Posted on July 22, 2015 by MANA “Reviewmageddon” Points to Concerns with Agency Business Model July 22, 2015, 10:38:21 AM Have you heard about “Reviewmageddon?” Apparently there is an unprecedented amount of advertising and communications business up for review in 2015 — with an estimated value of $26 billion in ad spending at risk. So why is this happening now? The big agency groups are saying it is due to the fact that marketers simply want to pay less for ad spending and that they are taking advantage of the current economic climate to pressure the agencies into reducing their costs. Others in the industry are saying it is due to the shift to digital, with clients seeking to optimize their investments in an increasingly digital media environment. These explanations seem reasonable and obvious enough. But there is also a more sinister explanation for why this is happening now, such as the suggestion made by a former Chief Executive of a major global advertising group that a lot of clients are increasingly concerned about the lack of transparency in their agency relationships, and that there is particular concern about agencies receiving “rebates” from media sellers for spending client money in certain places. In other words, marketers are concerned with the current state of the agency business. As the owner of a small independent communications firm, I have for a long time been concerned about some aspects of the industry and business practices that have developed. Particularly with some elements of the agency review process, the procurement driven model and the practice of having a “preferred provider” list of agencies. One of my main concerns is that these practices can encourage agencies to behave in less than ethical ways in order to win and maintain business. The “Walmart-ization” of the advertising and communications industry has its pros and cons. Driving down costs through procurement driven models, and dangling the promise of being able to lock in as a “preferred provider” can make some people in business do things they might not otherwise do. I’m not against the agency review process in principle. Marketers have to have some process by which they can evaluate potential agency partners and select the best ones. I get it. Nor am I against procurement having a role in agency reviews. Companies have a responsibility to their customers and shareholders to ensure that they are getting value for money. The issue that I have is that these practices have often been the only way for agencies to work with some of the larger marketers, and they have almost always favored the big agency holding companies at the expense of mid-sized and smaller independent firms. And the big agency groups certainly do not have a monopoly on creativity or quality. The other issue is that if any agency is “locked in” as a preferred provider, where is the incentive to provide the best people and the best quality work to the client, if you know you are virtually guaranteed the work? In many cases companies with procurement driven agency hiring models use cost as the ultimate decider on who gets the business. But purchasing strategic and creative services is different from buying staplers, stationery and pencils. There are great differences in the quality of people, productivity and creativity between communications companies. That’s just the kind of business it is. Sadly, hiring an agency simply because they are the cheapest often results in deep dissatisfaction for the client. Often, you get what you pay for. And, to borrow a quote from one of my favorite former bosses, “if you are only willing to pay peanuts, don’t be surprised when you get monkeys.” The thing about “reviewmageddon” is that, unfortunately, the business currently up for grabs will most likely simply move from one giant agency holding company to another. But it is a sign that the agency business model is receiving greater scrutiny. And that is healthy for the industry in the long run.