Are agency proft margins too high?

is the headline on an article on page 19 of this week's Campaign.

It is about the ISBA Paying for Advertising report which came out this week and is always worth a read (along with the Kingston Smith report that I mentioned a few blog postings back).  As the article says "The good news is that agency profit margins remain "remarkable resilient".  The bad news being that advertisers seem to resent the fact".

It is a hard one to comment on as we all want to make sure that the agency is making a decent profit, on the right things and is treating the agency in an open, honest and transparent way.  Still to this day there are agencies making revenue on areas such as production costs and annual insurance premiums.  This often support the fact that the scope of work has increased, the resource on the account has increased but yet there has not been an conversation with the client (marketing and procurement) on making sure that the fees match the work and that everyone is happy with all the ancillary costs.

It is up to all of us to make sure that those regular conversations happen, and we aim to work in a partnership way of working.


I am working with a great client at the moment who really wants to make sure that they are getting a 'good deal' by looking at the way that they work with their main agencies first.  By then looking at the marketing and admin processes, we can then look at the commercial construct of the relationship. 

Agency House of the Future

What a great phrase - Agency House of the Future (just needs Michael J Fox in the lead role !). 

I read it in a report by Forrester Research today entitled 'The Future of Agency Relationships' . The report is about how the marketing community needs to lead its agencies to change in this ever increasing marketplace and adaptive marketing era. 

The summary says the marketers should assess their agencies using 3 I's (not eyes!) - ideas; interaction and intelligence.

I think that this paper is really good and makes you think about the future.  I used some of its findings today with a client and they really thought that it made them think about their model and structure of their main agencies going forward.

And on page 11 it says (in bold) - "create a productive relationship with procurement".  I like this report.

A wolf in sheep's clothing

There is an article headlined in this week's Marketing magazine entitled 'Procurement vs creativity.  The oft-derided department can help motivate agencies'.  Now you must be thinking why I have chosen the title for this blog, as I have said before about the lack of positive press about procurement and this seems to be at last a breakthrough.

The article (I have a PDF of it if you would like it) starts off well saying that procurement can help in the creative process by putting a Performance Related Fee (or bonus) in place.  Sure but this is old news.  I put one in place in 2001 - I have even found the original article about it - here it is !.Orange Lowe PRF.  The rest of the article then really goes on about different remuneration models like the Anomaly model of sharing in intellectual property rights.  There is no real other mention of procurement and some of the great added value areas that they can work with both the client and the agency on e.g. process improvements, measurement and investment in technology to drive efficiencies.

I really think it is time to move away from PRF and I totally agree with Debbie M's view in the article that a lot of people talk about exciting new fee structures but the majority of clients (not agencies) are reluctant to do it.

So , let's be creative and take some risks - happy to help and give my view if any clients or agencies are brave enough.

PR article - The buying game

There is an article in this week's PR Week on Procurement and has quotes from PR agencies, Clients and Procurement.  Worth a read - some interesting views in it - with learning's for all in it. Click on the link to read - PR Week article