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Ad agencies: partners or suppliers?

Agencies have always liked to think of themselves as partners but Derek Day questions just how realistic this is. Quoting marketers’ criticisms of the agency world’s unwillingness to understand the commercial logic of their clients’ business, he offers advice on how to improve the relationship.

For an industry supposedly at the fulcrum of capitalist enterprise, the advertising business displays few outward signs of commerciality. The layperson, on a first-time tour of a typical advertising agency, would be surprised to find themselves in a low-pressure environment somewhere between an art dealership and a private members club: ironic sculptures in reception, table football in the creative zone.

At the bar – and there would be a bar – the conversation would be noticeably innocent of the vulgar language of trade: no talk here of ‘pricing’, ‘distribution’ or ‘sales’. Instead, the visitor will overhear reverent discussions of mysterious, almost Masonic, notions such as ‘Golden Lions’, ‘Silver Arrows’, ‘Black Pencils’. The closest to the marketplace that the chatter comes is the occasional reference to consumer insights, and the desire to stimulate consumer conversations. It is a long way from Orwell’s ‘rattling stick in a bucket of swill’.

Still, outward appearance is rarely the whole story and perhaps this is merely the wrapping for an implacably mercantile, core; the commercial fist in the cultured glove. In truth, though, advertising displays few inner signs of commerciality either. The average number of MBAs in a typical agency, to the nearest approximation, is zero. Ask for a view on advertising investment, with reference to the net-present-value discount formula, and you will be met with a blank expression.

Most curious and quaint of all is the gentlemen’s agreement whereby agencies currently producing fine work in a particular sector – airlines, say – voluntarily debar themselves from competing further in that arena until bad luck or misjudgement occasions the loss of their current customer. It would be like Airbus declining to sell planes to BA on the basis that it would feel wrong to be disloyal to Emirates.

We asked our clients for their views on what agencies and planners bring to the business. The vehemence of their answers took us by surprise

This endemic isolation from the norms of commercial existence does not go unnoticed by marketers, and nor does it escape criticism. Far from it, as my business partner Helen Edwards and I discovered last year when preparing for our slot at the Advertising Planning Group’s Battle of Big Thinking (BOBT) conference, held in association with Campaign.

The BOBT audience is dominated by marketers and ad-agency people, so we were keen to take the temperature of that relationship as a backdrop for our theme. We asked our own clients and more arms-length marketing contacts for their views on what agencies and their planners bring to the business. The vehemence of their answers took us by surprise.

While agencies are valued for creativity, and planners for insights, the good news ends there. Here are some of the verbatims from that mini-survey:

  • “Most agency planners just don’t understand the dynamics of business – they are about communications.”
  • “They don’t have any idea of business – they will suggest that we go back and explain to Tesco why we shouldn’t abide by their guidelines.”
  • “They are not always as data-driven as they should be.”
  • “They beat us up verbally from their office without really knowing how to do it, or what it takes.”
  • “Most agency people are simply not numerate enough to be useful in the wider context of brands and business.”
  • “They are so much further downstream than they think they are.”

One of the people we talked to at length was Richard Reed, joint founder of the smoothies-to-snackpots brand, Innocent. Since Reed is a former planner – he spent four years at BMP – you might expect him to be a bit more supportive of his former industry. He wasn’t. He said: “Agencies get carried away by the personality of our brand, but don’t do enough to understand how the business works.” Perhaps this helps to explain the brand’s three-time switch of ad agencies in 15 months.

For FMCG spenders like Innocent, the most livid sore point in the client–agency relationship is the latter’s inability to get to grips with the realities of the trade. The planning team’s focus is exclusively on consumers, with the endless quest for killer insights. There is no one on the agency team, it appears, with any worthwhile insight into the complexities of dealing with their client’s first, and most powerful, customers – the retailers. To illuminate the challenges of distribution, and the lengths to which marketers must go to outflank the intransigence of their retailer customers, we unveiled a trade story from the Harvard Burt’s Bees case study as part of our BOBT talk.

ad-agencies-partners-suppliersBURT’S BEES – A BIG RETAIL IDEA

Burt’s Bees is now a sizeable US brand in personal care. But when it was smaller, and just beginning to branch out of its niche retailer distribution and into the big US pharmacies, it ran into the problem of something retailers call ‘in-line display’.

