by Jerry Mpufane (@JerryMpufane) Let me start this month’s column by sharing the good news: The optics have shifted to Brand.
More and more, company executives are asking questions about the opportunity to leverage Brand in order to create stakeholder value. Since the last major economic collapse, companies are approaching close to 10 years of creating profits from cost-cutting exercises.
Cutting back was necessary when we consider the excesses that came with the good times leading up to 2008. High operating costs, however, do not represent the whole story if we want to establish long-term viability for any business.
Entire value chain
Leveraging Brand means that companies must consider the entire value chain, beginning with a deeper understanding of the ‘custumer’ (to coin a new word), to delivering best-in-class product/service, all the way to creating excellent customer experiences. Of course, brand communication remains the constant throughout the value chain, whether it be with helping to drive an internal company ethos or inviting customers to do business with them.
From an advertising-agency point of view, when client organisations start demanding a more robust performance from Brand, the stakes are raised significantly in our industry’s favour.
We are entering an era in which there is a real opportunity for increased revenues, the chance to create better work and to keep our employees engaged on more challenging briefs, as well as making the CMO famous in the C-Suite.
Mutual benefit
We can leverage this opportunity for the mutual benefit of client and agency.
The big assumption here is that agency bosses will remain very conscious about establishing a balanced client portfolio. A good portfolio has a good mix of clients who offer an agency the chance to shine creatively; they are a good match when it comes to values and ethos; they deliver when it comes to briefs that inspire our enthusiastic talent; contribute to scale; and, of course, pay us well.
The opportunity that comes with many companies focusing on Brand means that the traditional agency model is no longer a banker. Infamously built on the one aspect of the customer journey — this being the creation of brand awareness — the agency model must now incorporate skills sets that can deliver along the journey all the way to customer experience, conversion and retention.
Right response
The agency’s ability to provide brand communications that impact the customer journey along the key touch points is not only the right response to a client brief, but it also creates the chance for an agency to demonstrate real value as we help our clients meet their business goals.
Helping our clients achieve their business goals is what we do.
If we help our clients to meet their business goals, we may well be on our way to opening up a real conversation about value-based compensation. Charging by the hour is the beginning, but it misses the point. Our clients have the expectation that we feel their pain, and thus we equally have the obligation to discuss value with clients when it comes to our services. And not just price.
Shifting the fee conversation
Because Brand can help drive stakeholder value, it is time we shifted the fee conversation.
In the same way that higher fees do not have a direct link to value-creation for the client, the same applies to lower fees. Moreover, for a very long time we have quantified price, and not value, when we entered fee negotiations with our clients.
Of course, there is no science to determining price based upon value. As they say, value, just like beauty, is in the eye of the beholder! (Or was it the beerholder? Let’s ask the person who took the client to lunch).
Belief in delivering value
In addition, if agency bosses do not believe that they are truly delivering value to their clients, the clients will not believe it either. Also, we must avoid the temptation to set prices based upon clients’ willingness or ability to pay.
On the flipside, we need to choose our clients wisely, and be wary of the cynic. Oscar Wilde is famously quoted as having said “a cynic is one who knows the price of everything and the value of nothing.”
What we do know, however, is that the perception of good value, in the eyes of the good client, is determined by measuring the outcomes, and not the deliverables.
Pointers for fee negotiation
Here are some pointers in preparation for the fee negotiation. More importantly, this is what I suggest agencies consistently need to focus upon in order to drive the compensation discussion towards value:
- Establish a very clear process that defines the picture of success for every important client brief. Led by the agency and signed off by the client, this process must be worked back to fit the business goal. You can establish a value discussion this way vs focusing on a list of deliverables.
- Ensure that the picture of success represents a shared view in the C-Suite, and not just with the CMO alone. We are, after all, working towards meeting the business goal, and not just a communications objective. This way, our compensation can be linked to delivery for the business, and not only for the marketing department.
- In partnership with the CMO, focus on the bigger objective, eg gaining market share, as the campaign goal. The C-Suite is less interested in fluff.
- Ensure that the senior agency talent works directly on the client brief. You will get to the real client business problem quicker, and get to the creative solution even faster. And that’s going to make the CMO very happy. Senior involvement also ensures that the agency can elevate the day-to-day conversation with the client.
- Gear up to fix the niggles quickly, so you reserve valuable CMO time for the real business issues. Executive time must be committed to the war, and not the small battles.
- Always ask your clients about what keeps them awake at night. Agencies often fall into the trap of sharing the most brilliant ideas that will not fix clients’ most pressing issues.
Don’t be scared
Agencies must not be scared to have a conversation with the client about money. Many clients will listen when we present alternative methods of remuneration, considering the difficult trading conditions.
Lastly, we must not be scared to walk away from a bad deal. Someone once said that fees are commensurate with the consultant’s low esteem.
Jerry Mpufane has executive experience in both ad agency and client organisations. He’s only got one goal in life, which is to be an inspiring leader. Jerry is currently group MD, Gauteng of M&C Saatchi Abel. His monthly column on MarkLives, “The Business of Business”, focuses on what it takes to run a great AND sustainable ad agency.
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