Scene: Opens on two Jewish Women at a table a Lower East Side Diner:
First Woman: The food here is just awful!
Second Woman: And such little portions too!
First Woman: So I will see you again here tomorrow?
Second Woman: Are you crazy? Of course, where else am I going to be?
I was reminded of the old Borscht Belt joke above as I was reading Nancy Hill's, President of the 4A's, Op-Ed Piece in the Wall Street Journal a couple of weeks ago with a counter-point from Bob Liodice from the ANA.
Nancy's original piece set out that agencies can't attract talent anymore because clients have driven fees so low that salaries don't attract talent to the business anymore. She argued that largely this is a result of clients' reducing fees via going through "procurement" to hire agencies largely based on cost and not value.
In a quick riposte Bob Liodice responded that agencies can only blame themselves as agency holding companies have never made more profit and there is disconnect between saying that there is no money when the holding companies are almost literally rolling in cash and are buying agencies at a rate of about one every week.
With due respect (and I do respect Nancy highly) Bob is right. The agencies haven't lost their mojo because clients are paying less; actually if you look at the numbers clients continue to pay more and more for less. I have seen clients paying mulit-millions in fees for their business to be be essentially run by 24 year olds. Nothing against 24 year olds but a few million dollars probably buys more wisdom than they have the experience to deliver.
So where is the money going? Holding companies are getting it -- and they are snubbing the clients' nose in it.
One only need to look as far as the comments from the holding company presidents to make the case.
For instance, in the wake of the Omnicom and Publicis debacle, a debacle that everyone from my toddler son to Stuart Elliot knew was coming ... well, everyone, except for the guys who run Publicis and Omnicom that is...well.. to be fair they probably knew it was insane too, but...I'm sure they figured if they could make more money at everyone else's expense -- who cares. These same guys dismissed their $600 million + failure and the erasing of about 10% of their stockholders equity as nothing more than a small bump in the road toward greater profits.
I don't know about your agency, but at mine, $600 million could buy a lot of talent -- say three quarters of Olgilvy NY and... hmm, perhaps throw in a even Da Vinci and perhaps a John Ford, yeah I know they are both dead but with $600 million you could probably raise them up from the dear departed or at least find their likes in a new generation.
Yes, fellow advertising people, even "clients" read the news too and every time a holding company CEO comes out talking about how 18, 20, 40, 120, 600 million really isn't anything to worry about, and "by the way, I'm asking for an additional $5 million in my base compensation this year on top of the double digits I asked for last year and we are going to keep on buying marketing agencies at the rate of one a week, and, by the way, I can't write a headline or a media plan to save my life" all make the procurement people just sharpen their pencils a little more.
All of that money comes from somewhere and its coming from the people who work day in and out at the agencies. It is only so long that you can pay for increase profits on the backs of 22 year olds who work 18 to 24 hours a day or keep firing anyone who makes above $50K a year.
One of my favorite David Olgilvy's aphorisms is "The consumer isn't a moron, she's your wife". Perhaps the holding company pooh-bahs should take heed that the Clients aren't morons, they are your ticket to your Netjet's membership
So... it is all the agencies fault. Isn't it?
Like our Jewish diners in the opening, if you don't like what is being served up, one has to ask "why do you keep coming back to the same places"?
The fact is that the Clients are to blame. Not because of "Procurement", but because they keep coming back to the same places to "eat".
Off the top of my head I can think of six independent agencies (mine included) that would do a better job for less than a quarter of the price of the big agencies. And that is largely because we pay our teams an honest wage for an honest day's work, and "honest" means you work for the client and not sit around figuring out how to buy your next yacht.
But all of us independent agencies are still waiting for the call from big clients or from the pitch consultants or really anyone who can't afford the waste at the big agencies.
So, Clients,... one has to ask "when".
When are going to stop eating at the same diners?