Madison Avenue Management (or Mismanagement): 7 Perplexing Questions

There are so many illogical aspects about the way that Marketing Departments, Holding Companies and Media / Creative Agencies manage themselves that we're driven either to confusion or madness.

Credit: Shannon Wheeler, The New Yorker, The Cartoon Bank

After 30+ years of analyzing ad agency and marketing operations for global and domestic clients, I’ve developed enough data and insights to be able to characterize what’s been going wrong within client-agency relationships.

I’ve written 3 books and published over 150 articles about this.

I get almost no pushback from industry executives, and judging from the many comments I receive, there seems to be an industry consensus that “what’s been going on” is pretty much wrong.

What I can’t crack, though, is why C-Suite executives do so little about their problems.

Have they learned to accept the problems and “roll with the punches,” rather than see the industry flaws as problems to be solved through their leadership?

Have too many C-Suite leaders become “custodians” rather than “leaders?”

• Custodians take problems that exist and live with them, minimizing but not eliminating either the problems or their symptoms.

• Leaders take problems that exist and try to fix them permanently, working to create a sustainable future. In doing so, they’re willing to be disruptive in the short-term — disruption cannot be avoided.

There’s more custodianship than leadership today, leading to these perplexing seven problems:

1. The Brand Growth Rate Problem. Why do so many CMOs, who have seen their product growth rates fall below nominal GDP growth since 2009, focus on reducing marketing costs instead of trying to figure out how to rekindle brand growth? Do they have no confidence in themselves or in Marketing? Do they think that their legacy brands have no future growth potential? Do they think that markets are already too “saturated?” Is private label competition too strong to be overcome? Are Gen Z and Millennial consumers too anti-brand to be converted? Are there no arguments that CMOs are willing to make to CEOs, CFOs and Procurement so that appropriate marketing investments can be made? Or are CMOs merely doing what CFOs and Procurement tell them what to do (i.e., “cut costs because your marketing is ineffective”).

2. Marketing and Media Mixes. Do CMOs, who have seen their product growth rates fall below nominal GDP growth rates since 2009, really believe that they should be investing in even more targeted programmatic media — flooding the marketplace with online videos, ad banners, e-mail pitches, SEO ads and the rest…to enrich Google, Meta and Amazon at the expense of publishers? Subjecting their brands to fraud and exposure on inappropriate websites? Irritating consumers along the way? What if targeted programmatic ads hit their targets accurately but are no better than flimsy drones that carry no explosives ? What if the targeting is great, but there are no desired effects? What then? Will anyone change the media mix?

3. Agency Relationships. Do CMOs and Procurement really believe that changing agencies every three years or so is the route to brand success? Isn’t partnership, rather than vendorship, required? Toyota, which has become the world’s largest and most successful automobile company in the world, has always viewed suppliers as ongoing partners, not as a cost:

   • Relationships are permanent commitments, not transactions. Toyota makes long-term business commitments with its suppliers. This is the opposite of the Madison Avenue practice of constantly re-tendering to shave a few percentage points off of fees.

   • Teaching, not punishing. Raising expectations for suppliers and then helping them get there is Toyota’s way of working with them.

   • Challenge as a form of respect. Toyota can’t reduce its own costs unless its suppliers reduce theirs, but Toyota won’t force them through price squeezing. Instead, it invests in making suppliers genuinely more capable, by sending its own engineers into supplier plants, sharing methodologies and co-developing improvement plans so that cost reductions emerge organically from better processes rather than from margin compression. Has any client (or holding company) ever done such a thing?

4. CMOs commission ever-growing but unmeasured media and creative scopes of work…while Procurement cuts fees. I’ve been measuring this for three decades, since a big part of my consulting business looks at the relationships among SOW size, agency headcounts and agency fees. CMOs grow SOWs; Procurement cuts fees. Where’s the logic in this? What kind of result is this mismanagement meant to achieve? A restoration of brand growth? Not a likely outcome.

5. Media Agencies and Creative Agencies have no viable and uniform agency-wide systems to document and measure “SOW outputs.” An agency office head, regional head or CEO would have problems knowing what work is actually being done for clients throughout the agency network. Are we doing the right work to deliver results for clients? What if an assigned SOW is “wrong,” somehow? How can we change it? How much work is in our SOWs, requiring how many people? What is an appropriate fee for the work? What if the work exceeds the fees — what should we do about it? What will be the impact of AI on our SOWs and resources? If media and creative agencies are “creative factories” that generate outputs for clients (media plans and buys; creative deliverables that create brand loyalty and sales) how sensible is it for the agencies to have no systems to measure and evaluate what they’re doing? Ignorance remains ignorance; ignorance is not bliss. Management cannot review the nature of ongoing agency work…assuming that they thought this might be a good thing to do. They might review TV:30s for their “creativity,” but they certainly do not review entire SOWs, which today are made up of few original pieces of work (25%) and a huge number of adaptations (75%), with adaptations accounting for 40% of staff-hours and fees.

6. Agencies are forced to downsize when they have margin problems rather than try to fix their fee-workload problems. Agencies liquidate their talent to meet financial targets. Agencies delegate fee and SOW issues to their clients. Where’s the ownership of pricing, SOWs, pride and results? This is a pure example of passive custodianship.

7. Holding companies milk their agencies for financial purposes rather than strengthen them to become more effective with clients. Throughout the history of the advertising industry, holding companies have feathered their own nests (and share prices) rather than help their portfolio agencies become stronger. Holding companies have encouraged downsizings. They have merged brands. They took over sales leadership via holding company relationships — without spending much time figuring out “what problems need to be solved for clients, and how can we best solve them?” Holding companies accept inadequate fees to win new clients, leaving it to their agencies to “sort out the delivery and profit problems.”

I could go on, because there are more than 7 management problems of this nature.

What I cannot understand is why the ongoing Madison Avenue Machine continues to operate in this manner.

Will the newly-merged Omnicom / IPG C-Suite operate differently? Will WPP, under Cindy Rose? Will CMOs try to restore their credibility, along with the growth of their products?

It remains to be seen and heard, but thus far, the future looks a bit like business as usual and continued industry decline.