencies to become almost unrecognisably better-run

businesses than they were. As another chief executive told me recently

about the 80s: none of us had a clue about profit and loss

responsibilities per client back then, we just knew that whatever we

spent we earned a good deal more, which was our profit. Instead, the

real worry is the income that is being lost to advertising as a global

business; money that is finding its way into the pockets of anyone from

direct marketing companies to sports marketing agencies to new-media

shops and management consultancies.



We have yet to experience the full extent of the trickle-down from such

developments. What’s certain is that lone agencies or even groups cannot

resist the trend alone. What needs to happen soon - and it’s as radical

a suggestion in practice as it is common sense on paper - is for Phil

Geier, Martin Sorrell, John Wren and the other heads of the five

families to get together and present a united front to multinational

advertisers over margins and remuneration issues. Running your 20-man

shop in Soho, it might be hard to see how this affects you but, in the

end, we’re all in this together.



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