Originally published in AdExchanger, January 10, 2019
By Alison Weissbrot, AdExchanger
Agency cost-cutting and deteriorating trust with clients hasn’t deterred Marla Kaplowitz, CEO of the agency trade organization the 4A’s, from fighting.
“[Taking] a business problem and coming up with an incredibly elegant and different creative solution is what the best agencies do,” she said.
Agencies have been tarred by scandals around transparency, thanks to the 2016 ANA report on agency rebates. And the larger holding companies have a reputation for being too slow moving. But Kaplowitz said critics miss the pockets of innovation sprouting up at individual shops.
“Agencies that have been around longer are transforming,” she said. “I don’t think the word is getting out enough.”
Despite the challenges, Kaplowitz is positive the tables will turn back in agencies’ favor.
“If you look at the history of agencies, there’s a roller coaster pattern,” she said. “We’re in a different part of the roller coaster, but there’s always the upswing.”
She spoke with AdExchanger.
AdExchanger: What’s the biggest challenge agencies will face in 2019?
MARLA KAPLOWITZ: The business landscape is incredibly complex and everyone is fighting to the middle. Management consultancies are recognizing the only place for them to grow is the creative and agency space. Agencies do a lot of strategic and consulting work already, but now have to push that more up front. Disruption is scary and people want control.
And it’s not just in our industry. Part of that is a hyper-focus on short-term and the need to drive results. Startups don’t have that pressure. They have VC money, private equity money and a longer runway to grow.
It’s been almost three years since the ANA report on transparency came out. What’s the state of agency-client trust?
The transparency report was incredibly vague. There were no agencies named and everyone was guilty before any belief of innocence.
Each of the holding companies had 40-plus media audits. Not one has paid back money. So where is this guilt? Consultants have benefitted tremendously from creating doubt in the marketplace and telling people not to trust agencies.
But trust is starting to come back. You have to have honest dialogue and start the relationship right. There’s a lot of promiscuity in this business. Marketers are always looking for new opportunities. How can they find a way to not look at agencies as a vendor, but a partner?
How’s the relationship between the ANA and the 4A’s?
Bob [Liodice, CEO, ANA] and I have a very good relationship. We work collaboratively on the Coalition for Better Ads, the Trustworthy Accountability Group and Digital Advertising Alliance. We sit on a number of boards together, including Advertising Industry Self-Regulation Council. We co-own a company, Ad-ID. People are surprised how closely we partner, especially on lobbying efforts.
We have to find ways for our constituencies to work more closely together and address challenges. This is such a dynamic ecosystem. It’s so complex. Marketers and agencies need to work together to figure that out. It isn’t a fight of one side versus the other.
Is it hard to work with the ANA when they put out studies that undermine trust in agencies?
We’re always going to defend and champion our constituency. I’m not going to fight toe-to-toe with them. That’s not productive. But I am going to highlight things I don’t think are shared.
In the [ANA in-housing report], there were a lot of highlighted stats. But the 90% was buried in terms of what’s still happening around external [agency] use.
The number one reason [for in-housing] is efficiency. Clients have driven costs down so much for agencies. Talent costs money. When you want the best ideas and thinking, you need the best talent. How do you find the right balance, based on what your objectives are, and bring in partners to make that work?
Do agencies get paid fairly for the value they deliver if marketers always drive down costs?
Media agencies are more full time employee-focused. Ad agencies are shifting to project work. We also have agencies that are moving away from time sheets. What’s the value of a time sheet in trying to reconcile hours? Productivity varies. It should be about the output and the outcome.
For new clients, it’s easy to make that commitment. Existing clients have to transition out of that. The problem was when [agencies] shifted from 15% commission, no one thought about what other service industries do. It’s hard to dial back, but it doesn’t work anymore.
There was a lot of review activity last year. Is constantly pitching sustainable for agencies?
It’s gotten out of control in terms of how long they go on, the number of meetings and the kind of work. The most egregious request is a pricing exercise. Everyone wants cost savings. They’re not always focused on finding a better team to get a better output and experience.
We have talked with members about saying we need to stop doing pricing exercises. I’ve had agency CEOs and CCOs say, “Can we just stop doing spec work?” Agencies are saying, let’s do a project and then determine if we want to do something long-term. That’s different because at least [clients are] paying for the work.
Do most reviews come down to cost?
It depends. [Those with] procurement involved need to make commitments and identify savings. If you hired a consultant you need to justify the fees. To make a switch from one agency to another is a big move. It’s a good year that you lose, in my opinion, in that transition. There needs to be a significant value in order to make that change.
This interview has been edited and condensed.