96Million Reasons To Fix Your Agency Ecosystem
This weeks Euromillions lottery rollover jackpot is an estimated £96million.
That is a big prize.
We sat and had a coffee with a Global Marketing Director last week. The company is very large and is marketing intensive. Our client is brilliant and has had a sparkling career. Like all CMO’s though he is under constant pressure to find marketing efficiency and effectiveness gains.
We had a good chat about how the marketing services ecosystem has evolved. The skeleton of our conversation is shown below. You may wish to follow the conversation with a pencil in your hand doing your own mathematics because whilst your company may be a different size, and you may have a different set of ratios, we are confident you will recognise our clients issues as your own.
We asked our client how much his organisation spent on agency fees each year, not media or production, just fees. The answer was over £50million. That is a lot of money. Your budgets may be smaller, but read on, the issues and solution may be the same.
We asked how much of those agency fees were spent on account management, across all agency types. His best estimate was about 40%, so about £20million.
We asked what percentage of account management’s job was to ensure the client spent a lot on marketing, and to ensure their agency received the biggest share of the clients budget, he thought probably 30%.
Whilst our CMO acknowledged the valuable role that account management play he also knew that these hard working folk were under pressure from their employers to get clients to spend more money, and to pull a disproportionate share into their agency. The account manager has zero incentive in telling clients to spend less or to give money to other agencies, even if perhaps it was the right thing for the client to do.
In the old days when a client may have had just a few agencies on any campaign this situation was manageable. A client had a couple of agencies that he could manage with ease. Now the average client has on average seven agencies. (We are currently working on a project for a client with sixteen agencies!) With this new complexity the amount of people pulling ideas, and campaigns apart, and trying to increase marketing budgets has made things very difficult for clients.
So, of the clients total £50million agency fee budget he felt that he was spending £6million, or 12% of the total, on a portion of account management that was deliberately finding inefficiency and disintegrating his campaigns!
When asked how much more effective his campaigns would be if better integrated he said “Lot’s, a minimum of 15%, there are lots of missed connections, inefficiencies, and duplications “. His total marketing budget is over £600million including media and production. So, that is a whopping £90million potential gain in effectiveness, with better integrated campaigns.
So, the client realised that he was spending 12% of his total agency fee budget on something that was preventing him getting a 15% gain in effectiveness across his total budget. The total lost opportunity of wasted fees and the effect was £96million, from a total of £600million i.e. 16% of budget wasted.
You will notice that £96million is the Euromillions rollover jackpot and the potential savings through integration (see what we did there?!)
Both are big prizes!
There was quite a long silence in the meeting at this point. Our client made a nervous joke about how he hoped the the Group Finance Director did not have his office bugged.
Our client concluded that if the account management teams in agencies worked for the client, instead of the agencies, he would be able to get rid of a third of them (the proportionate part that is value destructive) and he would have fantastically integrated campaigns.
This of course is not practical. But maybe the effects of taking control of account management can be replicated.
You would want to have someone to:
- get everyone to focus on the same idea, and police it
- you would want an objective view on how much to spend, and how much on each marketing channel
- based on this mix you would specify an efficient scope of work for each agency that was based upon delivering materials to all other agencies (thereby finding a lot more efficiency)
- and have objective advice on what bits of the marketing were working and which were not, allowing you to optimise your campaigns
- you would want teams incentivised to collaborate, integrate, and find efficiency through better processes and purchasing
So, to save 16% of your marketing budget you will either need to take control of account management, or you will need to replicate the effect with these five points.
At flock we cannot guarantee you that your numbers will come up in the lottery, we can however promise gains in marketing efficiency and effectiveness. Could this be your lucky number? +44 (0)7768 465952
If you want to find out more about Flock, click here.
