Marketing Math Blog

Advertisers: Lost Interest Income Opportunity

By Advertisers No Comments

agency holding company profitsAs of this writing, the prime rate or the interest rate charged by banks to their best customers for loans is 8.5%. (source: Wall Street Journal Prime Rate Survey, March 26, 2024). This is up significantly from 2015, when the prime rate was 3.5%.

There was a time when Client/ Agency agreement language contained provisions binding the Agency to always conduct itself as a fiduciary, acting in the best interest of the advertiser and prohibiting the agency from earning any income on the use of client funds. Today, many such agreements don’t specifically address these two issues.

Understandably, the times have changed to a degree, specifically as it relates to practices such as principal-based media buying where the agency may forgo its fiduciary obligations (theoretically with the client’s prior written approval). Further, advertisers have been less vigilant when it comes to securing the requisite protective language and implementing the appropriate financial stewardship practices when it comes to their agency agreements.

This is particularly concerning given that the “estimated billing” process remains the dominant mode of charging practice when it comes to agency billing for third-party expenses. In short, estimate billing entails the agency invoicing the advertiser often in advance of performance and ahead of third-party vendor billing so that it is in possession of client funds when it is time to process payment to those vendors. Then, once a campaign has run or a production job has been closed, the agency reconciles estimated costs to actual and where appropriate issues a credit to the advertiser.

Unfortunately, the timing for agency media invoice reconciliations and production job closings can run upwards of 180 days post agency billing to advertisers. This combined with agencies holding unbilled media funds, rebates, and incentives often until ninety days post year-end and advertisers may be forgoing significant interest income opportunities resulting from their funds being held at the agency, rather than by client finance teams.

The good news is that these risks can be mitigated by taking some straightforward steps relating to an advertiser’s investment. For example:

  • Requiring agencies to reconcile and pay third-party vendor invoices within 30 to 45 days of the end of the month of service, rather than relying on indeterminant contract language such as “Agency will use commercially reasonable efforts to promptly remit client’s payments to third-party vendors.”
  • Establishing “job closing” timing and reconciliation guidelines with each agency partner.
  • Tightening up “unbilled media” reconciliation practices from 30 to 90 days end-of-year to 60 days end of quarter.
  • Identifying monthly financial reporting formats to estimate and track any “rebates, incentives, and credits” earned by the agency or its holding company related to the use of advertiser funds.
  • Establishing contract language prohibiting the agency from earning any income on the use of client advertising funds.
  • Consider moving from an “estimated” to a “final” or “progressive” billing process that allows advertisers to maintain tighter control of their funds.

Interest income opportunities, cost of capital, and improved treasury management controls are all factors that advertiser financial management understands and values and should be a foundational element of Client/ Agency agreement and relationship management practices. 

“Money is always eager and ready to work for anyone who is ready to employ it.” ~ Idowu Koyinikan

Agency Compensation Models: It’s About Time

By Agency Compensation, Agency Fee & Time Management No Comments

punch clockThe advertising industry has long wrestled with the challenge of determining the optimal manner and level of compensation between advertisers and their agency partners.

While there is little in the way of consensus on the best approach or normative data on the appropriate rate, the Association of National Advertisers (ANA) 2022 “Trends in Agency Compensation”  survey found that labor-based fees remain the predominant mode of remuneration. Further, the gap between labor-based fees and other approaches (e.g., value-based compensation) has widened. Of note, the survey identified the fact that advertisers “increasingly questioned” whether the use of performance incentives to complement fee arrangements had a positive effect on agency performance.

Ever since the industry moved away from the commission-based compensation model that was in place through the 1980’s there has been interest in a range of different remuneration solutions including the following:

  • Labor-Based Fees where agencies charge for the hours required to complete a given statement of work, with hourly bill rates assigned by function. Of note, these bill rates compensate agencies for their direct-labor costs, overhead, and a negotiated profit level.
  • Commission-Based Compensation, which is most typically used in the media buying area, pays agencies based upon a percentage of the advertiser’s media spend.
  • Value-Based Compensation where agency remuneration is directly linked to the attainment of actual results, regardless of the time or effort required on the part of the agency.
  • Performance-Based Compensation most often used to complement other fee arrangements, providing agencies with additional incentive to pre-determined KPIs.

Additionally, there are variations on each of these approaches along with hybrid compensation models that integrate aspects of two or more remuneration schema (i.e., labor-based fee for media planning, commissions paid for media buying for media agency partners).

