4a’s western finance committee meeting...approximately 2/3 of clients can’t prove the impact of...

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Client & Agency Burning Issues 2014 4A’s Western Finance Committee Meeting

June 3, 2014

Today’s Discussion

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Client and Agency Burning Issues

MIG Recommendations

Open Discussion

Client and Agency

Burning Issues

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Approximately 2/3 of Clients Can’t Prove

The Impact Of Marketing

36%

50%

14%

29%

52%

20%

0%

10%

20%

30%

40%

50%

60%

We prove the impact quantitatively We have a good qualitative sense ofthe impact, but not a quantitative

sense

We haven't been able to show theimpact yet

Which best describes how your company shows the short-term impact of marketing spend on your business?

Which best describes how your company shows the long-term impact of marketing spend on your business?

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Short and Long Term Impact of Marketing Spend on Business

Source: February 2014; The CMO Survey

Burning Issue #1: Greater Focus On Results

CMOs Must Prove Business Value

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1 – 2013 CMO Survey

2 – http://www.heidrick.com/~/media/Publications%20and%20Reports/The-Evolved-CMO-in-2014.pdf

Yes, 66.40%

No, 33.60%

Do you feel pressure from your CEO or Board to prove

the value of marketing?1

13%

16%

54%

Increase shareholdervalue

Meet profit targets

Meet revenue targets

Marketing goals or objectives are most directly aligned to:2

33%

40%

63%

Launch newproducts/brands

Increase brandawareness

Acquire new customers

Top three marketing objectives are to:2

Burning Issue #1: Greater Focus On Results

CMO Tenure is Increasing;

Client-Agency Tenure is Decreasing

Source: http://adage.com/article/agency-news/communication-breakdown-volvo-points-adland-issue/239711/ https://www.spencerstuart.com/who-we-are/media-center/chief-marketing-officer-tenure-now-at-45-months

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Average CMO Tenure

23.6 23.5 23.2

26.8

28.4

34.7

42.0 43.0

45.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

2002 2004 2006 2008 2010 2012 2014

Mo

nth

s Burning Issue #1: Greater Focus On Results

7.2

5.3

2.5

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

1984 1997 2013 2020

Years

?

Average Client-Agency Tenure

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38.3% 38.2%

20.2% 31.1%

22.6%

15.9%

9.6% 8.1%

4.0% 3.9%

5.2% 2.7%

0%

20%

40%

60%

80%

100%

2011 2012 2013 2014 2015 2016 2017

TV Digital Print Radio Outdoor Directories

TV

Digital

Print

Radio Outdoor

Directories

http://www.clickz.com/clickz/column/2299703/the-big-disconnect-why-marketers-are-slow-to-embrace-mobile-ads-and-5-things-you-can-do

Digital Spending Outpaces Other Media

Burning Issue #2: More Digital = Higher Fees

Digital Now Over 1/3 of Agency Revenue

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Burning Issue #2: More Digital = Higher Fees

2009 2010 2011 2012 2013

25.8% 28.0%

30.3% 32.5%

35.3%

Digital revenue as a percent of U.S. agency revenue.

Source: http://adage.com/article/agency-news/2014-agency-report-revenue-staffing-stocks-digital/292849/

Clients Are Increasing In-House Agency Work

9

…of client-side

marketers have in-house

agencies in 2013; up

from 42% in 2008

58%

Source: 2014 RSW/Us New Year Outlook Report: Agency And Marketer Expectations And Perspective For The Coming Year

40% Of clients with in-house agencies

have cited moving creative

strategy to their in-house agency

56% Of clients with in-house agencies

claimed to have moved business

that used to be handled by their

external agency in-house.

Burning Issue #3: More Work Going In-House

Annual Compensation Negotiations

10

Year ’97 ’00 ‘03 ‘06/’07 ‘10 ‘13

When

Required 45% 33% 30% 30% 23% 26%

Annually, for

the following

year

36% 42% 63% 61% 61% 72%

Source: ANA Survey Research: 2013 Trends in Agency

Compensation, 16th Edition

Frequency of Compensation Negotiation

Burning Issue #4: Client Negotiations Are More Aggressive

Agencies Can’t Avoid Procurement

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NORTH AMERICA

LATAM

EMEA

ASIA PACIFIC

Source: 2012 WFA SPIRE Diagnostic Tool

% of Marketing Spend Under Procurement Influence by Region


Agencies Negotiate with Procurement

Procurement led, with support from

marketing & finance, 51%

Procurement, 11%

Marketing, 6%

Marketing led, with support from

procurement & finance, 20%

Finance, 0%

There is no formal system in place, 6%

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43% in 2011

26% in 2011

Who is in charge of making changes to your remuneration models & implementing them?

Source: 2014 WFA report on Global Agency Remuneration Trends


Cost is the Most Important Procurement Metric

13

8%

16%

20%

30%

42%

44%

55%

56%

62%

72%

84%

94%

0% 20% 40% 60% 80% 100%

Other

Improve Brand Health Metrics

Sales/Market Share Increases

Improve Marketing ROI

Industry Intelligence

Innovation

Internal Stakeholder (Marketing) Satisfaction

Risk Mitigation

Process Improvements

Agency/Supplier Performance Improvements

Cost Avoidance

Cost Reduction

Which of the following metrics are used at your company to

measure the success of the marketing procurement organization?

