Agencies' race to the bottom will only end in tears

re: Agencies' race to the bottom will only end in tears

Liam Mullins — Thu, 02 Jul 2009 16:55:08 GMT

I am going to set up my own business painting and decorating. The first thing I am going to do is always undercut any rival firms no matter what it takes, even if it means me making a loss.

I have done a deal with a paint supplier that means if I buy all my paint from them I get a load of cash, its not the right paint or even the right colour sometimes, but its money in my back pocket.

Well technically it’s the clients money in my back pocket, but as long as they don't ask for it, I can add it to the bottom line.

Thinking about this in relation to media agencies and the pressure on revenues at present, if they/we can't negotiate a decent fee and remuneration structure from clients without these back handed deals and duplicity, what hope do we have when negotiating with their multimillion pound budget.

re: Agencies' race to the bottom will only end in tears

John Dick — Fri, 26 Jun 2009 10:40:50 GMT

The real issue is that many clients don't even know who is involved in their media buying and large chucks of their budgets are hived off by companies stating they have services when in actual fact it's outsourced. In any other industry complete disclosure would be required however advertising for whatever reasons continues to operate in an apparently murky and unregulated manner. There is no other industry that operates a commission structure such as ours. Not to mention that media owners are the ones that drive innovation and development yet have to pay (sometimes over the odds) for the privilege of some one using their formats.

re: Agencies' race to the bottom will only end in tears

Martin Thomas — Wed, 24 Jun 2009 16:03:18 GMT

I joined the media industry 10 years ago after 13 years in other marketing disciplines. Why? Because media agencies were where the action was ... they were well on the way to becoming clients' most trusted business partners, they were investing iin tools and technologies, they believed increasingly in the value of consultancy over trading and they had a good feel for the nascent digital market. What happened? They got greedy (or rather the parent companies became too reliant on media driven income) and stopped investing in talent and tools. Consequently, when clients started to put the squeeze on margins they were unable to make an intellectual or empirical case for the value they could add. Difficult conversations with clients were postponed because there were always alternative ways to massage the figures.

Colin Gottlieb has called the market correctly. All of the agencies are caught in a race to the bottom.

re: Agencies' race to the bottom will only end in tears

Alan Malarkey — Wed, 24 Jun 2009 15:48:58 GMT

And it seems that nobody is willing to put an end to the "race to the bottom". You rightly cite the Nokia eg as one where Carat has undercut a WPP agency. Yet, if rumour is to be believed, the Vodafone global pitch has been agigated for by senior WPP people who argue that they can deliver a better deal than the likes of Carat in local markets. Where will it all end eh?