One of the key challenges faced by clients and their agency partners when it comes to outcome-based approaches is the difficulty with identifying the proper metrics for assessing agency performance. This is even more challenging for advertisers using multiple agencies when it comes to attributing in-market results to a particular partner’s efforts.

The goal for clients and agencies has always been straight forward. Identifying a compensation model and rates that fairly compensate agencies for their resource investment, while aligning their efforts with the client’s expectations and desired business outcomes.

While no two relationships are the same, there is one truth that has guided agency compensation in the post-commission era ad agencies, like consultants, attorneys, and accountants provide professional services. The fact is that the most prevalent manner of compensating these providers is linked to one common denominator… the time required for the service provider to deliver against a pre-determined set of deliverables.

Thus, we believe that labor-based fee compensation is and will remain the most viable and least contentious mode of agency compensation. Why? The basis for developing these fees is straightforward, linking the time spent by specific employees at agreed upon hourly bill rates. Further, employee hours are the basis for agencies when internally assessing labor utilization rates and client profitability. The good news is that virtually all agencies track employee time at the job or campaign if not task level thus providing a stable basis for monitoring an agency’s resource investment against a particular statement of work.

Importantly, this approach lends itself to full transparency and is highly flexible for both advertisers and agencies to deal with changes in scope or the need to access/ deploy specialized agency resources. Even with the myriad of changes being ushered in by technology advancements, labor-based compensation models provide advantages over the subjectivity and attribution challenges inherent with outcome or performance-based compensation models.

In the end, good faith dialog between clients and their agency partners to clearly articulate expectations and to assess the resources required to achieve a mutually agreed upon set of outcomes is the key to developing fair, mutually beneficial compensation arrangements.

“The best compensation for doing things is the ability to do more.” ~ Napoleon Hill

How Will AI Impact Agency Business Models & Compensation?

By Advertisers, Advertising Agencies, Artificial Intelligence No Comments

KeysArtificial Intelligence (AI) is poised to reshape the advertising industry.

Based upon the speed with which AI is being adopted and the potential applications across multiple advertising functions it is not a question of “if,” but “when” these changes will take root.

The ability of AI to analyze behavioral data rapidly and comprehensively to inform or make decisions is profound and will directly impact tasks including marketing planning, market research, media planning, performance optimization, and ad operations.

When it comes to content Generative AI can both generate new ideas, create, and personalize content. One result is that there will likely be a reduced need for creative department time-on-task in this area.

As it relates to implementing AI, there are a few basic questions for advertisers and their agency partners to address in the near-term:

  • How will the agency deploy AI across its various functions? When?
  • What will the impact be on the hours and people required to deliver agency services?
  • What type of talent and training are required to implement AI?
  • Will we rely on the agency or look to implement AI solutions in-house?
  • What are the costs associated with implementing AI? At the agency? In-house?

The answers to these questions will impact client/ agency roles and responsibilities, future scopes of work and the fees paid to the agencies.

From an agency perspective, particularly those whose compensation is tied to direct labor-based fees, there will be concern that any reduction in scope and or hours expended in areas impacted by AI will lead to a reduction in revenue. For advertisers, the expectation will be that there are both operational and administrative time-of-staff efficiencies to be realized.  

It is clear that AI will lead to an evolution in the agency business model that impacts service delivery, staffing and talent needs, and remuneration. According to Forrester, ad agencies will automate 7.5% of jobs out of existence by 2030. The reduction in an agency’s billable hour base will obviously vary depending on the type of agency (i.e., digital specialist, creative, media, etc.). According to some industry pundits, Forrester’s estimate of 7.5% could be on the low side of the potential for lost jobs.

Time is of the essence. According to a survey conducted by Statista in 2023 among professionals in the U.S. “37% of those working in advertising and marketing had used AI to assist with work related tasks.” How should advertisers begin the AI “readiness” planning process?

A good starting point for AI “readiness” planning is to assess historical agency time-of-staff investment by function relative to past scopes of work to allow both parties to understand the potential impact post AI implementation. This analysis should be conducted, even though agencies will likely advance recommendations for implementing a different compensation schema (i.e., value-driven pricing, outcome-based fees, etc.).

Concurrently with the historical benchmarking, advertisers should engage their agency partners in discussions about AI can positively impact brand engagement with their customers, enhancing the customer and prospect experience with the brand at each point of contact. Once there is concurrence on a customer focused outcome and an historical context, discussions regarding efficiencies and effectiveness can follow.