Source: http://www.ana.net/miccontent/show/id/bd-elevating-the-role-of-marketing-procurement


AOR Structures are Disappearing

49%

57%

49%

44%

46%

48%

50%

52%

54%

56%

58%

Agencies 2013 Agencies 2014 Clients 2014

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The “AOR” is disappearing. (% of respondents who agree)

Source: RSW/US; 2011 New Business Report: A Client’s Look Ahead At Agencies


Clients Are Seeking Longer Payment Terms

"We can confirm that while our objective is 120 days… The reason we made

this move to 120-days payment terms is to align closer to the trends of our

peers.”

Procter & Gamble Co. said last year it would seek to extend payment terms

from 30 to 75 days in new contracts with agencies.

Mondelez International about a year ago confirmed it was instituting 120-day

payment terms.

Anheuser-Busch InBev has standard payment terms of 120 days.

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http://adage.com/article/agency-news/mars-seeks-120-day-payment-terms-vendors/293397/

http://www.mediapost.com/publications/article/205513/120-day-payment-term-survival-guide.html

75-120 day payment terms are becoming more common.






























Clients Considering New Incentive Plans

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Source: 2014 WFA report on Global Agency Remuneration Trends

6%

14%

14%

20%

28%

34%

37%

37%

0% 5% 10% 15% 20% 25% 30% 35% 40%

No, we have no current plans

Yes, we may restructure/reduce commission

Yes, we restructure/reduce fee

Yes, we switch agencies

Yes, we may change existing performance incentives

Yes, we want to link more closely our companyperformance to agency income

Yes, we may explore value based compensation models

Yes, we may add performance incentives

Performance Incentive Plans


Agencies Need to Innovate to Meet Expectations

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Source: RSW/US; 2012 New Business Report: Client & Agency Perspective on Topics Related to Agency New Business

3%

11%

86%

0% 20% 40% 60% 80% 100%

Don't Know

No

Yes

In general, do you feel clients are asking agencies to do more with less?

Burning Issue #5: Efficiency & Innovation

New Business is Increasingly Challenging

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10%

25%

48%

16%

2%

0% 10% 20% 30% 40% 50%

A lot harder

Harder

The same

Easier

A lot easier

Is obtaining business easier or

harder than it was last year? 66%

59%

22% 21%

5%

0%

20%

40%

60%

80%

Feweropportunities

Harder tobreak

through toprospects

Other Less time todo it

Can’t make the

investment in a new

business program

Why is it harder to obtain

new business?

35% of agencies are finding it

harder to obtain new business. Mostly due to fewer opportunities.

Burning Issue #6: More At-Bats & More Wins Needed

Burning Issues

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Greater focus on results

More digital = higher fees

More work going in-house

Client negotiations more aggressive

Efficiency & innovation

More at-bats & more wins needed

Source: Mercer Island Group

Burning Issues

20

Greater focus on results

More digital = higher fees

More work going in-house

Client negotiations more aggressive

Efficiency & innovation

More at-bats & more wins needed

Unprecedented Financial Challenges


How to Address Financial Challenges?

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1. Effective Negotiating

2. Secure current clients

3. Grow current clients

4. Pitch better


How to Address Financial Challenges?

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Effective Negotiating

Secure Current Clients

Grow Current Clients

Pitch Better

Negotiating Do’s & Don’ts

Relationship Management

Business Issues Training

Distinctively Address Real

Client Needs

What: How:


Negotiation Do’s & Don’ts

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Negotiation Do’s

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1. Link comp to Business Issues

2. Be transparent

3. Negotiate to a clear SOW

4. Have a compensation philosophy

5. Put it in writing

6. Avoid markups, hidden fees

7. Include a 3rd party 360


Negotiation Don’ts

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1. Negotiate with yourself

2. Negotiate without a clear SOW

3. Make it confusing

4. Keep it oral

5. Vague terms & conditions

6. Unclear success metrics


Keeping Current Clients via

Relationship Management

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Clear & Regular Communication

Could Ensure Better Relationships

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6%

18%

24%

41%

41%

47%

59%

77%

77%

82%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Other

Using operation process (i.e. 6 sigma)

Adding technologies to improve communication

Embracing best practice approach

Continuously auditing and assessing competency

Using performace scorecard or metrics

Involving senior client management

Ensuring client/agency teams are aligned

Making sure that the briefs are clear

Regular reviews and an annual evaluation

What can clients do to ensure better client/agency relationships? (Check all that apply)

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Annual Feedback Cadence & Tools

Annual Feedback Cadence & Tools

Daily Annual

Day-to-day Feedback

Regular Meeting

Feedback

Post-Project Feedback

Special Topic Meeting

Feedback

Formal Comprehensive

Feedback

Frequency

Type

Tool Interpersonal

Feedback Training

Regular Meeting Survey

Project Review Survey

Special Topic Meeting Survey

Annual 360 Review Process

Turn-key surveys:

