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What price loyalty?

A logical approach to business relationships would be to keep and nurture the ones that work but dump the ones that don’t.  But then, who said that logic and business have ever been good bedfellows?

For creative agencies, the single most common reason for a relationship ending is a change in the decision-making process.  More often than not, that means a change in the decision-maker.  New person, new broom, new approach, anxious to impress and stamp their authority.  A predictable package of clichés and an all too frequent predictable outcome.  A change of agency.

If the new decision-makers bring in agencies with whom they’ve previously worked, you could argue that this is a form of loyalty.  But you’d be wrong.  That’s about expressing a personal preference of how to get a job done.  It’s completely fair but it’s not loyalty.  It’s also often quite dumb.

Relationships reflect a lengthy mutual journey along a shared learning curve.  The agency often invests heavily in their own learning to better understand how to provide a consistently high quality of creative and strategic thinking to support the client.  This is likely to involve understanding the client culture as much as their product and market.  Such investment involves time, energy and a good deal of frustration.  Some clients simply take a little longer to understand.

Relationships, by definition, involve at least two parties.  So the investment is as much the client’s as the agency’s.

When the return on an agency’s investment is to have that learning summarily dismissed by being dumped, the personal angst is surpassed only by the below-the-belt business blow.  Income loss is unwelcome even if you hadn’t had it for long but it’s almost impossible to measure the impact when the relationship is measured in years, or even decades.  Those of you who’ve been there will know.

But the dumbness of some agency changes is more to do with the loss to the client.  For a moment, let’s take two steps back and look at this from an impartial perspective.

Imagine, if you will, that a company has appointed a firm of legal consultants to help it with its ever-changing compliance issues.  The firm provides a complex matrix of consumer services in a highly regulated industry.  Getting anything wrong could proves costly in reputation, market share and financial sanctions.   It takes a full year for the team of legal consultants to get under the skin of the client’s issues and how best to manage and safeguard them.  Everything then runs smoothly.

The company then appoints a new person to the role of Director In Charge Of Appointing Legal Consultants (okay, this lacks a little imagination).  She / he decides to review the arrangement and eventually appoints a firm with whom they’ve previously worked.  It takes another year to refine the process but they eventually get it right.

Let’s assume both legal firms do a good job.   The company has just wasted a huge amount of internal staff time by repeating a learning process (with a new supplier) which they’ve already successfully completed.  And they’ve paid the new supplier a huge amount of money to navigate their own learning curve.  That’s what’s dumb.  And that’s why it’s unlikely to happen in the circumstances described.   You just don’t mess with lawyers.  Unfortunately, it happens all the time with creative agencies.

The example uses lawyers to make a point.   There’s no doubt that every moment each legal firm spend on the client’s business is charged.  It’s a real cost.  For creative agencies, this may not be true and loads the burden of waste on to the agency side.

The dumbness stems from the rationale behind the change.

Statutory change prevalent in large corporations and the public sector is effectively a mandatory requirement to throw away the investment in relationships and mutual learning.  At best, the process wastes huge amount of industry time, even when the incumbent is re-appointed.  Repeating a theme from a previous article, this is exactly the opposite of what government should be doing to support UK businesses.

Change for change’s sake is the ‘new appointee’, ‘new broom’, ‘let’s be seen to be making difficult decisions’ genre.  It’s usually more about personal ego than good business practice.  It is often disastrous for the client as well as the agency.

Change related to under-performance is the only legitimate set of circumstances where logic and business meet.   Best practice suggests that great clients only contemplate change when there are shortfalls in business goals.  Why re-invest in new relationships if you don’t have to?

If all changes were performance related, none of this would matter.  But they’re not.  Are they?

My last client job before I switched to agencies was with Playtex.  We were the industry’s biggest spenders on TV with some famous badly dubbed American made commercials.  ‘Living Bras’ were the butt of comedic material and we were a sought-after brand for big agencies.

I was approached by the fledgling Saatchi agency and a young account director called Tim who went on to become a much respected advisor to the political elite (you work it out).  I had been in post for a short period, only two years out of University, and keen to put my personal stamp on the job.  Dumping the design agency which had been supporting the company for the previous fifteen years wasn’t that relevant to me.  Appointing Saatchi’s seemed like a cool thing to do.

I was young, I was inexperienced and I was certainly dumb.  I was prepared to throw away the learning from a successful relationship, which had produced consistently superb work and on-target campaigns for over a decade and a half before I arrived.

