A couple of months ago, the 4A’s and ANA released a joint report from their Agency Search Simplification Initiative. It contained results from a survey of 100 agency leaders and 41 clients about priority concerns in new business pitching. The report revealed some significant areas of misalignment between brands and agencies, which are ripe for improvement.
We spoke with 4A’s svp of business intelligence & insight, Matt Kasindorf, to learn more about the report’s findings and other agency new business trends. Read on for excerpts of our discussion on budget disclosure in searches, IP ownership, spec work, misalignment between procurement and marketing, and the latest new business challenges.
The 4A’s and ANA Agency Search Simplification Initiative
According to Kasindorf, the motivation for the Agency Search Simplification report is to elevate mutual understanding. He says, "when you don't understand another person's view and perspective, you can never come to an agreement. Once you understand the motivation, it is far easier to have a discussion where you are removing barriers instead of creating them."
Additionally, the research between the 4A's and ANA "was never meant to be a one and done," says Kasindorf. There are plans to launch a client-agency relationship forum in 2023 specifically designed to keep these important conversations going. The Agency Search Simplification report is meant, he says, "to be the start of ongoing conversations that will better the efficiency, productivity, and effectiveness of agency reviews, and therefore agency-client relationships."
As Kasindorf explains, great relationships increase the likelihood of great work and, with it, the probability of a positive impact on the client's business. Which is what agencies and clients are really here for. So, he says, "we need to reclaim the focus and get back to the most important question, which is, 'how are we driving business results for you?'"
Insights from the Report
Budget disclosure for agency searches
According to the 4A's/ANA report, 98% of agencies said it's valuable to know the size of the account, but only 61% of marketers said providing the budget is valuable to the process.
When asked why so many clients don't seem to understand the importance of budget disclosure for agencies, Kasindorf shared what he's learned about the marketers' perspective. "While often it may be due to corporate policy, there are two other aspects to it. The first is that some clients think an agency will pitch to the budget. They are concerned that once a number is given, it will automatically become the proposed budget instead of the agency giving them options at lower costs. Secondly, there are some cases where marketers don't know how much things cost or what they should spend."
For their part, Kasindorf says, agencies today are "focused on what they need to do to solve the client's business problem."
Without knowing the budget, says Kasindorf, "you can't know the kind of resources you need or what solutions you can offer," making it a real challenge for agencies. He adds, "not knowing the budget also makes it difficult for the agency to know if the client is a good fit and what internal resources it can commit to the review process."
Kasindorf notes that an increasing number of agencies are refusing to participate in a search if the budget is not disclosed. It requires too many resources on their part for the end goal to be a question mark. They need to know if it's something they can deliver on if chosen and if it's worth their time to pursue.
One solution that can work for both parties, Kasindorf says, is for clients to disclose a budget range. That can allow the agency to step back and consider:
- If they believe they can solve the client’s problem for that amount of money.
- Whether they want to pursue the business.
- The opportunity to provide different budget options to the client.
Agencies and brands still out of sync on IP
According to the Agency Search Simplification Initiative’s report, more than 80% of agencies find it painful when brands require ownership of the work created during the pitch process. For their part, more than half of brands do not find it valuable to the search process to allow agencies to retain IP.
This year, Adweek reported agencies pitching without retaining IP is on the decline, as "heads of new business indicated their agencies won't agree to pitch without signing an agreement to own their work – or at least get paid a fair price for it."
When asked why IP ownership for work created in a review continues to be such a sticking point, Kasindorf refers to report findings and what he's heard from marketers. Their concerns include the following:
- Seeing very similar work from multiple agencies makes it hard to give any single agency credit.
- Seeing work done for their brand go to a competitor.
- Feeling a sense of ownership around the work produced due to the time they spent crafting a detailed strategy and brief.
On the agency side, a big concern is that clients will demand to own the work, then not hire the agency, and end up producing the work on their own or with a lower-priced agency. Kasindorf notes that while this “does not happen often, when it does, it’s shameful.”
One potential solution to this long-standing sticking point, Kasindorf says, might be a "temporary embargo." While the agency would retain ownership of its IP, it might agree to the work being embargoed for a period, giving the brand some peace of mind that the work won't show up elsewhere next month. While not a perfect solution, this compromise could leave each party reasonably satisfied.
Spec work on the decline?
Kasindorf reports that the 4A's are seeing an uptick in reviews without the requirement for spec work. While some agencies are pleased with that — because it means less demand on their resources — other agencies are not so happy. Those agencies feel very strongly that the spec work helps them win business.
When asked whether those agencies couldn't 'go the extra mile' and still provide spec work if they felt so strongly about it, Kasindorf replied that it "opens the door to another uncomfortable issue for agencies." For example, "what happens if the marketer says they don't want spec work but ultimately chooses an agency because they did spec work anyway, thus 'demonstrating more passion for their business'? Is that fair to the other competing agencies?"