• Pre-programmed & ready to distribute

• Built in reporting & analysis

• Simple

• Easy to apply

• Effective

• Rich & detailed

feedback Details


Client Run Assessment

Processes Are Not Effective

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Of clients rate their agency measurement capability “highly”

Of clients view their assessment as being effective only “one-way”

Of agency evaluations are “externally benchmarked”

Of client evaluations are “externally benchmarked”

Source: WARC Best Practices; February 2012; How to Assess Client-Agency Relationships Effectively

Client & Agency Assessment Best Practices

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Regular & Timely Early Warning

Third Party; Confidential Filter Straight Scoop

Unbiased Equal Client & Agency Representation

Qualitative & Quantitative Uncover Performance Drivers

Measures Importance & Performance Focused Improvement Efforts

Access to “Norms” & Best Practices Grounded Recommendations

Two Way Full Relationship Focus


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Bi-Directional (360) Review Process Valuable, unbiased insight into improvement

opportunities. Based on best practices:

• Third party objectivity (like MIG)

• Quantitative & qualitative feedback

• Prioritized view

• Basis for rich improvement discussions


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Interpersonal Feedback Training

Interpersonal Feedback Training

Feedback Approach: • One-way • Short, to-the-point • Honest • Good intent • Direct • Fact based • Descriptive

Benefits: • Helps people hear your input

without defensiveness.

• Reinforces positive behavior, changes ineffective

behavior, or stops inappropriate behavior.

• Strengthens an authentic, respectful relationship

with co-workers.

Feedback Model:

Feedback Example:

When you took a call during the meeting I felt

disrespected. I suggest that you wait until after the

meeting to take your calls in the future.

I wonder

I suggest

I want

When I

heard or

saw…

I thought

or I felt…

1

2

3


Growing Current Clients via

Business Issues Training

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Agencies Are Often Self-Focused

35

0%

2%

15%

11%

26%

20%

14%

8%

3%

1%

0% 5% 10% 15% 20% 25% 30%

1

2

3

4

5

6

7

8

9

10

How often do marketing agencies comes to an initial meeting with thoughts about

your business and/or smart questions that show they have interest in your business?

Source: RSW/US; 2012 New Business Report; Client & Agency Perspective On Topics Related To Agency New Business

Me! Me! Me! Me!

ZZZZ…

(1=Never; 10=Always)

Clients Want to Hear Thoughts

About Their Business

36

0%

0%

2%

2%

3%

0%

13%

12%

22%

45%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

1

2

3

4

5

6

7

8

9

10

79% of marketers say it is “Very Important” to come to an initial meeting with

thoughts about their business and/or smart questions to show interest.

Source: RSW/US; 2012 New Business Report; Client & Agency Perspective On Topics Related To Agency New Business

(1=Not at all important; 10=Very important)

Agency services are viewed as a cost center

No one really wants to “buy”: • Advertising

• PR

• Media

• Digital

• Content

• Etc.

Clients need help solving their problems:

addressing key business issues

37

$$$$

Agencies Must Address Client Business Issues


Agency Solutions Must Address Business Issues

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Business Issues Agency Solutions - Examples

Revenue Offer optimization

Market Share Targeting & mix management

Traffic Promotional print

Customer Acquisition Sampling

Loyalty Loyalty card

Growth Targeted investment

Awareness Media targeting

Leads Direct response

ARPU Integrated marketing

Upsell/cross-sell Targeted offers

Competition Direct marketing

New Products & Launches Targeted offers


Better Pitching

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Client’s Want Agencies Focused on

The Client’s Business Issues

40


2%

11%

12%

17%

26%

28%

40%

39%

40%

60%

63%

72%

77%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Lenth of presentation

Other

Keeping to the scheduled appointment

Attendance of the day-to-day team

Relevance of case studies

Other clients agency has worked for

Agency's planning process

Personality of presenter

Questions asked by agency

Offering something fresh & new

Understanding your company direction

Creative presented

Understanding of your market

Which aspects presented during the presentation (or introductory meeting) were most

critical in helping you decide which agency to choose?

Client, not

agency, focused

selection criteria.

Basic Pitching Do’s

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1. Address the Business Issue

2. Focus on the client

3. Address the assignment

4. Make it interactive

5. Finish early

6. Bring the workers & everyone presents

7. Rehearse


Basic Pitching Don’ts

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1. Focus on yourself

2. Change the assignment

3. Make it a speech

4. Finish late

5. Bring a pitch team

6. “Wing it”


Final Thoughts

1. Understand how the client

defines success

2. Help the client succeed

43 Source: Mercer Island Group

Thank you!

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Stephen Boehler

[email protected]

206.236.0447 X105

206.650.3759

Robin Boehler

[email protected]

206.236.0447 X106

206.650.8856

mailto:[email protected]

mailto:[email protected]

4a’s western finance committee meeting...approximately 2/3 of clients can’t prove the impact of...

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