Perversely, this doesn’t mean that the products are displayed in a nice strong line in a single part of the retail space. In fact, it’s the exact opposite: they’re flung all across the store, with each SKU forced to sit among similar specific product lines (hence ‘in-line’). So Burt’s Bees had its shower gel in one place and its lip balm in another, with its baby oil somewhere completely different. For a brand without a big communications budget this diffuse presence in store can really reduce impact. Burt’s Bees – an ‘artisan’ brand that had always shunned advertising – knew that in-line display was a costly issue, one exacerbated by the fact that most of its products were in small containers. The brand was getting lost. So the management team reacted with a combination of imagination and measurement.

First, they designed a special ‘hive’ display unit, with all the products in one place, and sought to encourage retailers to work with this eye-catching display.

When those retailers proved stubborn, the brand offered to pay for and run a controlled experiment in selected stores: Burt’s Bees’ SKUs would be displayed both in-line and in the hive. The specific products were electronically tagged so the store could measure which kind of display resulted in higher sales.

Burt’s Bees was able to prove that sales were higher from the hive displays, because they prompted multiple purchases. Even then, some retailers wouldn’t change, so the brand took the courageous step of focusing on just those that would. Today, Burt’s Bees is a $200m brand, and this was just one of many tough distribution calls that helped get it there.

What is noticeable here is that the brand took on the retail challenge itself. At the time, it had no agency. Would a brand facing similar issues today be able to encourage its ad agency to help solve the problem? It’s doubtful.


Imagination and measurement is hardly a combination that marketers enjoy from their advertising agencies on trade issues. Yes, imagination is there in the background, but it is a rare agency that can persuade its best creative talent to focus on the distribution exigencies of its clients: the importance of the issue to the client is in inverse proportion to its attractiveness to creative teams as a route to glory at Cannes.

As for measurement, look no further than Campaign’s recent editorial (21 October 2011) berating marketers whose focus is metrics and ROI. Under the banner ‘Creativity is more than just a numbers game’, editor Claire Beale insists that ‘creativity defies data’. Yet without data to underpin its creativity, Burt’s Bees packs would still be flung all around the store.

Remarkably, in the same editorial piece, Beale argues that agencies need to be better represented in their clients’ boardrooms. This is a variation of a long-expressed agency yearning for a seat at their client’s so-called ‘top table’. Yet that table is the very place where numeracy, terminological precision and – whisper it – compromise will be expected as a minimum.

The marketers we spoke to were well aware of their agencies’ desires to be up there with the corporate great and good, but noted that marketing teams themselves have difficulty making their presence felt at this level. They want agencies to help them practically in their negotiations with influential internal disciplines such as operations and HR, or at least to be sensitive to the way these conversations run. ‘Naive’ was a word we heard time and again for agencies’ perceptions of, and impatience with, the internal commercial matrix.

From one of the big brewery companies, we learned that the operations director had vowed to ignore the pronouncements of any agency that had not ventured “north of Watford” or worked a shift in a pub kitchen. Since one of its agencies had done neither, the marketing team was left to fight its bruising internal battles alone.

In service businesses, internal brand engagement is another area in which marketers would welcome more hands-on support from agencies. Recently, we have seen a rash of ambitious, service-based promises in national ad campaigns: ‘We’re on your side’ from Nationwide; ‘Here for you’, from RBS; ‘Thinking of you’, from O2. Do the agencies that created them have a process for taking the message to the thousands of people on the inside, whose task it will be to make these promises a reality? Or will these campaigns stumble, the way the ‘Doing the right thing’ campaign did, for British Gas, whose own employees got to see it at the same time as customers did, on the telly?

