ANA Study and strong words in Campaign

The ANA in the USA has just published a report which says that the majority of clients are still using the fee based remuneration system, with only a small minority (1% - very small then) looking at value based output.  I would have thought the latter would be higher with the likes of P&G and Coca Cola now looking to operate in this week. Be interesting to see which clients over here start to look at value based pricing in a big way.  Here is the link to the article - ANA report.

The letters page in this week's Campaign page 22 has 2 letters of interest.  One from David Wethey @ Agency Assessments which leads on from the above mention of value based pricing.  David feels that clients and especially procurement people have become use to paying agencies as some form of salary and that we should look at how architects and design shops are charging.  True re design agencies - they tend to charge per staged delivery.

The next letter is from someone called Marcus Cauchi (if you look him up he seems to work in sales). His views on the Thomas Cook media pitch are shall we say very strong.  His website seems to be written with the same strong view on life.  He does make some decent points, and I understand why Campaign has published it as it is a very entertaining ! read, but I do object to the phrase 'guttersnipe procurement monkeys' when he is talking about the recent Belgian pitch where the agencies went on strike.  Does he know all the facts and like the Thomas Cook pitch, it is always better to know all sides of the story before making such sweeping comments.  But worth a read if you have a copy of Campaign.

IPA Report

The IPA have published a report that says that ads that win awards are 11 times more effective. The report examined 213 case studies of advertising over the last eight years, including campaigns by marketers such as Cadbury, Volkswagen, Budweiser, Honda, Audi and Orange. They claim that there is a direct link between creativity and effectiveness and that this is a good argument for quality over cost. So far so good.

But in the next breath, guess what, Hamish Pringle the DG of the IPA says that by putting all the emphasis on cost and procurement, are marketers reducing their chances of creating campaigns that really work and will drive business growth in the long term?. Yes we have last week's example of the Thomas Cook signing on fee (still no proof on that by the way), but hey don't wave a broad brush at everyone else in the industry. 

Apparently procurement people are paid a significant bonus linked for reducing costs. Where is the evidence of this ?  Sure there may be a bonus in play for the individual or department, but targeted savings may be one of say four measures that the bonus could get paid out on (if at all).

I am disappointed by this as I don't really see any evidence of 'tough' procurement driving out cost at the expense of quality.  It is our job to get and know the balance to get the best result for marketing whilst making sure that a fair commercial proposition in place.  Perhaps the IPA could redo the study and see how many of their successful case studies had procurement people in.  I know one of the answers as I worked at Orange when we won the IPA awards !.

The aftermath of the TC affair

This week's Campaign has a number of different articles in response to the 'news' that Thomas Cook was 'asking' its pitching media agencies to pay £1m up front.  I have not seen an official response from TC Procurement or Marketing but I did speak to someone who is aware of the process, and their only comment was that TC treat their agencies as suppliers - read into that what you want.

So for a guided tour on the articles:

Page 2 - Claire Beale leads with the headline 'Why it's time to say no to damaging fee term's'.  This is about the fact that agencies often don't help themselves and likewise there are some clients that will take advantage of this. I agree with this totally and for once procurement isn't blamed !

Page 12 - Tim Williams of Ignition Consulting calls for a better way of charging that isn't link to hours, quoting examples of Coca-Cola (well documented in this blog). I am a great fan of the concept or licence fee - the client pays an one off lump sum for the agreed level of output with agreed parameters e.g. .usage for one year in the UK on TV.  Kerry Glazer @ AAR said this week that they are seeing a few more examples of this happening.

Page 18  - Ian Darby has a good view then the TC pitch is running the danger of supporting  a "murky and opaque world where agencies collect their wedge in the form of undeclared kick-backs from media owners".  I wonder where TC stand with their incumbent agency on unbilled and AVB's ?

then finally on Page 22 - James Kydd ex Virgin Media says that he is sympathetic to TC's demands and that media agencies haven't help themselves so don't deserve much sympathy.

So a jam packed issue on this very thorny topic. I would really love to know the truth on this pitch.  Let's see how it pans out.

Buzzing news today

Have a look at a story on today's Brand Republic site.  Apparently Thomas Cook Procurement are asking for a £1m signing on fee for their £30m media contract that is up for grabs across 4 agencies.  They are asking for a significant reduction in agencies fees and at least a 10% reduction in media costs.  The IPA are saying that this is very unprofessional procurement and that the agencies should pull together.

First is it true ? (MH @ TC if you read this - would you like to set the record straight?).  Secondly would any other category of spend discuss with suppliers a signing on bonus ?  I am sure I have heard about it before, not in marketing but in another category.  Thirdly I do agree with the IPA (if this is true) that the agencies should say no if they are fundamentally disagree with the requirements of the pitch.

Any comments on this?