Money Matters

By The Drum | Administrator

April 7, 2005 | 7 min read

When it comes to service, people have different expectations. Some like the languorous, expensive but friendly service of the local deli, while others relish the speedy, economical anonymity of the supermarket. Realistically, both customers make allowances in price for the differential in service. The same choice is made in marketing departments, the difference between going for a local, independent media agency and the big network-linked one is increasingly coming down to the bottom line; cost over quality of service.

Last year’s shock consolidation of the £12m Scottish Executive media account into MediaCom made many Scottish agencies sit up. Incumbent, Feather Brooksbank, had held on to the various parts of the Executive’s business under individual reviews so their performance on the accounts could not be questioned. However, it was widely recognised that when the crunch came, the financial savings of handing the account to MediaCom swayed the Scottish Executive. Another public body, Scottish Enterprise, also surprised the industry recently when it ended its 16-year relationship with The Media Shop, and handed its £1.5m account to Feather Brooksbank.

The intricacies of quality client service versus cost savings are a hard subject to broach with agencies. Every agency insists that it offers low-cost, high-quality service, and few clients are willing to admit to going for the cheapest option.

Although looking at public sector account moves is slightly ambiguous given the transparency demanded by taxpayers when it comes to governmental spending, the move by Scottish Enterprise proved that, however depressingly, a long love affair means little these days.

“The move [to Feathers] was partly down to cost,” said Alan McIntyre, marketing director at Scottish Enterprise. “There was a cosiness in the relationship [with The Media Shop] that I had to look at and ask, was it productive? What I’m looking for in an agency is a working relationship where they are training our staff to work with them in the best possible way. That was just part of it. With media buying, there’s always the black art of who buys best. Everyone says they get the best price, and the cost issue is difficult unless you get it in black and white from the media owners.”

That’s not to say that The Media Shop didn’t put up a good fight to retain the account. The agency retained it four years ago, just before McIntyre joined, and again two years ago. McIntyre is keen to point out that the service and value for money he was getting from The Media Shop was not the issue for the review, more that he wants to evaluate ROI when it comes to media.

“All the people on the shortlist came back with better cost savings,” he said. “What we were looking for were new ideas, and new people often come in with fresh eyes. What agencies have to do is give added value. With the changes in technology, and the vast array of media, we’re looking for people who can give us new ways of working. Evaluating what you’ve done with the media is very important.”

Caroline McGrath, managing director at The Media Shop, is pragmatic about why it lost the account: “We’re really proud of the relationship we’ve had with Scottish Enterprise,” she said. “Tell me any other client in Scotland where there’s been a 15, or even ten year relationship. Few things are surer in life than death and taxes, and when you have held on to an account for years, at some point you’re going to lose it. Anyone who goes down the route of the cheapest option gets found out.”

While sceptics have gossiped that MediaCom’s may have struggled to achieve the rates it promised, handing an account of that size to a smaller agency could bring problems. With £12m of business hurtling around a 25-strong agency, time is of the essence and you could ask who’s servicing other clients.

“Would I pitch for Procter & Gamble?” asked Philip Jones, managing director at Spirit Media. “No. But would I pitch for a brand that was to be launched in a particular region, Yes. With a large account like that, the mechanics of the operation take over.”

So there is still a market for independent agencies to compete against the bigger ones, even if clients start looking towards cost? “It comes back to value for money,” said McGrath. “Half of our clients are managing directors or owners of their own businesses, they like to know that they’re dealing with their equal on their media business.”

Sally Stanley, marketing director at Highland Spring, agrees, and disagrees that there’s a move towards cost obsession. A long-term client of Spirit Media, she looks for service above everything. “I like to deal with a senior team, whether it’s an ad agency or media agency,” she said. “In the past, not at Highland Spring, I’ve used bigger agencies and not had senior people on my account. It’s not just about costs or size. When you’re going through the process of selecting an agency, you’re looking at how much time they’ll spend on your account, how many people will work on it.”

All this talk of cost-cutting and client demands could indicate a gap in the market for media agencies to specialise in markets. Philip Hogg, marketing director at Edinburgh-based Miller Homes, moved its media account from Feather Brooksbank to Space & Time Media, a similar-sized media agency in England, that specialised in the housing market, and could deliver a cost-saving as a result.

“We had been with Feathers for six or seven years, and we had absolutely no problem with their service at all,” he said. “We undertook an audit and invited some media agencies to quote, and found quite a price differential. There was never any question on service, and it was a pity we had to part company with Feathers. Had the cost differential been relatively close we would have continued the relationship, but unfortunately we can’t bring sentiment into it.”

Roger Williams, marketing director at the Scottish Executive, was not at all sentimental either, and was upfront that his decision would be swayed by cost. “In terms of the pitch, I said straight away, price,” he said. “As the way we’re working our marketing gets more complex, we’re looking for more integration and a range of communication. In the past you looked at conventional campaigns, and you ticked the boxes for radio, TV and print. Now we’re more communications-focused.”

With Scottish Enterprise, Spirit’s Jones doesn’t believe cost was the biggest factor. “I think it’s an over-simplification to say with the public sector it’s all down to cost,” he said. “They had to change the focus, in my opinion, and, I think, they needed the international element that Feathers could give them with Carat. With the Executive, the procurement part of the process dictated the pitch. The majority of businesses in the UK are SMEs, and they are focused on servicing and value, so, no, I don’t think clients are sacrificing service for cost.”

Price will be a big issue though, if agencies want to go after public sector accounts, according to Giles Brooksbank, joint MD at Feathers. “It’s going to be very difficult for smaller companies to compete,” he said. “Let’s just say, I know how much it cost me to run the Scottish Executive business. You have to have the infrastructure and resources to run that kind of piece of business.”

Williams is adamant that regardless of clients’ demands requiring a broader base of skills in agencies and, therefore, tighter margins, agencies have to realise it’s now a buyers’ market. “If you want to work for the Executive then that [keeping costs down] is what you will be asked to do,” he said. “All our agencies would say the bar has been raised, and the demands of the client are becoming more sophisticated.”


Industry insights

View all
Add your own content +