I had the privilege of sitting on a panel with a group of very smart and talented creatives from the in-house and agency worlds at an InSource sponsored event focused on the in-house/agency dynamic. I had expected to take off the gloves and go bare-fisted with Michael Lee and Ken Carbone about how internal creative groups can offer more value than outside creative teams, but I was disarmed by their humor, intellect and commitment to doing great creative work.
Yet after the event, I found myself still thinking about all the experiences I had or heard about from in-house colleagues that called into the question the value that some ad agencies and design firms bring to their corporate clients. It became obvious that InSource had chosen particularly enlightened representatives from the agency and design firm community, leaving gaps in the big picture.
I want to put into context my next observations. I’m not trying to imply that all agencies and design firms are engaged in the practices below – far from it. But I’ve observed the practices noted below first-hand and am concerned that if they go unaddressed, companies will continue to be exploited by the bad apples in the bunch. So here are some candid thoughts on the unaddressed underbelly of the outside vendor reality.
First, agencies and design firms are for-profit entities unlike in-house teams. This fact, coupled with marketing, infrastructure and other overhead they have to recover that in-house teams don’t, impacts their cost to their client companies. A potentially larger concern may be that the profit motive might incentivize these partners to engage in practices that aren’t in the best financial interests of the companies they service.
Having partnered with Procurement at various companies by assisting them in vetting agency contracts and invoices, I’ve witnessed first-hand and in discussions with in-house colleagues, specific agency financial practices.
1. Overcharging on new media deliverables for which clients have no pricing benchmarks. I once reviewed an agency bill charging $47,000 for a single static web banner ad assembled from repurposed branding elements.
2. Agency utilization of a blended hourly rate structure. The rationale behind the employment of this fee model is that it simplifies billing and when there’s a mix of high- and lower-end agency staff engaged on projects the end cost balances out. The problem is that agencies can — and do — bill for a mix of tasks heavily weighted toward the lower level transactional functions billing $120/hour fees for admins.
3. Price gouging on out-of-pocket expenses. $50 to burn a CD, $35 for a color laser print, $25 for a cardboard easleback – need I say more?
4. Charging clients to turn over assets they already paid for. Talk to just about any in-house team that had to get their hands on agency developed assets for repurposing into new deliverables and you’ll invariably hear a story where the agency charged thousands of dollars to burn DVDs or fill external hard-drives with digital files and, even when guaranteed payment, dragged their feet for weeks or even months to turn them over.
5. Enabling poor client collaborative practices. No creative brief? – No problem. Poor direction and disorganized and conflicting feedback? – Bring it on. Scope creep? – Love it. All these dysfunctional behaviors add hours (read revenue) for agencies.
6. I’ve been told by creatives working in agencies that they sometimes engage in a practice of a team bait and switch. They put their A-team on the pitch and then swop them out with the B-team once they win the business. In some industries that don’t allow for much creative latitude, they don’t even bother with the aforementioned scheme and just put in the B-team.
There are other disadvantages to working with agencies and design firms that, while not intentional or profit-driven, add to the cost of jobs, impact quality and impact speed to market.
7. Lack of institutional knowledge – both branding and bureaucratic. Outside vendors often aren’t privy to the branding nuances and culture of a company because the company hasn’t effectively communicated that information or they’re new to the relationship. As a result, they may inadvertently submit concepts out of alignment with the company’s branding strategies resulting in more hours spent and time lost on revisions.
8. If agencies are working in a highly regulated industry that has a multitude of marketing guidelines and policies and a robust review process, they can get tangled up in the rules, regulations and processes behind approval processes and again burn through time and money.
9. With no larger context, agencies can unintentionally create materials that, while meeting the client’s requests, run counter to broader corporate marketing strategies. One place where this often occurs is in product branding. A product manager inclined to aggressively push the brand of his or her product above that of the company, may instruct the agency to place the product identity above that of the company, violating corporate branding guidelines.
10. Missed opportunities for leveraged spends. If a company works with multiple agencies and firms, then funneling their printing, paper and stock imagery spends through designated vendors allows a company to negotiate pricing for those services and control those relationships. Companies can also eliminate unnecessary markups on those purchases.
If the industry actively uncovers and addresses the practices I’ve noted above then client companies protect their financial interests, ensure quality deliverables and create a level playing field where ethical, quality ad agencies and design firms are recognized and rewarded for their client-centric business models.
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