Agency Economics, 101

Sales organizations spend lavish amounts of time, energy and capital pursuing business at agencies. But once there, most of us ignore the elephant in the room.

We talk about marginal improvements to performance, brand "safe" environments, effective CPMs and a lot of other minutiae tied to successful stewardship of the latest plan. We prattle on about our latest reporting dashboard, the premium publishers or content we represent, how we're more "transparent" than the other guys. I wonder if at a certain point of this litany the agency folks just see our lips moving and only hear "blah...blah...blah...."

We stay locked onto the marginal, temporary issues of media planning (insuring that all we'll ever have is marginal, temporary success) while ignoring the big economic issues that could give our relationship with the agency some much needed urgency and power.

It's the Agency Economy, Stupid!

This week's Drift is proudly underwritten by Krux, the Salesforce DMP. Krux drives more valuable content, commerce, and advertising experiences for the world's leading marketers and media companies. Clients include Anheuser-Busch In-Bev, JetBlue, Kellogg, L'Oréal, Meredith Corporation, NewsCorp, the BBC, and Peugeot Citroen. Learn more at

My hypothesis is pretty straightforward. We are living at a time of consolidation, in which clients and agencies are going to be dealing with fewer companies, not more. (This trend is masked by the insignificant "testing" that goes on around the margins of planning.) The winning media companies, aggregators and tech vendors will be those who frame their benefits and align their value with the core economic issues confronting agencies. There are four:

Account Security: Senior agency executives live in perpetual anxiety over a major account going into review. That's a seismic event. But the more subtle, persistent agita comes from the soft erosion of clients inviting other shops in on a "project" basis. If you're not talking about how your services and capabilities can help the agency drive interest and loyalty with the client, you are missing a big opportunity.

Budget Growth: The dirty secret is that margins on digital media buying are thin to non-existent. The only way the agency stays healthy and profitable is to get its current clients to increase budgets. Too many of us only stay focused on getting our share of existing budgets, instead of on how we can help the agency access and grow the dollars they get from clients.

Workforce Extension: It's no secret that agencies are severely understaffed. Most don't have the FTEs (Full Time Equivalents -- agency-speak for "people") to do more than keep up with process. How can your organization serve as an extension of the agency's own workforce and provide core services -- creative, aggregation, marketing, promotion -- that allow the agency to drive more profit without more bodies?

Commoditization: And here we sellers thought this was our issue! The agency -- and most especially the planning teams -- are swimming against the same currents of commoditization and automation that many of us do. How can you effectively bundle your services into programs and add value to them so that they can't be commoditized or automated? How can you help the daughter agency or the planning team hold onto the spending and influence they so desperately fear losing to the trading desks?

Are these conversations you'll have with the media planner at the 11th hour of the RFP process? Hardly. But if you're not engaging in them at an organizational level and allowing them to drive your strategic planning, then don't be surprised when the RFPs stop coming and you find yourself frozen out of the agency entirely.

The core content of today's Drift was posted in 2012. Despite so much change, how little has really changed.