In 2007, AAAA members indicated that their fiscal results were generally positive. Agencies from all geographies, service types and size levels reported modest growth in revenues and profits. However, members indicated that revenue growth lagged behind the growth rates that they experienced in 2006. The softening of revenue growth has been attributed to continuing client pressure on agency compensation and a weaker consumer-spending environment due to elevated energy prices and rising interest rates. Agency profits also have been affected by a challenging environment for finding and retaining affordable, experienced managerial talent, particularly in digital and emerging-media areas.
Ownership and Monetization of Agency Ideas and Work
In 2007, the AAAA expanded member education activities and provided best practice guidance related to the ownership of agency ideas and work. The AAAA engaged industry experts to promote discussion on ways to link ownership, license and assignment of work product to client compensation.
The Association issued two Board of Directors-approved position papers to help agencies in the new business/agency search process. In January, the AAAA recommended that agencies preserve ownership of new business-search ideas, plans and work product. In September, the AAAA recommended that agencies execute new business agreements with client prospects at the outset of every agency search. These position papers included relevant background considerations, sample contract language and examples of payment provision approaches. The Association’s best practice guidance was communicated to members, search consultants and industry leaders as part of an “AAAA New Business Tool Kit,” which also included the AAAA’s “Standardized Marketer New Business Questionnaire” and “Guidelines for the Pursuit of New Business.”
New Business—Agency Search
AAAA new business committees partnered with research consultancy Millward Brown to conduct an in-depth marketer survey, “Agency Search—What Matters?” The results of the marketer survey—which explored client business challenges, examined reasons why clients conduct searches and considered processes that clients use to conduct agency reviews—were released to AAAA membership in April. The study probed key evaluation parameters that marketers use at each stage of the search process, including the primary reason that the client selected the prevailing agency.
In 2007, the AAAA kicked off a Webinar series to help members improve the planning, efficiency and effectiveness of their business-development efforts. The Webinar series featured an all-star roster of new-business experts, including Robb High, Robb High Associates; Kim Bastoni, Millward Brown; and Stephen Boehler, Mercer Island Group; as well as seasoned new business committee members, who shared business development tips, tools and tactics with AAAA members. During the year, the Association also began development of a revitalized AAAA Agency Search Web site that will include expanded member agency profiles and improved search functionality when relaunched in early 2008.
Finding and retaining experienced, affordable and innovative talent has become a critical issue for the marketing services industry. Industry dynamics are changing rapidly and our member organizations need to develop new skills to accommodate the proliferation of media alternatives, consumer control of messaging, client emphasis on behavioral marketing, algorithmic experimentation and expanded accountability metrics. The AAAA has been helping our members evolve recruitment, training and employee compensation practices that allow them to compete effectively for premier, diverse talent.
Recruitment initiatives in 2007 included an evolving advertising career center (job and résumé posting site), a contemporary careers-in-advertising tool for job seekers, an updated best practice recruitment publication and collaboration with the Advertising Educational Foundation to help attract college students to the industry.
The compendium of AAAA employee compensation and benefits surveys was expanded to include two new surveys. The “Approaches to Employee Bonus Compensation Survey” provides information on salary administration, bonuses and employee incentive and deferred compensation plans, and the “Training Survey” detailed industry training practices and enrichment activities.
In September, the AAAA held a national conference that was entirely dedicated to talent. The AAAA Talent Conference program featured outstanding speakers addressing strategic topics. Brian Brooker, Barkley, presented his agency’s unique approach to recruiting top talent. Elizabeth Zea, Gilbert and Partners, challenged the industry to elevate pay grades, invest in training and integrate digital and communications planning into the core service offering. Donna Pedro, Ogilvy New York, and Chuck Underwood, The Generational Imperative, Inc., shared insights to help the industry begin to achieve cultural, ethnic, lifestyle and generational diversity. Multiple thought leaders discussed coaching, environment and operating practices that facilitate agency cultures that foster innovation, creativity and collaboration. The conference also established a platform for launching future AAAA talent initiatives in the areas of recruiting, training and motivating a diverse industry talent pool.
AAAA member interest in and experimentation with value-added/benefits-based pricing (value pricing) continued to evolve in 2007:
Industry thought leaders, including Tim Williams, Ignition Consulting Group; Ron Baker; VeraSage Institute; and Michael Farmer, Farmer & Company, Inc., discussed agency value creation, pricing theory and value-oriented compensation models at a number of AAAA committee meetings, seminars and national conferences.
Awareness of value pricing experiments and case studies expanded dramatically over the past year. Executives from Deutsch, The Gate, Ground Zero, Anomaly and other AAAA member agencies shared their value principles and compensation models with industry members.
AAAA compensation tools, including the “AAAA Compensation Dialogue Process,” which begins with “Scope of Benefits,” “Pricing Continuum” and “Major Compensation Options Analysis” (“The Grossman Grid”) continue to gain awareness and traction with members.
Clients and search consultants expanded their dialogue on value pricing. In the past year, the Association of National Advertisers, Inc., featured AAAA members and staff in several of its committee meetings, national conferences and publications.
The AAAA partnered with negotiating and selling skills expert Tim Brenton, The Brenton Group, to help agencies develop a team-based/value-oriented process for discussing compensation with clients and prospects.
The AAAA surveyed members on prevailing labor-based billing rates and mechanics.
The AAAA and the ANA collaborated on an “Agency-Advertiser Value Survey.” The survey explored topics that included client and agency perspectives on how agencies add value to the client’s business; how advertisers add value to the agency-client relationship; degree of interest in value-based compensation; and potential barriers to changing from a cost-based to value-based compensation arrangement. What’s clear from the findings is that there is a high level of interest among agencies and advertisers in exploring alternative compensation approaches.