Marketing Procurement

In a post pandemic world are your current governance practices for managing agencies fit for purpose?

Current Governance Practices

“Open communication and transparency are healthy for any relationship, and a good place to start is to take a fresh look at your current governance practices and ask yourselves some key questions”

In the spring of 2021, after the first waves of Covid, FirmDecisions conducted a survey of leading North American marketing and marketing procurement professionals and influencers in the hope of better understanding how the most rapid cultural and business changes in memory were impacting planning and priorities for their agency commercial relationships. This group, who managed a combined spend of $26.5 billion, told us that, as with the broader marketplace, everything was on the table, and a wholesale re-evaluation of their marketing agency partner network was underway. 

As these marketers were moving rapidly to adapt to the new reality of changing consumer behaviours and business landscapes, they were also wrestling with big questions about their current agency relationships – whether to extend them, evolve them through consolidation or redefinition, or even end them. Unfortunately, though, it became apparent that for many of them, a clear and holistic view of their agency partners’ capabilities and operational soundness was spotty at best – at a time when they needed it most.   

Gauging the impact of rapid decison making

A key theme that arose from our study was an imperative to focus on the interconnectivity of their marketing agency ecosystem, with digital at its centre. Their digital, data & analytics, and content agencies had to be firing on all cylinders with minimal waste, and maximum operational efficiency, all while being supported by the best and brightest. However, without clear visibility to their agency partners’ current resources, fiscal transparency, operational soundness, or potential for scalability at their fingertips, many marketers were playing catch-up in the midst of the crisis. This caused a lightbulb moment for many, that performance and accountability priorities, to gauge the impacts of the rapid decisioning that was happening, had to be a fundamental part of the mix going forward. One-off look-back measures were going by the wayside, and conversations around ongoing governance programs with actionable insights have been a hot topic throughout 2021. 

More tactically, our study identified some emerging red flags that could materially impact marketer-agency relationships, chief among them, impacts on resourcing, and transparency, and as we rolled into 2020, it turned out that we were spot-on in our predictions.

A looming resource crunch, and the inevitable resulting service challenges and commercial risks across all marketing agency-types was forecast and appears to be coming to pass. The accelerated shift into digital, the growth of ecommerce, and the looming cookieless future has meant strains on not only digital buying and analytics resources, but also an anticipated push for more rapid and frequent content creation.  This raises red flags for resource underservice across Marketer’s agency partner ecosystem, as well as the potential for lax fiscal management in studio campaign reconciliations, which could lead to overpayments when jobs don’t get actualized.

Strained relations and questioning fee structures

Unfortunately, many advertisers have still not adjusted their governance models to meet the moment. Without ongoing review and governance, we continue to caution that this may set the stage for strained relationships between agencies and clients, with clients questioning fee structure and service quality.  

Additionally, the continued march of advertiser spends into non-transparent Agency affiliates as a trade off for cost-saving guarantees are putting more and more advertisers at risk of having shifted the majority of certain media spends out of the reach of scrutiny for cost transparency, and ultimately validation of the relative merits of the investment tactics taken. Contract language must be reviewed and updated annually and then tested to ensure maximum transparency so that marketers can continue to evaluate the relative merits of their investment channels.

Six key questions to ask about your current governance practices

A lot has happened over the last two years and many marketers may be hesitant to “rock the boat” with their agency partners, but the amount of money on the table, and relative stakes of maintaining pre-Covid status quo practices are too high not to have a fair and reasonable review of whether your partnership is operating optimally. Open communication and transparency are healthy for any relationship, and a good place to start is to take a fresh look at your current governance practices and ask yourselves some key questions:

• When was the last time I reviewed my MSA, including terms and definitions?  Have I done so since the onset of Covid?
• Have I conceded transparency rights?  How will I test the cost/benefit rationale for these concessions?  Do I have codified metrics in place to do so? 
• Have I conceded compensation rights?  If so, have I measured the relative service cost delivery to fees?  Is there a pattern of underservice, and if so, is my model still fit for purpose?
• What guarantees are in place for service levels?
• How do I measure my partner’s operational soundness, scalability and adaptability?
• How transparent is the agency’s management of my budgets?

The lessons of covid are many and deep. With a shiny new year stretching out in front of us, all things are possible and there is still time to ensure your commercial relationships are foundationally strong, transparent and adaptable.   

Christine Moore is Managing Director, North America at FirmDecisions