The marketing agency business has never been an easy business.
People watch Mad Men and think it’s all five martini lunches, hosting clients at the Super Bowl and hanging out on the beach at Cannes, but that’s like looking at someone’s Instagram feed, and believing that those selfies are their whole life. What everyone doesn’t see is how agencies pitch and pitch and pitch and keep going (unpaid), in the hopes of winning an ongoing mandate or a significant project. Sometimes it materializes. Most of the time it doesn’t. When it does happen, it becomes a financial struggle for the agency to figure out how to deliver, and still be able to recoup the massive amounts of time and money that was spent on the pitch (and still make a margin at the end of the work). That’s not even factoring in the human condition. Examples of the human condition? Working for weeks (and sometimes months), to have someone on the client side change jobs (and the mandate goes with them), a spouse that doesn’t like the creative, a shift in corporate positioning, and a myriad of other factors that stop things dead in their tracks. Are agencies ever paid for all of this? Some are able to recoup… most are not.
Sometimes, you’re in too deep.
Think about it, agencies spend months and months on a RFI (Request for Information) – which is usually a document that is typed up. The client goes through the RFI and selects a handful of agencies to move to the next stage, the RFP (Request for Proposal). The RFP might as well be called RFW (Request for Work). In my twenty-plus years in the marketing agency business, most RFPs are, literally, the entire embodiment of the work. The majority of RFPs are unpaid. Some clients offer a minor stipend, but those are few and far between. From there, agencies move to in-person presentations. At both the RFP and presentation stage, you have to show the client real work (not work that you have done for others, but work for the client). If you ask the client directly, “are you looking to see creative?,” they will usually answer with: “it’s more strategic direction that we’re looking for,” or “if you can show more general creative direction, it might help to illustrate your work better,” both can be translated as, “show us creative.” Clients don’t ask for it outright (although many do), because they are worried about industry backlash if it’s revealed in the trades that they’re asking for unpaid work. If you still don’t believe me, please feel free to Google it. You will find countless stories (and some lawsuits) about brands asking for (basically) final creative at the RFP stage. After in-person presentations, it is either widdled down to a final round (2-3 agencies competing for the work) or (sometimes), the client makes the final decision at that stage. Once the business is awarded, everything on the “investment” page/presentation from the agency is now thrown to the wind, as the agency must finalize the contract with procurement. This is where the margins dwindle away. This is the reality. You present pricing at the RFI, RFP, in-person presentation, and final round. It is never hidden. You make it from round to round, because the client likes your answers (which includes the pricing), and then (even though they agreed to move you forward based on your pricing), the agency gets hammered down.
You’re in too deep.
What would you do? Would you balk in the third round, when the client asks for more creative? Would you step away from the potential business in the final round, if the client sent two-pages of additional questions, that they want answers to in person? The agency is in too deep (it’s not worth it to step away, so you do the unpaid additional work). The procurement process is also hazardous to the agency’s business, because it’s not just the pricing structure, but the terms. I’ve seen everything from 30 days payment to 120 days (not kidding). And, who pays their bills on time? You have to agree to 90 days, and the client is still 30-60 days late (often… more often than anyone will admit). Now what does the agency do? Do you walk away because your payment terms are 30 (maybe 45 days) max? Are you willing to toss away the thousands of dollars that you invested on the pitch, because the client is asking for a few more things – over and above – what was expected? I mean, the whole point of the agency business is to be an agent for the client, and their marketing needs. To be their partner. This is what partners do – they support one another, right?
Agencies have no optics.
If you think that an agency has optics into how the business operates, how well they are capitalized, what their capacity is to pay their bills, or how likely they may be/or how close they are to bankruptcy, you’re kidding yourself. Agencies only get to eyeball the client, while the client can ask a million and one questions about the agency’s financing and capitalization. We simply don’t know if a client has the ability to pay, or if they’re operating on a thread that’s about to give. That’s the other reality. Sure, you can pay someone to do some financial recon, but that’s more expenses that can’t be recouped on business that is not even secured.
Fyre. Fire. Fyre.
Have you watched the Netflix documentary, Fyre – The Greatest Party That Never Happened? The founder, Billy McFarland, is a con man (he’s in jail now). He’s got all the trappings. Fancy lifestyle, constant flow of money, access to people with power. It’s social proofing of the highest order. And, if you’re a marketing agency, why wouldn’t you want this type of company as a client? Big budget, exciting event, entertainment, influencer marketing, social media marketing, and it’s all tied to a technology startup/platform with smart people working on it. Most agency leaders that I know would probably watch this documentary, and then accept to meet and pitch the exact same type of client the next day. Why? Read above. That’s the business. What would you do? You go through the entire process above, and now you’re neck-deep into the marketing. You’re doing everything that you can to make the marketing as exciting as possible, with faith that the client can deliver on their side (the product, the service, the quality, the experience, etc…). Then, you realize (long after it’s too late), that the product/service will not meet expectations. That the client is in way over their head. All an agency can do is get paid and walk away.
It’s rarely that clean (if ever).
Clients don’t just go, “yeah, my business is not working, but let me pay you for all of the hard work that you’ve done.” They’ll file for Chapter 11 to save themselves, if needed (ask any agency owner – they’ve been there). Agencies (contractors and employees) work under the assumption that everybody’s being honest, and things are as they have been stated and shared. When it goes haywire – like it did with Fyre Festival – it’s really hard to blame anybody but those – right at the top – who know the truth (from day one).
A better ending.
There are so many other ways that this could have ended. From cancelling the event to a whistleblower to the many agencies and contractors pulling together to put a stop to things, but did you watch the documentary? That scene when the caterer got fired? There was a handful of other caterers waiting in line for the business (knowing that it would be an impossible mandate, but still willing to take it). That scene… that is this business of marketing agencies. I can’t think of one terrible client-agency situation that didn’t have a handful of well-respected agencies behind it waiting to snatch the business away. It’s easy to say that agencies get the clients that they deserve. It’s easy to armchair quarterback the Fyre Festival, and judge it all in reverse, but ask yourself: How many times has your business been in way too deep, and all you could do was hope that things worked out in a positive way. Maybe if it wasn’t such a rat race to win the business. Maybe if there was a real sense of due diligence. Maybe if there was a real partnership between clients and the agency. Maybe if there was more transparency in the pitch process. Maybe if agencies had real optics into the business operations of their clients. Maybe.
But that day isn’t here… yet.