Ad agencies a convenient scapegoat

One view in Montreal is that when times get tough, some people in the business of helping companies market products are not shy about using ad agencies as scapegoats.Another load of buckshot was fired recently at the beleaguered Canadian advertising industry...

One view in Montreal is that when times get tough, some people in the business of helping companies market products are not shy about using ad agencies as scapegoats.

Another load of buckshot was fired recently at the beleaguered Canadian advertising industry by the newly elected head of the Association of Canadian Advertisers (aca) to cap off what has to be the year that ad agencies were dinged so many times there cannot be much left to shoot at.

Not very reasonable

aca President Patrick McDougall was recently interviewed in The Globe and Mail, and what he had to say about ad agencies was not very reasonable.

McDougall appears unappreciative of the economics of the advertising agency business and the value we offer clients.

‘Ad agencies face fee pinch as clients cut spending’ reads the headline in the Globe. ‘Advertisers’ group urges them to become more responsive,’ it goes on.

In a business as voraciously competitive as advertising, how can agencies not be ‘responsive’ to the needs of their clients?

In this brain-dead, mud-stricken economy in which a good account is as hard to find as the rarest jewel, would any agency consider being unresponsive to its clients’ needs? It is an untenable suggestion.

Lower commissions

At the same time, McDougall tells agencies they can expect their commissions to fall because ‘many advertisers are no longer prepared to pay the traditional 15% commission rate.’

He also tells them they must be more responsive.

This is backwards. In order to get more service, clients must be prepared to pay more, not less. This also forgets that it is not the client who pays the 15%, but the media which gives an agency rebate for placing an ad.

There have been numerous attacks on agencies this year. There was the ‘wake-up call’ scolding from the beer executive. There was the sermon from the media buyer advising us on how to do our business.

In addition to being called ‘unresponsive,’ agencies have also been called ‘bureaucratic.’

Ridiculous

This is ridiculous and ironic, given that this criticism has come from highly paid people working in some of Canada’s largest and probably most bureaucratic companies.

Labatt’s operates in the oligopolistic beer industry in which two companies share more than 90% of the market.

Let’s guess which might be more bureaucratic – the big ad agency or the big brewery. Count the number of largest ad agencies (50), and then count the number of largest breweries (two) to glean insights.

Advertising agencies are frail financial business structures. In terms of capitalization, most agencies, even the biggest, are only the smallest fraction of the size of the clients they serve.

But their smaller capital requirements allow many entrants into the market even in the middle of a recession.

Clients may scarcely appreciate it, but this is good for them because low entrance barriers for new agencies create a teeming tropical jungle of competition.

The laws of the jungle market guarantee the client will get maximum value for the dollar.

Why, then, do they gang up on advertising agencies when things start to go wrong? Because a certain kind of client needs a scapegoat.

Industry observers, clients and the press, in the u.s. and elsewhere, panicked recently when Marlboro, the cigarette brand, lowered its price in the u.s. in a bid to reinvigorate sales.

This is becoming predictable: sales fall and everyone points their axe at their advertising, their ad budget and their ad agency.

Marlboro sales may be falling, but as a result of any number of factors, including people giving up smoking.

Yet critics are ready to point out the failings of ‘traditional advertising methods,’ forgetting that it was ‘traditional advertising methods’ that made the brand great in the first place.

Do clients really benefit from making these scapegoats of us? It is a pointless, mean-spirited waste of time.

Maybe it provides them with a short-term venting of their frustrations, but it cannot do anything beyond that except disappoint, frustrate and aggravate their supposed ‘marketing partners.’

You do not get more work out of someone by demeaning them. It’s bad management.

Ad agencies put up with this insanity because these people are paying our bills.

It is a difficult position because everyone knows what is being said is mostly nonsense, yet, we would probably still take the account if it were given to us and put up with the nonsense, at least for a while.

Set record straight

But there must be someone out there who does not need that kind of business and can set the record straight.

We can’t zipper our mouths shut every time we get lambasted and not defend ourselves. We have to defend what we do.

Michael Judson is president of Publicite Judson Woods, a full-service advertising and public relations company in Montreal.