What Agencies Must Do to Restore Success
It isn't about "winning new clients." It isn't about "being more creative" or "reducing costs." It's about committing to help clients grow their brands -- and helping CMOs become successful again.
Credit: David Sipress, The New Yorker, The Cartoon Bank
Agencies have suffered for too many decades from fee reductions, relationship insecurities, too many RFPs, bloated scopes of work, downsizing edicts, high rates of employee turnover, loss of status, depressed salaries and other assaults on their business economics and professional dignity. And yet, advertising (including its technology) remains a beloved profession by those who know and have experienced that agencies at their best can be powerful forces for change, success and personal enhancement.
I have argued in my books and on these pages that Madison Avenue’s C-Suite executives have let down their clients and their employees by prioritizing short-term earnings at the expense of client success and long-term agency sustainability.
This is not hard to prove: any talent-based business that liquidates its talent for short-term profits is very badly run. Think about the Omnicom / IPG acquisition, for example, which touts, as its main raison d’être, that cutting costs by $750 million will be a great thing!
The chronic problems of Madison Avenue are not inevitable and can be solved.
Client relationships could cease to turn over every three years and become long-term relationships again if agencies solved the real growth problems that bedevil their clients. Who’d get rid of an agency that was helping to generate growth and business success?
Advertising expenditures and fees could grow again if the marketing investment generated positive, growing returns for clients — instead of being viewed as a cost to be cut by finance and procurement.
The chronic problems of Madison Avenue are symptoms of client dissatisfaction with their moribund brand growth rates — it’s no more complicated than that. Low brand growth leads to efforts to cut costs and find new agency partners, and that’s what clients have been doing for the past 20 years.
What, then, is the formula for agency success in 2025 and beyond?
Agencies must commit to helping their clients grow their brands. This mission must become the new foundation for agency positioning. Client growth has been stagnant for the past 15 years. Ironically, product growth died once Madison Avenue was seduced by the promise of personalized, targeted advertising as promoted by Google, Meta, DSPs, SSPs and purveyors of click-rate attribution metrics. The superiority has yet to be proven — not by the phony click-rate metrics currently in use, but by an increase in client brand sales.
Agencies must become knowledgeable about the history and current low-growth situation of brands, using the same analytical skills as those employed by the strategy consulting firms. Legacy brands used to grow; they ceased growing after the 2008 global financial meltdown. The reasons for growth slow-downs can be understood, but only if agencies spend some time gathering and analyzing the data — using client brand strategic plans, if they are available, and carrying out independent brand research, if they are not.
Agencies must develop and negotiate media and creative scopes of work that solve the brand problems — even if their clients already have fixed ideas about this. SOWs need to be developed rationally and logically. This is not how they are done today. They are not specifically designed to solve brand problems. They are more likely to be constructed along the lines of “let’s do more digital and social than we did last year.”
Marketing Mix Models (MMM) need to be deployed to support this effort. Too often, MMM is used by Marketing to justify current expenditures, used after the fact rather than as inputs to make expenditure decisions. Sophisticated MMM programs like Mutinex and others need to be employed to help make marketing mix decisions.
Agencies need to be paid for the work they do, not for some estimate of manhours for an unknown quantity of work. The gap between SOW workloads and agency staffing allocations has been growing for decades, simply because agencies agree to fees without having a clue about how much work clients will lay on them during the coming year.
This is, perhaps, the most astonishing failure of Madison Avenue’s C-Suite executives — they have done very little to fix this for decades, preferring to fire employees to make their margins rather than ensuring that their agencies were paid appropriately for their outputs. The technology for documenting, measuring and monetizing agency deliverables exists — I’ve been using ScopeTrack® and ScopeMetrics® for years to analyze agency SOWs. But agencies neither document nor measure the scopes of work they are required to carry out.
None of these changes are easy, particularly in light of the fact that agencies have liquidated so much of their senior talent over the years. But who said that C-Suite executives should have an easy ride?
Agency executives have a responsibility, for the high levels of remuneration that they receive, to do the right thing for their clients and for their employees. This does not mean accepting high relationship losses and replacing them with new client wins. This does not mean cutting costs and asking employees to deliver superhuman amounts of work.
To do the right thing means to promise to help clients grow; to understand brand problems; to develop appropriate scopes of work; to be paid for the work; and to create an environment where employees can flourish and grow, seeing long-term success down the road.
“Making the numbers” by sacrificing agency viability needs to be abandoned immediately. It’s an unworthy, self-destructive strategy.
If the right things are done, the numbers will take care of themselves.