“When deploying AI, whether you focus on top-line growth or bottom-line profitability, start with the customer and work backward.” – Rob Garf, Vice President, SalesForce

Is There Gold on Oak Island? Or in Programmatic Buying?

By Ad Fraud, Media Transparency, Programmatic Buying No Comments

money“The Curse of Oak Island,” History Channel’s long running TV show chronicles the Lagina brothers search for buried treasure on a remote island off the coast of Nova Scotia. After eleven seasons, the brothers and their team have yet to find a horde of gold, the holy grail, or the ark of the covenant all which legend suggests were buried on the island.

In many respects, the plight of the Lagina brothers can be likened to advertisers and their search for advertising “gold” through the use of programmatic buying. With the promise of greater efficiencies, better targeting, and improved effectiveness programmatic buying has yet to deliver on those aims. To the contrary, a multi-layered, often opaque supply chain, increased intermediary fees, lack of measurement standardization, and persistent fraud have negatively impacted advertisers’ investments in this area.

Yet 55% of ad spend is going toward digital media with a preponderance of that is being place programmatically. Further, most marketers know little about how those investment decisions are being made on your behalf.

According to the Association of National Advertisers (ANA) recent “Programmatic Media Supply Chain Transparency Study” of the estimated $88 billion in open web programmatic ad spend “around $22 billion is wasteful and unproductive.”

If you are alarmed by that number, you may want to engage your media team and agency personnel in dialog around the questions suggested by the ANA in their report. Below is a sampling of the suggested queries:

  • Ask why Made for Advertising (MFA) websites are utilized, as they are largely useless for growth-oriented strategies.
  • Ask why they “spray and pray” across 44,000 websites per campaign when less than 5,000 will probably be sufficient.
  • Ask whether the agency is acting as principal or agent. If they are acting as principals, are your brands getting the best media deals possible?
  • Ask why they have not already embraced log-level data, a principal pathway to more effective decision-making with programmatic media.
  • Ask if they are fighting fraud optimally. Or better yet, ask if they know where to look for fraud and how to fight it when they find it.

The stakes are too high for advertisers when it comes to their continued and escalating investment in this complex area. In the words of twentieth-century American scientist, Alan Perlis: “Fools ignore complexity. Pragmatists suffer it. Some can avoid it. Geniuses remove it.”

Now is the time to “turn up the heat” as it relates to advertiser demands of their media supply chain partners and the need for greater accountability around the issues plaguing their programmatic investments.

Are You Spending (Wasting) Too Much on Programmatic?

By Ad Fraud, AdTech, Digital Media, Programmatic Buying No Comments

RiskAccording to Statista, global programmatic ad spending will reach $617 billion in 2024, growing over 20% year-over-year.

The unabated growth of this sector is quite amazing when one considers the findings from the Association of National Advertisers’ (ANA) recent study on the programmatic supply chain. Consider the following observations from their research:

  • Only 36% of a programmatic dollar invested via a DSP effectively reach a consumer.
  • 29% of each dollar goes to cover DSP and SSP fees.
  • Nearly 35% of every dollar is spent on fraudulent, non-viewable, MFA or non-measurable traffic.

Ironically, the ANA study is not revelatory in nature, rather it has reaffirmed what the industry has known for several years… this sector of the media market is fraught with risk and inefficiencies for advertisers. Yet programmatic accounts for nearly three-quarters of digital media spend.

While there is no silver bullet to cure these ills, the ANA made two key recommendations that advertisers may want to consider:

  1. Reduce the number of SSPs utilized – The study found that media teams were utilizing between 9 and 53 SSPs. The report authors stated their belief that 5 to 7 SSPs would be optimal.
  2. Cut the excessive use of programmatic partners – Researchers found that the average number of websites purchased averaged 44,000 per campaign. The report authors recommend reducing that number to 75 to 100 “trusted programmatic partners” to provide media buying teams with access to the premium inventory they seek.

According to the ANA, implementing steps such as these could result in “savings of up to 25% the media dollars spent using ad tech on the open web.”

One thing is clear, considering the ANA’s report… media buying teams will need to consider altering their approach to mitigate advertiser risk and boost the return on their programmatic media investment.


Blind Trust Puts Advertisers at Risks

By Agency Holding Companies, Client Agency Relationship Management, Marketing Accountability, Marketing Agency Network No Comments

Trust“Trust without inquiry is a compass pointing toward deception.”

