Managerial and marketing consulting

Client-Agency Relationship Sustainability: A look at industry trends and relationship behaviors

May 2002

Relationships. They permeate every aspect of our lives – both personal and business. There are good ones and poor ones. Some we look forward to and others we tolerate.

Business partnerships assume a prominent role in the strategy of leading firms, large and small. Successful business partnerships are built on trust, confidence, understanding, and mutual success. These relationships require a pro-active effort to sustain and are critical to future growth.

Client-agency relationships are one of the most complex in the business environment, requiring a substantial level of collaboration to be effective.

While top agencies in the U.S. admit they are not doing their best work for many of their clients, "creative genius" is not always the key component of the success or failure of the client-agency relationship. (1)

The State of Business Partnerships Today

Despite their promise, many partnerships fail to meet their expectations. Numerous studies confirm the sensitive nature of partner relationships:

  • 30% Fail
  • 17% Eventually wind down as priorities and people change
  • 39% Achieve/exceed initial expectations
  • 9% Bought out by a partner
  • 5% Spun off as independent
  • 20-25% of all outsourcing relationships (marketing, finance, IT, manufacturing, etc) fail within 2 years and 50% fail within 5 years (2)
  • 31% of alliances are seen as limping along in some suspended state of under-performance (3)

The trend in client-agency relationships is to terminate those that under-perform. In 1984, the average client-agency relationship tenure was 7.2 years. By 1997 (13 years later), that number declined 25% to 5.3 years. (4)

If the trend continues, by 2010 clients will search for a new agency every 4 years.

Why Clients Terminate Agency Relationships

Clients continue to cite the same reasons for terminating their relationship with their agency. Most of the time, these issues might have been resolved if they were acknowledged and addressed earlier.

  • Turnover – New marketing director
  • Lack of interest/understanding of client's business
  • Strategy and creative linkage unhinged
  • "Outgrown" the agency
  • Understaffing and inexperienced personnel
  • Changes at the top
  • Research scores consistently below norms
  • Creative intransigence and arrogance
  • Mandated consolidation
  • Loose attention to budgets

Avoiding the Pitfall of Failed Relationships

Successful relationships do not sustain themselves. Many client-agency relationships fail to meet expectations because too little attention is given to nurturing the close working relationships and interpersonal connections that unite them.

All parties involved must remain pro-active in monitoring and evaluating the level of trust, confidence, understanding, and success felt by every other member of the group. Disconnects can strain the relationship until it collapses. Only constant, open
communication can solidify the client and agency's expectations and perspectives regarding the other.

Distinguishing Qualities of a Great Client

Obviously, sustaining a successful relationship is a two-way street. Neither just the client nor the agency can exert all the effort. On the client-side, there are a number of simple attitudes and behaviors that foster communication and create a long-term, successful client-agency relationship.

• Instill a spirit of partnership in the relationship.

Avoid the superior/subordinate relationship characterized by an atmosphere of mistrust, lack of respect for the agency's expertise, and undercurrents of intimidation. These tactics have no place in a partnership. Using fear of dismissal to "deal with" an agency undermines trust and productivity.

The best advertising is only created in the absence of fear. A successful joint effort is achieved only through mutual respect of intelligence and expertise.

• Agree on a clearly defined objective of the advertising you wish to create. Failure to define or agree upon the precise
purpose of advertising dooms the creative process from the start.

• Give the agency the opportunity to be totally absorbed in your product, people, and culture.

Exposing agency people to client weaknesses and secrets costs more money (service time) and involves some level of risk. However, great clients totally immerse their agencies in their product.

When an agency team thoroughly understands it's client's corporate culture, it will more likely create campaigns that endure.

• Create an environment of experimentation and be prepared to pay for failure.

Great clients want advertising that stands out. However, nothing predicts mediocrity in advertising so precisely as a risk-aversion environment. Although it's natural to want to conform to rules and formulas in quest for a measure of certainty, elements of the development process are inherently uncertain. Trust that the outcome will be viable advertising.

• Be wary of change for change's sake.

The first purpose of advertising is to create a distinctive image for a client. Imitating a trend, by definition, fails to achieve distinction. We believe success in advertising is achieved by finding a long-term positioning and sticking with it.

• Treat the agency people well.

Great clients know it's human nature for people to work harder for their friends than for business acquaintances. Facilitate an environment of friendship and collaboration to get more out of the agency.

• Keep approvals simple and disapprovals kind.

Nothing saps an agency's energy more than presenting the same work over and over at succeeding layers of the client organization.

Be honest. If you don't like something, say so.
Be specific. Don't ask for a new execution simply because this one "doesn't do it for me".
Be kind. Think of the commentary as if you are evaluating the person.

• Make the agency responsible for the advertising and give them the authority it needs to do it.

Too much involvement consistently denies the agency the ability to realize its vision. Some clients use lack of involvement to avoid sharing responsibility for a poor end result.

Great clients state precisely why they disagree, then challenge the agency to find a solution both parties can agree upon.

• Make sure the agency makes a fair profit.

If an account is unprofitable to an agency, that account will be less important to the agency.

• Perform evaluations of each other at least annually, and even more often in the beginning of the relationship.

A good agency wants to know if there is a major problem before reading about it in the trade press. Great clients draw up the terms of evaluation in the initial agency partnership process.

The Bottom Line

A successful client-agency relationship is essential to a firm's success. High financial, emotional, and strategic costs are associated with frequent partnering shifts.

Clients must promote open communication and seek feedback to ensure the relationship continues to meet the expectations of all involved and endures over the long-term.

THE BEDFORD GROUP is a marketing and management-consulting firm that has served senior marketing and management executives of Fortune 250 Companies for over 15 years.

TBG focuses on marketing strategy, organization design, communications strategy, and agency search/negotiation. Specialized area of practice involves high-value client relationship research.

Advertising/Brand Partner Alignment

TBG can help you assess relationships with any number of marketing partners including Advertising Agencies, Branding & Identity Consultants, Direct Marketing Agencies, Public Relations Agencies, and Interactive Agencies.

Relationship Evaluation & Repair

Relationships can encounter rough terrain due to poor leadership & strategic advice, diminished creative quality, missteps, bottlenecks, organizational restructuring, and more.

TBG helps determine the root causes in a strained partnership. As an objective party, we address both the agency and client
perspectives without bias. We help you determine where the stress resides in your partnership and use this knowledge to help you repair the relationship before it is permanently damaged.

We evaluate and improve client-agency relationships through:

  • Relationship Audits
  • Counseling
  • Contracts of Expectations
  • Monitoring and Coaching

Agency Compensation Review/Negotiation

Agency compensation is not a static phenomenon and can often become a thorny issue.

TBG has assisted dozens of enterprises set, correct, and negotiate new compensation arrangements with their agencies as strategic
marketing needs evolve over time.

We have also assisted firms settle cost and payment disputes with their marketing partners. By enlisting TBG's expertise in these areas, you can minimize the potentially damaging emotional response associated with these issues.

Services to help you improve your compensation strategy may include:

  • Compensation Assessment
  • Compensation & Staff Design
  • Negotiation
  • Arbitration

References

1. Agency Reference Database and Proprietary Research, 1988-2002. The Bedford Group
2. Marq R. Ozanne, Dun & Bradstreet Barometer of Global Outsourcing, 2000
3. Dispelling the Myths of Alliances Study, 1999: Accenture
4. Survey of Client-Agency Relationship Tenure, 1997 : American Association of Advertising Agencies

View Client-Agency Relationship Tenure & Sustainability in PDF format.