Certainly, at the time of the BOBT, the best examples we could find on the subject came from brand owners themselves without agency involvement. The one we spoke about, for one of our own clients, Cambian, showed how internal messaging can be held together by the power of a ‘big, symbolic gesture’.


Cambian is in step-down mental health care: semi-secure places for people who have often been in the system for years, many of them sectioned, usually arriving with a bare few possessions to their name.

The brand is run by a charismatic founder, Saleem Asaria, who created a symbolic gesture to signal that Cambian feels differently about the people in its care: a ‘Wow! pack’, that patients get the day they arrive. Awaiting them on a table in their room is a designer rucksack, inside which is an array of branded toiletries, a watch and an iPod. Often it’s the first time patients have been provided with decent, branded products in their entire time in the system. These were symbolically chosen as the brands Asaria uses himself.

The aim was to send a signal – or, rather, two: the first to patients, to encourage them to start feeling differently about themselves; the second to staff – many of whom will have come from other parts of the mental health system – to think differently about the patients. The symbolic gesture does not do its work alone, of course; it is part of a fuller internal brand engagement process. But it is extraordinary how the people who work at Cambian – cleaners and cooks, as well as nurses and carers – talk about the ‘Wow! pack’, and what it means to new patients. It’s a kind of talisman, part of the folklore of the brand, and part of the reason why staff stay motivated and deliver the Cambian promise: to help the people in its care achieve ‘their personal best’.


Clearly, as our exploration a year ago reinforced, there is plenty of client-side resourcefulness and imagination on the more routine commercial challenges of marketing life. Equally, though, there are many marketing departments where resources are thinly stretched, leaving marketers needing all the intelligent external help they can get.

From a practical point of view, what can marketers do to persuade agencies to take a more holistic, commercial perspective as part of their everyday service?

The first thing is to be clear in your own mind that this is what you want. A simpler option might be to dispel all talk of ‘top tables’, ‘lead agency’ or ‘brand guardians’ and restrict the agreement to one of just producing great insights and great ads. It could make for a more streamlined relationship – and may leave you free to explore project-based arrangements rather than keeping a retained agency, or even considering lower-cost options such as creative consultancies or crowdsourcing.

The downside is obvious: if all of your marketing services suppliers are separated this way, without any one of them taking a broad view, then you will be the one who is left joining the dots. The opposite way to go is to take the advertising agency’s desire for deeper involvement at face value and be clear what it is they need to do to achieve it.

This might include:

  • planners who go beyond consumer groups to conduct in-depth interviews with trade customers and produce insightful observations about them, and about opportunities within the retail environment;
  • an agreed format for presentations of creative work which includes implications for operations, finance and HR;
  • at least one person on the dedicated agency team to have an MBA from one of the leading business schools;
  • exchange of graduate trainees between agency and client for agreed periods; this used to be a norm, but seems to have gone out of fashion of late; and
  • incentive-payment metrics that include evaluation of agency input and understanding on the full range of client issues: distribution, pricing, trademarketing, supply chain, service delivery, ROI.

It’s decision time for ad agencies, too. Do they really want to confront all these extra complexities, on top of the myriad communications disciplines and channels that they already need to master? Or is the more honest approach to stick to creativity and ads? There is no stigma, and much good business sense, in going this route.

Conversely, those who want to be ‘partners’ or earn a place at that client ‘top table’ need to recruit a few more business-school alumni, gain greater fluency in the language of the corporate boardroom and recognise that their current Achilles’ heel is dubious numeracy and a casual disrespect for data. A little stakeholder risk might also help; buying a brand and running it was one suggestion we made, only half in jest, for the members of the Advertising Planning Group.

It would be nice to think that a healthier respect for numbers, to run alongside its genius for originality, might pay dividends for agencies in the most literal sense, too. Right now, average ad agency margins are under 11%. That, if nothing else, shows that the advertising industry could use a bit more commercial nous.


This article is based on a talk given at the Advertising Planning Group’s 2010 ‘Battle of Big Thinking’, held in association with Campaign.