Kasindorf presents another potential outcome for consideration: "if the marketer made it clear that they don't want spec work and an agency does it anyway, maybe they should be told 'you broke the rules, and you're out.' It would be a drastic measure, and we may not ever get there," Kasindorf says, "but having clarity upfront helps make it easier for agencies to decide if they want to participate and helps avoid surprises at the end."
In the Agency Search Simplification Initiative’s report, 100% of agencies and brands agree that what agencies are being judged on should be clearly communicated. Additionally, more than half of brands find it painful when agencies go “off book” and deviate from the pitch guidelines.
The “problem” with procurement
A recent ANA study revealed just 15% of agencies consider their relationship with marketing procurement to be “extremely or very healthy.”
In a previous conversation, Kasindorf mentioned that "marketing and procurement face fundamental challenges to alignment because their goals are often at odds. Procurement generally aims to generate savings, while marketing aims to generate growth." We asked him to speak about that further.
Historically, procurement's purpose was to source materials and components directly, Kasindorf explains. "The goal was most often lower cost, comparable quality. So once you meet certain standards, then price becomes a factor. And in that sphere, it was very effective."
However, Kasindorf continues, these "legacy procurement objectives and protocols are not a good fit for professional services — agencies in particular — because the differences in quality, pricing, and output are much greater." Forcing agencies into a process designed for a very different purpose "is not how an agency is going to succeed and may not even be how the internal marketing team is going to succeed," Kasindorf says.
While traditionally, procurement's goal is to generate savings, marketing's goal "is to drive value; whether through incremental sales, incremental awareness, or incremental clicks. It's about bringing additional value to the client's organization through marketing activities," explains Kasindorf.
And the conflict "really stems from how people are compensated," he continues. "You have to look at how they earn their bonus. So marketing may be incentivized to increase share or awareness by X amount, while procurement is likely awarded a bonus by reducing costs year over year. Those goals are often fundamentally at odds." And navigating these two teams' oppositional goals puts agencies in a no-win situation.
The fix for that, which the ANA and the 4A's are "very much in agreement" on, Kasindorf says, is "internal alignment on the client's side. Marketing and procurement must come together to engage with an agency through a singular voice."
In the Agency Search Simplification Initiative’s report, 92% of agencies and brands said it was valuable for procurement and client marketing teams to agree in advance on the criteria for an agency’s success.
Kasindorf is quick to point out that while this misalignment tends to happen at organizations with a "legacy procurement process" in place, there are also "many outstanding marketing procurement professionals who are taking a different approach, and they 'get it.'"
How can agencies tell if marketing and procurement are aligned?
There aren't any tips or tricks for this one, says Kasindorf. You just have to ask the question and trust they will be upfront about it. For example, he suggests asking the marketing team, "Is your procurement department involved in this review? Do they agree with the objectives outlined in your brief?"
Kasindorf notes that the 4A's are working with the ANA on additional initiatives surrounding procurement, which will "hopefully help procurement professionals understand agencies' value and think about advertising and marketing as an investment instead of a cost. If we can make that change and evolve how procurement perceives advertising and marketing, it will make things a lot easier," he says.
Kasindorf also references important work done by the World Federation of Advertisers (WFA) through the Project Spring Initiative, which published a report on transforming marketing procurement in 2020.
Other current new business challenges for agencies
We asked Kasindorf what other new business challenges he’s heard about from agencies. He shared two with us.
The first is that "some clients are requiring their existing agencies to go through the whole RFI/RFP process to get an additional piece of business from them." While Kasindorf doesn't know what's driving that, it's something the 4A's are hearing about more often.
It's "a shame," he says. "If you have a good client relationship and the client trusts the agency, why wouldn't you have a conversation with your agency and say, 'hey, we've got this new issue, we've got a new product, whatever it is…a new vertical we need to go after.' It seems to me you'd have that conversation first with your trusted agency partner."
Secondly, Kasindorf reports they've heard that many reviews are still long and drawn out, with moving targets and increasingly smaller prizes. "Even with the smaller prize size," he says, "the process can be equally as difficult as a huge review." And you may be told you're going to the finals, given a date for the finals. Then you complete the process, he explains, "only for the client to say, 'hey listen, we've got a couple of other stakeholders you're going to have to do another presentation to.'”
There is a resource cost to that for agencies and an emotional cost, says Kasindorf. "Because you think you're done; like 'I passed my final exam,' and then you're hit with 'oh, actually… there's another final exam you've got to take.'"
Editor’s note: Comments from Matt Kasindorf’s interview have been edited for length and clarity.
Position your agency for maximum new business success in 2023 with TDP:
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- Your Agency & the 4A's/ANA Best Practices for Search Consultants
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Image credits: Photo by Beatriz Pérez Moya on Unsplash; Photo by JJ Ying on Unsplash; Photo by John Robert Marasigan on Unsplash; Photo by 傅甬 华 on Unsplash; Photo by Barthelemy de Mazenod on Unsplash