Ka-Ching!
A man once went to a fruit market. He was looking for the best quality fruit at a good price. He went around looking at the product of different sellers and compared their prices. Realising there isn’t much difference in prices; he eventually stopped at a shop and decided to buy, and to negotiate of course. He wanted 9 Bananas for the price of 6, 15 Oranges for the price of 12 and half a Pineapple for half the price of one. The seller politely told him that the prices are non-negotiable, and that he doesn’t sell Pineapples in halves as it spoils the fruit and no one buys the other half. The dissatisfied buyer left the shop saying he’ll make the purchase from some other shop in the market. He went to a few other shops only to hear the same thing from every seller. He was disappointed, but he still had fruit to buy, and so he decided to buy on the sellers’ terms.
This is what the advertising business in Pakistan was like. Every agency had a certain quality of fruit to offer and generally did not sell Pineapples in halves. Then something happened. I don’t know what, or maybe I don’t want to say it, but whatever happened changed the industry for the worst.
I have heard all about why our industry is in such a shameful state, from the industry gurus as well as the interns. We blame our clients for choosing bad quality product, we hold them responsible for the bad quality advertising our industry produces, for starving our creative teams to their intellectual death, for not giving any respect to our profession, and the list is endless.
We blame them for pushing agencies to the limit but truth is, when someone comes to buy fruit from our market now we bend over in ways our predecessors couldn’t imagine an agency was capable of.
We as an industry sold our soul for peanuts and now complain about profitability and productivity day and night.
For those who’ve already labeled me as a client pleasing moron after reading the above, I want to quote Joe Klass from 12 steps to Happiness: “The truth will set you free, but first it will piss you off.” And please also consider the fact that very few (read none) at the client side actually like me anyway, not that I care, but this isn’t about them. It is about us, about ad people. Yes, agency business and profitability is under unprecedented pressures; especially creative agencies (Media agencies still have a few tricks up their sleeves and make a lot more money than their creative counterparts do. You can find more media buyers / planners holidaying in Thailand than their creative counterparts… no?). The quality of creative advertising we produce reflects the quality of people in the ad world, not just the whims and wishes of the advertisers. Similarly, the quality of people in advertising is a reflection of the nation in general, not just the
People support what they help create so it is no surprise that a lot of agency heads aren’t bothered by the way things are, it is just a phase to them and you know they’ve seen it all. We can handle it… or so we think. The more experienced you are in this industry the more difficult it is to understand that we are mistaking our opinions for the truth. We say: this is how it is. Not realizing it is no more than a viewpoint, one of many possible perspectives. It is no more than a bundle of thoughts. But reality is one uni?ed whole, in which all things are interwoven, where nothing exists in and by itself. Reality is we helped create the client who pays peanuts but wants William Shakespeare on his account. We proposed the “infinite monkey theorem” not the clients:
It states that “given an infinite amount of time and bananas, a monkey hitting keys at random on a typewriter keyboard will almost surely eventually type every book in France’s Bibliothèque Nationale de France. In the restatement of the theorem most popular among English speakers, the monkeys eventually type out the collected works of William Shakespeare...
There is no one-click undoing this damage, much like the damage to the economy courtesy our lack of unity as a nation. Agency leaders need to join hands and carve out a solution. It will take time, and looking at the way things are, it will take much longer than most agencies have to prevent the cave-in. Besides, this is just one of the demons we are fighting. Change is another… not that things are changing; they always were, but that they are changing so fast. This represents a bigger transformation; with such rapid change can also come great chaos and risk. For all the agencies that have been able to navigate the changes in technology, media ecosystem and agency roles, the world is made up of many more that didn't. Because of this sheer velocity of change, creative agencies not just in Pakistan but the world over are suffering from continuous erosion in operational health. For some businesses this erosion is threatening; especially because it usually hides behind older, more visible menaces like lack of leadership and high attrition rates for instance. For other agencies that are apparently doing very well right now the damage isn’t visible yet, primarily because profits seem good. Profits could be better yet!
See the agency business with a new lens:
You need at least sixty percent of your revenues coming from monthly payouts of an annual retainer if you wish to sustain a mid to large size creative agency unit and your pride. The higher that percentage is, the happier the agency leadership will be. Trouble is most agencies can only long for such favorable conditions when in reality clients do not want to pay for most jobs they want us to do (because the other fruit seller will do it for free happily). That said, whether the agency gets more from annual fee or from project / rate-card basis, time is our currency. We become profitable when a fair amount of hours are estimated and a fair an accurate amount of time is used and billed to the client. But time is also the problem. Besides some clerical /mechanical tasks, there are no definite measures of time spent to complete a creative job as no two jobs are the same. Even if the job header gives you the impression that it is indeed the same job from the same client, it isn’t! All we have is an estimate... time sheets and time/task recording are the fundamental source of determining the revenue that the agency earns. But is filling timesheets a billable task? I am not arguing the importance of financial, administrative and managerial information in measuring productivity. I am just saying it is no longer enough. We analyze the profitability of client relationships through the lens of time instead of the quality of time spent on a job, and that ladies and gentlemen is the problem. We need to change the lens, here’s what I mean:
Redefine (or in some cases, just define) productivity for each client:
To start improving the ad agency’s operational health, agency leadership needs to go well beyond income, staff-cost ratios, hourly rates, overhead rates, multiples and margins - not that these are unimportant, but productivity is not merely client-wise income. Here are two important ratios to help you measure the agency’s health:
- First and most important is the “billable vs. non-billable deliverables” ratio in total scope of work. Look at the complexity of work being done on each client instead of just the total number of deliverables. If on a given client the non-billable tasks weigh heavier, strengthen your Client Service & Planning team on the account. Why? Because such clients require better project planning and management from the agency regardless of the reason why more unbillable jobs come your way from them. If you are lucky and it’s the other way round, don’t just look away thinking all is well; keep supplementing the creative team with fresh, entry level resources to prevent the creative teams from burning out, and to keep this going of course.
- The second is “deliverables per million” but this can only be calculated if you are already measuring the first one. For every 1 million PKR of agency income, agencies deliver 25 to 40 creative executions (this number is as honest as all the agency heads I spoke to were). The number of deliverables is increasing every year, and types of deliverables per medium are also growing rapidly while being classified by clients in the dreadful section of “adaptations”. Ideally, the number should be less than 50. If it goes above, you need to check whether your client service teams are slacking or the client is taking advantage of your spineless stance fueled by the urge to retain the account. This is a critical metric for both retainer and rate card relationships as it helps channel your energies in the right direction, the more profitable direction. It is also helps in internal performance evaluation and team / employee appraisals.
Respect yourself!
I hear this all the time, change is the only constant. We need to be flexible. Being ready for change is not the same as being ready to fulfil all your client’s demands. If you want your client to respect you, respect yourself. Remember, a principle isn’t a principle until it costs you money. But trust me when I say it will cost you more than just money if you don’t have any principles.
Account retention is supreme! Or is it?
This has been the dogma of our industry. It stems from the erroneous service industry belief that the customer is always right. Truth is most modern day service marketing books say otherwise. This dogma of client retention is our collective conceptual prison. And the strange thing is that despite the state of our business, we love our prison cell because we made it with our own hand, and because it gives us a false sense of security that things will get back to how they were; when the money was good and the client’s respectful. This needs to change… and change starts from the top. Replace your shallow hunger for revenues and growth with that of ideas and creative drive that brought you in to this business to begin with. Help foster this change in your own organisation, start with yourself... you can thank me later!
Published in Dawn Aurora, May-June 2016
https://aurora.dawn.com/news/1141482/show-me-the-money