The End of Client Conflicts

March 2, 2018 Daniel Langer-Hack

Loyalty is a false god.  

We already know this to be true when it comes to how consumers engage with brands. But isn’t the same also true of agency-client relationships?

In my early agency days, there was an urban legend that circled the halls. It told the tale of an art director walking into a meeting with a client — one who happened to be a very large and well-known purveyor of sparkling beverages. Perhaps not thinking as he unpacked his bag (probably filled with painstakingly cut foam core boards), he placed a half-finished bottle of a certain competitor’s product on the table. He was promptly called out by the lead client for doing so and unceremoniously fired only hours later.

While this may seem a bit extreme in hindsight, the value of that type of agency-client relationship was so vehemently defended by both parties, that many working in the industry at the time wouldn’t have bat an eyelash at that story. The financial stakes and potential impact to the agency’s reputation were that high.

Of course, consumption of a competitor’s product and doing work for said competitor are two different things. But maybe not as different as we think.

While we’ve seen a ton of criticism and expertly-crafted content ridiculing the notion of spec work in recent years, there’s been comparatively little discussion around client conflicts of interest. While the tectonic plates of the marketing ecosystem have continued their unrelenting shift, this part of the stone tablets has remained relatively unscathed.

In fact, even as the unspoken (yet often diligently scribed into an MSA) agreement around conflicts of interest has remained static, the context surrounding it has continued to become even more suffocating. Categories continue to consolidate and encompass broader product and service offerings. So too do the number of players within each one, with M&A activity occurring at an increasingly rapid clip.

Concerns around conflicts are certainly more understandable in categories with sensitive proprietary data or long-standing oligopolies. But the “Retail” category, for example, includes a huge swath of businesses with varying levels of overlap and loosely defined customer segments. Most QSRs only compete with each other in the broadest sense of the word for share of appetite — or essentially when asking oneself “do I feel like a burger or burrito today?” And the amount of recent consolidation in CPG has been staggering. If the cheese client merged with the ketchup client, is it understood that now the ketchup agency can’t work on a competing dairy brand, simply by association? That doesn’t seem reasonable.

Not wanting to ruffle feathers any further, it’s understandable that most agencies still abide by the old conflict rules. But should they have to? Some cold, hard truths provide context: It is without question a tough time to be an agency. Further limitations placed on the pool of clients an agency is able to solicit business from has only exacerbated this problem. As retained relationships become more the exception than the rule, old agency models are struggling to keep up.

Against a backdrop of commoditized production creating a race to the bottom, many clients expect strategic planning work to be included with the agency’s offering as a “value-add”, even on project-based work. The irony being that, outside of creative ideation, sound strategy is one of the few tangible services that can distinguish an agency who adds value from one who doesn’t. It is what elevates them from simply a vendor to a true business partner - the inability to monetize that thinking is problematic.

Some agencies have scaled up their operations and human resources in order to efficiently service behemoth clients in sectors like automotive or telecom, yet they cannot deploy those very resources and models to help similar businesses. Instead, they nervously wait out the inevitable relationship cycle (honeymoon phase….  comfortable domesticity… where did the spark go?…  I think we should see other people.). Best case scenario, they’ll pick up a replacement business in the shuffling of agency deck chairs that happens with RFPs of this nature. Even so, they’ll end up with a smaller retainer, leaner team and said marriage cycle will most likely shorten the next time around.

Agencies that have scaled this way are most vulnerable because they lose the very thing that made them appealing in the first place - their ability to operate nimbly and come up with great ideas without being bogged down by cumbersome processes. They’ve built a robust assembly line, but can no longer develop a concept car.

Clayton Christensen’s “The Innovator’s Dilemma” shows how most businesses fail to change because their cultures reflect long-standing client cultures. At the same time, many clients in less embedded relationships feel that agencies, to their detriment, no longer understand the client’s business to the degree that they used to. As an agency, it’s tough to win.

Marketers are certainly not having an easier time of it. Brand Managers are now, more often than not, tasked with managing a portfolio of brands, their attention stretched thinner across an increasingly large set of responsibilities. When it comes to budgets, “more with less” is the name of the game.

Many marketers for global brands are not even truly in control of agency assignments anymore. Each year, relationships are ended for reasons which are entirely out of the hands of even the senior-most clients. What agency veteran hasn’t been given the “we really like working with you guys but we’re moving to a global-mandated relationship” talk, at some point?  

For all of these reasons, fewer than one third of marketers want to get stuck in a long-term relationship with an agency. It’s not that retainers are inherently broken, but we should also acknowledge they can lead to unclear briefs, unnecessary meetings, noise and frustration on all sides. Many are choosing to grow their in-house teams and hand-pick agencies for assignments. And that’s okay. Good agencies should be comfortable with going project-to-project. They should have conviction in their abilities and the impact of their work, so long as there’s enough visibility to allow for resources to be planned and deployed effectively.

BUT, in exchange for this leaner, meaner, less needy agency of the future, clients should stop expecting agencies to resist any pursuit business from competitors, or even those that occupy vaguely similar airspace.

If we’re going to have an open marriage, the rules need to work both ways.


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