The advertising industry was founded based upon the trust between stakeholders in what was once a compact supply chain. Much has changed since the early twentieth century as the industry has evolved into a complex, rapidly changing business sector that has significantly diminished the level of trust among advertisers and their partners.

In our experience there are a handful of factors related to this metamorphosis that have created financial risks for advertisers:

  1. Holding Companies Have Come to Dominate the Agency Landscape – Since eschewing the full-service agency model in favor of multiple specialist agency partners, holding companies have greatly expanded their portfolios through acquisition to include dozens of agency brands, data companies and technology firms. Publicly held, these organizations’ primary responsibility is to their shareholders, not the clients that they serve. The transition from full-service agency partners has impacted advertisers as well, causing their agency networks to expand often beyond their marketing teams’ ability to effectively manage each of those relationships.
  2. The Advertising Supply Chain Has Dramatically Expanded – The number of intermediaries that provide service to and or transact portions of the creative and media services funded by advertisers has grown significantly. Importantly, each of these intermediaries, with their own financial self-interest, takes a cut of an advertiser’s investment to compensate for their services. This has reduced “working” ad dollars and dramatically limited advertiser transparency into the disposition of their ad funds at each phase of the advertising investment cycle.
  3. The Principal Agent Model Has Been Breached – Long the basis of Client/ Agency relationships, advertisers historically could take comfort in the recommendations and actions of their agency partners knowing that they had their interests at heart. The basic tenet of this model is that the agent is obligated to make decisions and take actions that are always in the best interest of the principal which, in turn, achieves the highest possible degree of accountability and trust. However, a conflict has arisen with the advent of principal-based media buying and non-disclosed transactions between agencies and their related entities, whereby advertisers can no longer rely on agencies always having their best interests at heart. In a recent Forbes article on misaligned client/ agency financial interests, Arielle Garcia, former Chief Privacy and Responsibility Officer at UM Worldwide summed it up well: “Advertisers can’t trust their media agency partners to always act in their best interests at the moment when the agency’s best and economic interests diverge.”
  4. The Estimated Billing Process is Outdated and Ineffective – Billing advertisers in advance of service delivery and or media activity based on estimated costs in the hope that third-party vendors will be paid on-time and that those estimated billings will be promptly and accurately reconciled to actual expenses do not serve the interests of advertisers. Presently, agency “final/reconciled billing” does not include copies of associated third-party invoicing and many agencies often do not reconcile costs until 120 to 180 days after a job/ campaign closes, and in some outlier cases, not at all. This severely limits advertiser visibility into what happens to their funds once they pay an agency invoice. Consider a recent study by OAREX for MediaPost which found that nearly 50% of digital media invoices were paid late and that over 20% were underpaid. According to OAREX, while causal data was limited, their analysis showed that “the demand-side overall is keeping its cash close to its vest.” If an advertiser is paying its agency within 30 – 45 days from the receipt of an invoice, what is causing the problem? Which demand side entity(s) is hanging on to the advertiser’s cash?

There is an obvious, cost-effective method to address these risks… agency contract compliance and financial management audits. Notably, most client/ agency contracts afford advertisers this right and require agencies to fully support their billings to the client. These reviews encompass all transactional data between client and agency and the agency and all affiliates and third-party vendors, providing comprehensive feedback on the age-old question; “Did we get what we paid for?”

These projects are conducted with the support of agency finance personnel and do not interfere with the day-to-day activities of the advertiser’s marketing team and agency staff responsible for service delivery. The costs are miniscule relative to the learning and financial benefits gleaned from such reviews. And the trust earned from these audits can go a long way toward eliminating uncertainty and building relationships.

As it has been said, “When you trust someone blindly, it only proves that you are actually blind.”

Interesting. But How Will It Affect My Fees?

By Agency Compensation, Agency Fee & Time Management No Comments

contract signingIn theory the fees that agencies charge their clients are based upon a combination of direct labor costs, an overhead allocation, and a desired level of profit.

Agency operating expense, which is the combination of direct labor and overhead costs can vary dramatically from one organization and one market to the next. While there is no standard for overhead rates, which are often expressed as a multiple of direct labor costs, advertisers and agencies largely agree on the components of each of these categories. Direct labor consists of payroll and related payroll expense. Overhead covers indirect labor, space and facilities, some categories of corporate expense and professional fees.

