Much depends on marketers overcoming hierarchical prejudices and agencies stepping-up as true strategic partners.
In the modern western concept of healthy personal relationships, equity is key i.e. what ‘I think of you’ should be pretty much equated with what ‘you think of me’. When there is a disconnect, trouble looms.
The same applies when comparing performance evaluations between two business teams, in this case between marketers and their agencies.
Our database reveals that at a global level, marketers score agencies -4.08 points lower than agencies score their clients.
This ‘gap’ is in some ways understandable, but it is also reasonable to suggest that a large gap in perception between the two parties, as with individuals, is not a healthy place to start
When we compare some of the world’s major markets against this global average, an interesting picture emerges.
Marketers in the USA and UK start with a gap which is narrower than the global average. We interpret this to mean that they have a somewhat more equitable view of each other at the beginning of a relationship compared to markets with larger negative gaps.
In cases showing large negative gaps in initial perceptions, there are two possible forces at play
- The agency may be giving its client a high score for fear of retribution or
- Clients may perceive the agency as a ‘servant’ to do their bidding.
Instinctively, neither are good when the independent voice of an external agency is one of their principal reasons for being and the essence of their value-add.
The culture effect
In a previous article, we explained that North America tends to score generally higher than other countries – largely a factor of culture.
Yet among these ‘larger gap’ countries are some of the most powerful and dynamic economies in the world today which leads us to question which approach is better? To treat the agency as a ‘servant’ or as a trusted strategic partner?
To answer this we examined how some of these ‘worst-case scenario’ relationships evolved over time and whether they responded differently to regular, formal relationship evaluations.
Using data from the 20,000+ evaluations Aprais has conducted globally over the past 20 years, we traced these initial differences over a subsequent 2-year period (5 evaluation rounds).
As the chart shows, despite an unfavourable initial gap in the relationships, most of these cases improve (narrowing gap) over time, as we would hope and expect.
Two notable exceptions are China and Korea where the gaps widen and, it would seem, relationships worsen.
Why might this be?
Hierarchy vs equity
One theory is that this is a result of the staunchly hierarchical societies. For example in East Asia, Confucian thinking continues to underpin behaviour in both social and business contexts.
The Confucius teaching of jun jun, chen chen, fu fu, zi zi translates to ‘let the emperor behave as an emperor, let the mandarin official behave like a mandarin official, let the father behave as a father and let the son behave like a son’.
Hierarchical Confucian precepts of the buyer-seller relationship are at odds with a partnership mindset. In the context of client-agency relationships, the buyer (marketer) is the master and the seller (agency) has to follow.
What can be done?
Confucius and the Kraljic matrix
Beyond the cultural influence of hierarchical structures on how ‘suppliers’ are perceived in certain cultures, there’s another contributing factor.
Back in 1983, Dr Peter Kraljic proposed that supply items should be mapped against two key dimensions: risk and profitability. The results were presented as a matrix (now called the The Kraljic matrix) and until today it is considered the basic tool for cost categorization in companies.
As the illustration shows, the categories/product have been divided into four segments;
- Strategic items
- Leverage items
- Bottleneck items
- Non-critical items
Strategic Items include criteria that agencies often dream of, such as the development of long-term relationships and collaboration and innovation.
While the Leverage items are defined as the exploitation of full purchasing power, targeted pricing strategies/negotiations.
Price-driven or value-added?
The big question is, where do advertising agencies belong in this matrix of service providers and where are they are perceived by marketers and their procurement teams?
What marketers and agencies should do
To enable relationships to improve over time, marketers – usually in the driving seat of the client-agency dynamic, need to overcome hierarchical business prejudices inherent in their cultures. This will provide room for agencies to step-up as true strategic partners.
Based on the Kraljic matrix, agencies need to maintain, re-establish or establish their position as Strategic ‘suppliers’, moving away from commodity behaviour (and pricing) and further upstream into the realm of value-added suppliers. Agencies need to continually earn the right to remain among the inner-circle of client consultants.
Regular, honest, objective two-way feedback is a proven technique to achieve this ‘trusted strategic partner’ position.
Analysis of thousands of client-agency evaluations in our database reveals a powerful, fundamental truth; clients get the agencies they deserve.
There is a clear interdependence between the performance of marketing teams and their agencies - as one gets better, the other gets better. The converse is also true.
Marketers that follow the four elements of being a good client can achieve 37% more value from their agency partnership, simply by changing the way they work with their agency.
Partner or servant? Dominant or equals? It’s up to both ‘partners’ to decide.
Kim Walker is founder and chairman of Aprais.