How to negotiate adversarial interests towards mutuality

November 23, 2005 10:23 AM

Business Negotiationsfilter What are some creative ways of retaining an ad agency's services in a manner that makes their interests align with the client's? IOW, how best to structure the contract such that their compensation is dependant upon results, when advertising "results" are such an amorphous and ephemeral thing. [more]

The task at hand is to revive a once pervasive but now all but forgotten brand in a now quite crowded marketplace.
The problem is success or failure as a metric is indivisibly multifactorial. Saying "sales didn't or did increase" can be attributed to sales/marketing/advertising/the weather etc.
The agency is receptive to some sort of progressive arrangement...What to do?

posted by Fupped Duck to work & money (4 comments total)

Hire an independent agency to perform market research on the brand recognition before and after the ad campaign.
posted by mischief at 10:46 AM on November 23, 2005

Well, any ad agency should provide you with some tangible idea of what they are going to accomplish for YOU. You should set clear objectives when purchasing their services, or else they will be able to get away with doing nothing! Sure, sales can be affected by many things, but a good ad agency will figure out how to harness the weather/marketing/sales/position of the moon/whatever to benefit your company. I mean, I work in public relations, where results are even more "amorphous and ephemeral" than in advertising, but in any contract we have with a client clear goals and objectives will be agreed upon.

Anyway, my point is set vague objectives, get vague results. Have an idea of where you want to company/brand to be in a year, and go by that. Say "this is what we want, so tell us how you can help us achieve this," and from that create a list of mutually-agreed upon objectives for the year/quarter/whatever. If they aren't willing to be fairly specific, you won't be able to hold them accountable. At least then you'll have a clearly-defined, customizable rubric with which you can evaluate their services.
posted by apple scruff at 10:47 AM on November 23, 2005

This is the classic dilemma of advertising. The advertising agency always has an out: Your sales didn't increase, but our advertising made sure they didn't drop, either. Your sales decreased, but our advertising made sure they didn't bottom-out. Your sales increased: we did that.

My thoughts, based on years peripherally in the ad business, are:

-- Brand-building does not necessarily build sales. It builds brand-recognition. It usually works better with an amazing product or service launch.

--Any effort to structure fees based on results is a mistake, unless you want to sell them shares of the company, too. You can either do it as a percentage of media-bought, say, 15% on top of the cost of whatever media buys the agency does for you, plus all ad producing costs, on which another agreed-upon percentage will be tacked; or you can go the fee route, in which you pay the agency a plat fee for set goals. Flat-fee advertising is for term-limited goals with set end dates, not for long-term strategy.

--Advertisers get what they deserve. Have balls, money, and persistence. If you can't afford to advertise, then you need to rethink why this brand is worth reviving.

--It sounds like you have an agency, but if you're asking the questions I see here, then you have a larger problem. Get somebody on your side who knows the ad biz. You need an advertising expert on your staff who's not buddy-buddy with the ad agencies but has years in the business and will fight for you. Given the money that will be spent, you cannot make this a learn-as-you-go position. Make this one person you main conduit throughout the ad relationship. If you're not locked into the agency you have now, there are companies that will conduct agency searches for you. They cost big wads of cash but they can be very useful.
posted by Mo Nickels at 1:08 PM on November 23, 2005

What you'll want to do is put in a bonus structure based on success metrics that both parties agree to. If you're branding, you'll need to do research pre- and post- campaign recognition/associations to base it on or something quantifiable.

The fee should be whatever appropriate to meet the goal and do the work. The bonus is on top of that. Do your assignment and you'll get X. Do better and we'll throw you Y too.

Example: We expect unaided awareness of our brand blah blah blah to rise by 20% in the period. The agency will receive a bonus of x% of fee for beating that goal.
Don't use sales as a metric unless you can tie the agency's activity back to the sales. Or have a separate bonus for increased sales if the branding work does blow the doors off sales.

I worked for a major advertiser and you'd be amazed how motivated agency management gets when there's a bonus on the line. Especially if you're rather lean on the base fee. We would also stipulate that a portion of the bonus would go directly to creative/account/media/etc people that actually did the work on the agency side.
posted by birdherder at 5:57 PM on November 23, 2005