Since most advertisers, according to the Association of National Advertisers, utilize fee-based compensation schema and many of those are direct-labor based engagements advertisers engage in dialog on each of these components to gain an accurate view of agency costs and to establish mutually agreed upon guidelines. Once aligned, the parties will negotiate full-time equivalent standards, the treatment of temporary employees and freelancers, overhead factors (typically expressed as a multiple of direct labor costs) and profit margins.

Over the course of the last three years there have been several interesting developments that directly impact an agency’s operating costs. These include, but are not limited to the following:

  1. Increase in the number of agency employees working remotely.
  2. Higher percentage of freelance personnel that compose an agency’s workforce.
  3. Consolidation of agency brands, offices, and shared services.
  4. Emerging technologies and their impact on the number of labor hours required to deliver a scope of work.

These trends have certainly resulted in a higher level of operating efficiency for agencies. The question is: “How have these efficiencies impacted the fees agencies charge to advertisers? In our contract compliance practice, where we review agency staffing plans and fees, the answer appears to be fees have adjusted little if at all. Consider the following marketplace dynamics considering these trends.

Post-COVID 19 many agencies have not mandated a return to the office for their employees, certainly not on a full-time basis. Further, as part of an effort to attract and retain talent, many organizations have implemented a hybrid model that allows employees to live and work remotely, spending fewer days (if any) at the office. In addition, agencies have embraced the concept of flexible workforces, comprised of an increased mix of freelancers to supplement their full-time employee base. As such, agencies, have been able to reduce their real estate footprint, develop location-based salary guidelines to reflect the variances in talent cost by market for remote workers and reduce the cost of onboarding, training, and compensating employees by using freelance personnel. Actions such as these can lower both direct-labor and overhead costs.

Many of the agency holding companies have begun to consolidate agency brands, eliminating duplicative resources, and sharing back-office personnel and platforms to reduce operating costs and drive efficiencies. Recent news for example has profiled WPP’s reorganization of its media operations (GroupM, Mediacom, Wavemaker) and its plans to merge VMLY&R and Wunderman Thompson into the “world’s largest creative agency.”

AI will most definitely expedite an ad agency’s ability to complete tasks, requiring fewer employees and hours. While there are advantages to be gained by both advertisers and agencies, many in the industry have raised concerns about AI’s threat to the direct labor-based billing system or more specifically, the agencies that employ this mode of compensation. According to Forrester Research “Some 33,000 ad agency jobs, or roughly 7.5% of the current total agency workforce, will be lost to automation by 2030,” At a minimum, agencies may be more open to considering outcome or performance-based compensation models to counter AI’s potential impact in reducing billable hours.

All successful client/ agency partnerships are predicated on mutual respect, a shared perspective, and a fair agency remuneration program. That said, advertisers should be cognizant of the forces that are underway to reshape how their agency partners organize and the resulting impact on their operational costs when negotiating fees.

3 Key Reports Every Marketer Should Review

By Client Agency Relationship Management, Marketing Accountability, Marketing Budgets No Comments

Keys to SuccessWhen it comes to budget management no one likes surprises, least of all marketers.

The process around initiating advertising creative/ production jobs and media campaigns is typically sound. Plans are reviewed and approved, statements of work prepared and executed, purchase orders issued, agency invoicing is generated, and work commences.

Unfortunately, the process for tracking jobs once work has begun is less well defined in most organizations. This can pose challenges in an industry that relies primarily on estimated billing and has become accustomed to elongated job / campaign closing timelines that often run 120+ days following the cessation of activity.

To address this situation, it is incumbent upon marketers and their agency partners to closely and regularly monitor spend levels and pacing vis-à-vis approved budgets. In our experience, there are three key reports that every marketer should ask their agency partners to generate on a monthly basis for review and discussion between stakeholders within each organization.

Job Cost Detail Report – For each job or campaign initiated, require the agency to summarize progress from both a fee and expense perspective relative to estimated costs. These reports should identify approved funds by category and project-to-date progress compared to the actual time and cost incurred.

Fee Burn Report – Tracking agency time-of-staff investment and fees earned at both a retainer and project level provides a clear indicator of resource utilization. Understanding agency staff utilization relative to the percent completion rate for an annual retainer or individual job is critical if marketers and their agency partners are to effectively manage performance in this area. Importantly, if hours are running higher than anticipated, both parties can make the necessary adjustments to mitigate the potential for time or fee overages. Similarly, if projects are proceeding smoothly and the potential exists for coming in under budget, marketers can either redirect agency time to other projects or identify potential credits that could be due back upon job closing. As well, this type of tracking often becomes the basis for estimating future work, especially if job types are reoccurring.

