Why is the agency business model not working?
Michael Farmer, the author of two key books in the agency industry ‘Madison Avenue Manslaughter’ and ‘Madison Avenue Makeover’, has studied creative agencies for over 30 years in his capacity as management consultant.He’s identified patterns and a worrying downward trend.Here are 3 of the trends:
- Scopes of work (SoWs) are increasing in volume and yet agencies fees are declining - but because agencies aren’t measuring their SoWs they don’t often realise the extent to which this is happening
- Agencies aren’t helping clients achieve their business outcomes, clients are paying them less and typically fire them every 3 years and also generally treat them as order takers
- AI is now putting fuel on the fire and is reducing the amount of creative adaptation work agencies do
During this enlightening podcast interview Michael talks about how agencies struggle to get paid for the true value they bring to clients and are often at the mercy of Procurement who insist on agencies sharing their hourly rates.You can listen to the episode here.Michael explains how account managers need to be more like management consultants which means:
- Being thoroughly committed to doing work that solves client or brand performance problems
- Knowing the performance history of the company or the brands they are focused on
- Having a point of view — and expressing it strongly, backed by data, of what kind of work the agency should do to enhance company or brand performance and having a point of view about a “better SOW”
- Being more like a strategic partner than a service provider and not being afraid of having a ‘critical perspective’ which is not combative but healthy
Here's a 30 second clip:
