It’s not about the journey, it’s about the destination
Taking a different perspective to clients’ needs to save costs, Bryan Crawford, chairman of FCB New Zealand, flips the picture to suggest a client’s first step should be reconsidering its approach to working with its agency.
His dealings with client procurement have shown him their objective is to save agency costs – which clients believe comes from an agency discount or going in-house – and more often than not, Crawford believes the secret to reducing cost is to look inside the client to see how they work.
“The cost inside the agency is often the result of the inefficiency of the client,” he says.
“Take two clients, one of whom writes incredibly clear briefs and works in a structured way versus a client who briefs verbally, or not at all, and uses the creative process to get to the answer – that’s an incredibly high-cost way of using an agency.”
His solution is a disciplined process with a clear brief and approval process. It’s a very efficient way to use an agency and if that’s how the money is saved, he asks, does it really matter?
However, in saying this, Crawford points out that there are benefits to working with an agency and there is a lot agencies could do to educate clients about those things.
One of these is the ability to deliver insights to clients from observing what’s happening in other categories and what’s happening around the world.
“If you are not bringing insights to clients then you are not leading your client,” he says.
Insights can also come from the future-thinking nature of agencies as they are looking to see the latest and up-and-coming innovations and capabilities to deliver to clients.
Crawford admits agencies face a challenge as they need to invest in new talent or tech ahead of clients needing it, and no one wants to pay for the future. But when done right, it can be incredibly valuable.
The point was also raised in Digiday’s ‘Confessions of a marketer: Agencies forced brands to in-house more marketing’ article, in which a senior marketer at a global advertiser said things move so quickly that marketers need agencies to know more about the technologies than them.
“Because agencies are in such a competitive market, they thrive off the need to innovate, whereas things can get stagnant with in-house expertise because businesses have internal politics and processes preventing decisions from being made fast.”
Another benefit Crawford sees in agencies, is the ability to hire the top-tier creatives and strategists because the wages can be shared across all the agency’s accounts. When clients only use a percentage of the planner’s or creative’s time, the amount they pay reflects this, so taking them in-house 100 percent of the time means 100 percent of the cost.
“Most clients would have far less than 50 percent of a chief creative officer being paid for in their agency fee. So the idea that they can afford to hire one 100 percent is pretty challenging.”
Creative directors in New Zealand earn on average $200,000 a year and an executive creative director earns on average $320,000 a year according to The Creative Store’s 2018 Salary Survey.
With those numbers, Crawford estimates the number of New Zealand organisations that can afford to hire senior creative talent full-time would be less than five – “maybe two or three can”.
On top of this, he explains the time that talent spends working is accounted for when they work in agencies, as agencies track how much resource was used and how long it was used for.
“There’s a discipline to using the agency because the only thing we have is time.”
“There aren’t many clients, at least that I know of, that has someone accounting for every 15 minutes and what they did in that 15 minutes.”
Crawford believes that can make the work of a client inefficient as there’s no incentive to have a disciplined process and without it, the decision-making and approval processes can become convoluted.
“Agencies are professional service firms – no different to lawyers and accountants in a way – so we have a fairly rigorous process of managing time and valuing time that most clients don’t have.”
But despite that “rigorous process” being all in a day’s work for agencies, not everyone agrees agencies are the most efficient at getting the job done.
According to Anne Miles, managing director and founder of International Creative Services, there is no incentive in the current agency model to work efficiently and effectively and the number one culprit is time sheets.
In an article on LinkedIn, she explained with agencies billing by the head hour, the focus is on increasing head hours and reducing overheads to maximise return.
“Let's say a junior creative costs the agency $50 per hour, and a senior is $90 for example (note that the rates are fictional, but relative, for demonstration). If a junior takes 5 hours to do the job it will be a cost of $250 but the agency will bill it at $750 with a profit of $500, assuming a head hour billable rate of at least $150. If a senior does the same job, and finishes it in 2 hours the cost is $180 and billed to the client at $300 (assuming the same head hour bill of $150 per hour) with a profit of only $120. So see who is the real loser here - the Brands!”
Her suggestions include moving to project-based fees; making sure clients know who is working on their business and holding them accountable; using junior talent for facilitation and getting things done and leaving the senior people for their thinking and tapping into the benefit of their experience and speed; and moving to flat commissions on costs.
In total she has 19 different solutions to keeping agencies relevant and for brands to retain value in their marketing executions, so it’s no surprise Iceberg’s O’Sullivan says brands are taking execution functions in-house.
“The bottom line is, by being able to control the creative and control advertising spend they will save quite a lot of money and be able to return that to shareholders.”
This story was originally published in the 2018 Media issue of NZ Marketing. To subscribe, click here.