Lowballing hurts agencies' mental and financial health Today I heard of another agency willing to take an account for a 4 percent commission. Pretty soon, one of you will forgo a paycheck altogether just to have the privilege of adding some big, sexy brand name to your roster. OK, so maybe that's an exaggeration, but you get my point.
Exactly how low will you go?
I realize this isn't a new phenomenon. There's always been cheap clients and agencies willing to compromise on compensation for "the big win." I guess some think the adrenaline high is an important morale booster, even if it doesn't last long or add much to the bottom line.
Naturally, all agencies vehemently deny being guilty of this practice. You point fingers at the other guy, claiming you would never stoop to such depths. The fact is, many of you would succumb if you were desperate enough. But recently, we all talk about the same culprits.
Before Y&R went public in May '98, the agency was on a new business shopping spree, stockpiling Sony, Citibank and an enviable number of other accounts. Thing is, the industry sport at the time was to privately bash Y&R for bargain hunting. Y&R, critics cried, was chasing business by waving a discount coupon. Worse yet, it was a repeat offender.
Obviously, Y&R denounced the charges, countering that it was just sour grapes. Beth Gordon of The Media Edge wrote to us explaining that competitors were envious of the agency's profitability. Maybe so.
Apparently, JWT is the latest offender. The talk is that the WPP shop took on Kimberly Clark for a paltry 4 percent. Grey gets bandied about as a lowballer, too. That seems odd, given that Grey is considered to be a money machine and chief Ed Meyer is known to be rewarded handsomely.
Still, when the New York Lottery account moved from DDB to Grey, the client admitted that Grey won because it offered a "better price."
To the agency's dismay, the client publicly noted that the state would save $3 million over the next three years.
As long as a handful of agencies are willing to reduce their pay to embarrassing figures, the problem will persist. More and more clients will expect the same, and commissions and fees will continue to fly south.
It appears the industry realizes this is an issue that needs to be addressed. At the American Association of Advertising Agencies' conference in Amelia Island this April, there was a closed door, invitation-only gathering of 20 or so big agency CEOs. I'm told one hot topic was this controversial compensation problem.
Burtch Drake of the 4A's did not want to comment for this piece. But I'm glad the industry is tackling this issue as a group. Rarely does it band together to combat a common foe.
Sure there's the annual industry call for diversity--but that's a pretty safe crusade. No one is going to be criticized for promoting equality. So why are the more provocative issues kept behind closed doors?
I say you go one step further. Call for public outings. Total exposure. Air this dirty little secret in public. Talk to each other instead of whispering behind each other's backs. Make clients and consultants talk publicly, too. What are you afraid of?