Primary Client Challenges
Ballester interviewed senior and middle management at 273 U.S. companies
overseeing advertising budgets of $10 million and greater.
The interviewees said their top marketing challenges were “breaking
through the clutter,” building awareness for their brands
in a crowded and changing media and consumer landscape, and generating
effective sales increases.
How Are We Doing
It won’t surprise you to hear that clients have a mixed assessment
of our industry. 61% feel agencies meet their expectations and deliver
on promises while 39% say we fail to do so. They complain about
three specific shortfalls: we don’t focus enough on effectiveness,
i.e. sales results; don’t target consumers effectively enough;
and haven’t yet mastered the “new media.” On average,
advertisers report having had the same agency 6 years, with a core
group of 24% reporting 10+ year-long relationships.
Why They Look For New Agencies
Turns out 28% of the companies surveyed requested proposals and
pitches last year. That number seems high to us. The remaining 72%
said they asked for pitches within the last 3 years. The primary
reasons they give for changing:
- They’ve “outgrown” their current agency (28%)
- They’re generally dissatisfied (26%)
- “The thrill is gone” from their agency/client relationship
(12%)
Interestingly enough, complaints such as failure to achieve results,
client conflicts, and price were indicated as secondary reasons
to go shopping..
So what do clients want when they look for a new partner? Just
what you’d expect - the agency’s understanding of their
market and business problems, strategic consumer insight, creativity,
ideas, the ability to react fast and efficiently, quality people,
and the people chemistry factor.
And if you’ve ever wondered what role agency search consultants
play in moving accounts, according to Ballester they’re active
in only 30% of the pitches, and mostly for accounts with budgets
below $50 million.
Prospecting
Advertisers report being contacted by agencies an average of 14
times a year. 35% of them feel they are being solicited too much,
but 58% consider the pester frequency as "about right."
Pay attention to this: The respondents say the most effective way
for agencies to solicit clients is through personal contacts and
recommendations, adding that contact through mail campaigns and
e-mail are usually not as effective.
Agency Compensation & Financial Trends
- 60% of those surveyed compensate their agencies through fees
or a combination of fees and commission.
- 44% include a performance bonus piece (typically less than 30%
of the total compensation package) that’s usually a function
of client sales targets met or based on a comprehensive evaluation
of the agency by the advertiser.
- Advertisers expect their agencies to make a profit margin in
the 15-20% range
Want Fries with That?
If you believe you must provide a full menu of agency services,
only 43 % of the advertisers surveyed agree with you.
Yes, clients know the benefits - consistency across channels, one
effective brand steward, and the efficiency of one-stop-shopping
- but they also see the downsides such as uneven expertise, staying
creative in multiple areas, increased coordination challenges, and
the risk of putting all their eggs into one basket.
Most advertisers (81%) believe that their agency is indeed able
to offer integrated services, but nonetheless prefer to unbundle
their business to “best-of-breed” specialists while
retaining control themselves for overall coordination.
A Comment. . .
Don't go crazy over this report. In my opinion big-universe surveys
mush so much data together that the resulting watered down generalities
are often misleading. Life can't be so easily fractionalized into
neat percentages.
What’s important is what the story is at your place.
Use Ballester’s information to help focus your group for better
results. Are you consistently making the mistakes that typically
lead advertisers to look for new agencies?
If you need insight and solutions based on our experience assisting
all sorts of agencies – all we do is help agencies run right
– or you’d like to talk about this or any other agency
matter, just give us a call 847/726-9898.
Source: “US Advertising Agencies Survey
2002/03”, Ballester, Inc.