Luckily for me, Saatchi’s produced some poor speculative work with an estimate four times the cost I was paying the incumbent.   The poor work was out of character but the costs weren’t.  They quickly offered me a 65% discount (revealing that they really wanted to get us on their client list) but the work still wasn’t good enough, so I declined.  As naïve and potentially disloyal to the incumbent agency as I was, I just got lucky and was forced to do the right thing.

My humble request to all client decision-makers is to urge them to treasure the benefits they get from long-term relationships with their agencies and consider change only when they need to.  For successful clients, new products and new markets will always provide scope for adding new agencies to their roster.

The price of discarding loyalty can be as high for the client as the abandoned agency.  Let’s all stop being dumb and leave good relationships alone.

Time to ditch the pitch?

You have an uneasy feeling that the client has already decided on re-appointing its incumbent agency but allowing yourself to be put on the ‘pitch’ list is a temptation you can’t resist.  Being asked is flattering.  The potential difference it could make to your business is significant.  It’s a no brainer.  Of course you’ll pitch.

It’s disappointing that the client won’t disclose how many agencies are on the pitch list, or who they are.  The brief appears a little unfocussed and seems to make a lot of references to the great work which has already been done.  If the current agency’s doing so well, why the pitch? 

The pitch process permits questions (the answers to which would be shared with competitors) but no meetings are allowed.  There will be no opportunity to look the client in the eyes and suss out their real intent, establish a little chemistry or get a feel for what they’re looking for.

It’s taking you and your team a lot longer to put the presentation together and you’ve already invested a lot of the agency’s resource.   Too bad about the disruption to day-to-day business.  That affects the clients you’ve already won who are paying you to do what you do. 

So, exhausted but inspired, you turn up for the pitch, strut your creative and strategic stuff, charm the clients with your charismatic presentation and leave feeling optimistic.  Or perhaps you realise half way through that you hadn’t prepared as meticulously as you now wished, difficult questions asked by junior client staff were left poorly answered and you are pondering the significance of the senior client leaving the room early.  Either way, it’s done.  And you wait.

If you get the phone call announcing your success, the pitch was a reflection of your business prowess.  You’re good at what you do and even better at convincing others that you can do it for them.  Break out the champagne.  You deserve it and can now afford it. 

It’s just a fact of life that the majority of pitchers get the other call, or more likely the other email, explaining how one of your competitors had ‘more closely matched’ the client’s needs.  But the client was both grateful for and impressed with the work you had done, and the interest you had taken in the possibility of working for them.  Terrific, that makes all the effort worthwhile.

For the winning agency, the huge amount of time invested in the pitch remains just that.  An investment.  It can be considerable, although rarely costed.  A value of £20,000 of staff time and out-of-pocket expenses is not an unusual pitch cost.  It will often be less and often be more.  But morale is good, and the profitability of working with your new client (less the cost of the champagne) will start to pay back the investment and deliver a positive return at some point in the new relationship.  But not always, especially if you’re pitching for a position on a roster.

For the losing agencies, morale is not brilliant and mitigated only by your ability to imagine poor client judgement rather than shortfalls in your own performance as the reason for failure.  There is zero return on your investment, so the £20K or whatever it is you’ve just spent is gone.  Wasted.  But you haven’t spent any money on champagne, so that’s good.

Whether you were bad or the client was bad, whether it was a fair fight or whether the odds were stacked against you is not the issue for us here.  Although, these are certainly subjects which Creative Times will return to at another time.  The point for now is that the picture we’ve painted is a reflection of a process which the industry has come to regard as the norm.  I controversially suggest that it may be time to reconsider.

Even the most successful agencies won’t win every pitch, so the best case scenario is that your business plan has to absorb the costs of the odd zero-return pitch added to the ones where you’ve come out on top.  The more you lose, the longer it takes to get into profit.  For less successful agencies, let’s say winning one in three, the time it takes to hit a level of overall profitable return is immense.  If your ratio is worse than this (you know who you are), the maths doesn’t need a computer to figure out.  Your business plan is blown.  Big time.

If the client in this little scenario is a public sector organisation, the collateral damage is magnified.  By default, there are many more agencies adding a nil-return pitch to their business plan calculations.  On an individual agency level, the damage is even greater because government (and often European) procurement rules mean that investment has been considerably higher in the ‘tender trap’ of big budget seduction.  You’ve simply taken a lot longer to lose the pitch.  On a frustration level, the feeling that the right suppliers are not always appointed in such situations is a nagging irritation which compounds the problem. 

Procurement processes tend towards a formulaic assessment of pre-boxed criteria.  It’s exactly what is NOT required to make an objective judgement about an agency’s creative match to public sector need.   Big surprise, it doesn’t always work.   Again, we’ll leave this for another time.