Unbilled Media Report – It is imperative for advertisers to track the cost difference between media funds approved and prepaid for relative to the amounts billed by the media seller and paid by the agency for media placement activity. Unbilled media occurs across media types but can be most acute in digital and can run in excess of 12% of total media spend. Most client/ agency agreements contain language regarding this area and guidelines around the timing of media cost reconciliations, the return of unspent media funds to the advertiser and the indemnification of the agency as it relates to latent media seller invoicing. 

While generating and reviewing these reports is helpful, scheduling recurring monthly meetings with each agency partner helps expedite job/ campaign closings and reconciliations and significantly mitigates the risk of budget overruns or unused funds not being returned to the advertiser in a timely manner. In the words of American architect David Rockwell:

“Every project is an opportunity to learn, to figure out problems and challenges, to invent and reinvent.”

4A’s Position on Payment Terms

By Marketing No Comments

4A'sAdvertisers should never expect an agency to cover media costs or other third-party expenses. Payment terms should ensure that an advertisers funds are on-hand at the agency to satisfy all third-party vendor payment obligations in a timely manner. Further, there are two aspects to the payment terms discussion:

  1. When the advertiser pays the agency.
  2. When the agency is to pay third-party vendors.

These payment terms should be discussed, agreed to, and incorporated into the client-agency agreement Read More

Relationship Risk: When Actual Practice Deviates from Contract Terms

By Client Agency Relationship Management, Contract Compliance Auditing, Marketing Agency Network No Comments

RiskContract: A formal, legally binding agreement between parties defining what each party will do and the terms that will govern the relationship.

Virtually all advertisers have formal contracts in place with their advertising agency partners.  Most of these organizations have reviewed industry association contract templates and engaged outside legal counsel to review and customize agreement terms and conditions to satisfy their expectations.

All well and good, and while having a solid agreement in place is an important safeguard in any business relationship it doesn’t eliminate risk. As relationships evolve and personnel on both sides turn over, knowledge of the terms of the contract and their intent often wane.

This dynamic can result in agency relationship managers with little knowledge of the binding agreement that adopt practices which deviate from contractual guidelines, opening the door for potential legal and financial risks.

The good news is that these risks can be easily addressed by adopting the following three processes:

Regularly Review & Update Client-Agency Agreements:  Schedule annual contract review sessions for each agency contract.  These sessions, involving authorized representatives from marketing, procurement, and legal should be scheduled 2 to 3 months prior to the start of the new fiscal year. Reviews should include discussions surrounding client-agency relationship changes, regulatory, and or industry related issues that may pose legal, financial, or operational risks. Proposed contract language enhancements, addendums, and annual Statements of Work should be shared with each agency partner at a time and in a manner that allows for dialog and the execution of the updated agreements prior to the end of the current term.

Periodically Audit Agency Contract Compliance: It is an industry standard that advertising agencies must be able to support their billings to clients. This includes fees, out-of-pocket costs, and third-party expenses. Fortunately, most client-agency agreements incorporate “Record Retention and Audit” language that further clarify an advertiser’s rights in this area. However, few advertisers act upon these audit rights to review agency compliance to contract terms and financial management performance. Conducted at two-to-three-year intervals, with each agency partners, these audits can provide valuable feedback to both parties and help to ensure alignment between contractual intent and relationship management practices.

Implement a Cross-Functional Agency Oversight Model: An organization’s agency network is a corporate resource consisting of multiple marketing services agencies that provide valued support to the profitable growth and advancement of a company’s brands. Developing and nurturing these strategic relationships requires a commitment to involve representatives from across the client and agency organization. Securing the involvement of client-side procurement, finance, and internal audit personnel along with agency financial representatives in addition to marketing and account management personnel brings diverse perspectives that contribute to meaningful ongoing dialog around relationship management and performance dynamics. Through a combination of monthly budget and performance discussions and quarterly business reviews both parties and their resulting relationship will benefit from such meaningful interactions.

Experience suggests that such steps require less time and money to advance client-agency partnerships than is necessary to repair deteriorating relationships or to replace a marketing services agency that has fallen out of favor. As Hugh McKay, the Australian scientist once said: “Nothing is perfect. Life is messy. Relationships are complex. Outcomes are uncertain. People are irrational.” Aligning relationship management practices with contractual terms can address these realities.