Agencies Bend to Client Whims

NEW YORK Red flags abound in ongoing reviews for brands such as Amazon.com, Zappos.com and Current Media. These include unusually long lists of agencies presenting work (nine shops for Amazon, 12 for Zappos), a request to own the pitched ideas (Amazon) and relatively small fees compared to the scope of the work (Zappos and Current). What’s more, Amazon encouraged agencies to go beyond storyboards in their presentations and Zappos asked for creative concepts in its initial RFP.

But rather than walk away, many agencies are jumping in, even while acknowledging flaws and irregularities in how these clients are conducting their searches.

Why? According to consultants and agency leaders, agencies, suffering from client fee cutbacks, are starving for new revenue. Also, agencies believe that some brands are “sexy” enough that the red flags can be overlooked or downplayed.

From the client side, some marketers may be exploiting hungry agencies or simply don’t know better, given that they’re not using search consultants and don’t currently have lead agencies.

“It’s client naïveté. It’s procurement [executives] trying to show value,” said an agency new business chief. “But, at the end of the day, you can always say, ‘No.'”

Certainly, that’s a core tenet of prospecting preached at new-business conferences for years. The theory is that client reviews are as much about agencies selecting clients as clients picking agencies, and that selectivity has its rewards. The hurly-burly of the current marketplace, however, can skew the perspective of even savvy agencies, particularly smaller shops struggling to survive.

“The adage, ‘A principle isn’t a principle unless it costs you money’ has never been more true,” said Jason DeLand, a partner at independent Anomaly in New York, but, he noted, “we’re talking about the very nature of survival for some of these agencies.”

Emotion also plays a role in such decisions, said Richard Roth of search consultancy Roth Associates in New York. Some agencies “go for it, but that doesn’t mean it’s the correct decision,” Roth said. “It’s all about risk versus reward. If they think the risk is worth the reward, they’re going to pitch it.”

That said, “one in nine is not acceptable odds for anybody,” Roth added.

While agencies will compromise in pursuit of new revenue, their obsequience to unreasonable client demands in a pitch creates the potential for an unbalanced client relationship should they win, said Mark Sneider of Reardon Smith Whittaker, a new-business advisor in Cincinnati. If marketers shopping their accounts are “consuming now, think about how consuming they’re going to be as a client,” Sneider said.

More broadly, agencies that fail to stand on principle and do accept expanded client demands run the risk of further eroding the value of agencies in the eyes of clients. “That’s very dangerous behavior that’s going to be a further commoditizing force,” DeLand said. “It lowers the tide for everybody.”

Added Ken Robinson of Ark Advisors in New York: “How can you demand value-based compensation when you give work away in the RFP?”

One shop that presented ideas to Amazon spent about $40,000 on the pitch, including the cost of flying four executives to the client’s headquarters in Seattle, according to a source. An agency leader acknowledged that the process was “ineptly handled” with “no clear objective laid out.”

Still, the time frame was relatively short and the potential upside of working on a coveted brand was too alluring. “It’s a great brand and something you’d like to have on your client board,” said a source. After the presentation, though, Amazon cut the agency, citing ample ideas from other presenters that it would test. Amazon didn’t respond to questions about its review, which is said to be in its final stages.