Many agencies have already made a strategic decision to decline pitches altogether or impose strict rules about the circumstances in which they will ‘invest’.  For others, the vast majority, that’s a luxury they think they can ill afford.  But they include the creative businesses who suffer most from the process, expending time they haven’t got with occasionally little chance of success.

My controversial suggestion is that all clients should start to think seriously about requesting predominantly credentials-based pitches.   This will allow agencies to demonstrate their ability to answer the brief by using work they’ve already done for others with a little added tailored thinking to persuade the client that their experience and expertise ‘match’ the project needs.  The days of producing mountains of free work, most of which will obviously be wasted, should be numbered.

There will always be a need for some speculative work, and rightly so, for younger smaller agencies to conquer their larger rivals through raw creative talent.  That’s the only way small agencies will get to grow.  But too many pitches are set up as more of an academic exercise than a genuine search for creative answers.  Even winning work may never be used.

The public sector, in particular, should acknowledge that it’s responsible for a massive amount of wasted private sector energy.  Lost time and resource, never to be recovered.   Isn’t this the opposite of how government is meant to help industry?

By our actions and words, the industry itself should lobby and persuade if we want it all to change.  So let’s get started.

Pervasive Media

 My wife asked me recently why I go everywhere with not just my iPhone but my iPad and my MacBook Air as well.   The point, she thought, was that mobile technology has become increasingly smaller and more powerful to avoid such a need.

I thought for a second or two about constructing a convincing argument relating to a hierarchy of functionality being essential to my everyday needs.  But then I realised she knew me better than that.  I confess, I just like gadgets and so much of my life is spent immersed in digital content.

Even seems a little daft calling the content ‘digital’, as haven’t we been watching TV, listening to music and reading newspapers for a lot longer than the d word has been in common use?  Maybe a better description is ‘pervasive’. 

Ask Andy Gray and Richard Keys whether a world which enables the visual evidence of verbal indiscretions to be circulated in seconds provides a good example of pervasive media.

Ask the producers of The Social Network whether the 103,000 tweets on their opening weekend reaching 54 million users was a massive dose of profitable irony.

Ask the list of politicians and celebrities whose casually scribed tweets have hit the headlines within less time than it takes to recharge a battery, and often brought them down.

The digital revolution is in all our lives and almost everything in our lives.  So how come the BBC have just cut their online budget by over £30 million and culled half of their 400 online sites?   Is this revolution not immune from economic downturns?

A brief look back into recent history will help us find the answer.  I wrote an article for a now defunct industry title (although their demise really wasn’t my fault), reporting from an internet convention in Los Angeles in 1996.  Remember the date because what I’m about to repeat will make it seem like 1966 and not just a decade and a half ago.

There were just 9.5 million internet users at the time, with a forecast of 200 million by the year 2000.   Many thought the claims were nonsense by the way and that the ‘super highway’ was not going to provide the sea change that only a few were predicting.

How’s the current tally of 1.8 billion internet users and 4.6 billion mobile users to make those forecasts look like a pretty modest punt?  Even a single product, like Apple’s apps software, has been downloaded over one billion times.

The numbers are massive as is the speed with which they have been achieved.  In broad terms, the penetration levels of pervasive digital media have taken around a third of the time it took TV to establish itself.   Speed to market, speed to interact, and speed to succeed.  Or fail. 

Let’s take a step back from the staggering stats and give ourselves time for a reality check.   Without a proper focus on old fashioned business basics, digital platforms won’t do anything other than to hasten the day when you call in the receivers.  Remember the infamous bubble bursting year a decade ago when 57% of business failures had .com in the business name.

By all means, revel in the excitement of ‘visits’ and ‘eyeballs’ but if you don’t mention revenue, profits and cash flow in the next breath, you may have a problem.

In 1996, I reported from LA that only 23% of internet users had ever made an online purchase.  My guess is that figure might be close to 100% now but it’s a sobering thought that over 85% of websites are NOT transactional.   76% of online revenue comes from 1% of the sites.

The BBC cull is a timely reminder that resources devoted to information, and not customer engagement with a transactional trigger, are vulnerable when the economic chips are very much down.

Our world is passing through the mother of all retrenchments.  For many businesses and individuals, this is a pretty rotten time.  To come out of the other end at all, we have to ride the learning curve with a little more concentration and focus on business goals. 

Whether online or offline or the crucial space in between, we need to work harder on the boring objective of making money. If we harness the incredible technologies evolving around us, we’re going to have all the fun we want on the journey.  If we get it right, we’ll arrive with a smile on our face and cash in our virtual pockets.