How would you characterize doing business with ad agencies today: adversarial or friendly?
Do agencies get "added value" (i.e., free spots, remotes, liners, promotions, etc.) that your local direct clients do not?
Also - what's your station's policy toward agency rates and commissions? Do agencies take their 15% off the net rates, or is their commission added to your net rate?
Are you even paying 15% any more*?
*A front-page article in the May/June issue of MARKETING*, a Seattle-based publication serving advertising and media professionals in the Pacific NW, caught my attention this week. The headline read: "How Are Agencies Paid Here?"
Five questions were asked of the agency principals who agreed to participate in the survey by MARKETING:
1. What is your normal compensation arrangement with clients today?
2. Do you still have any media commission-only compensation arrangements?
3. Do you receive media rebates on any of your accounts?
4. Are clients increasing their efforts to roll back fees?
5. Have you noticed a trend toward clients taking more work in-house?
The responses were illuminating. For example, I hadn't realized that agencies have been losing their once inviolable 15% commissions from at least some media companies. One respondent was rather outspoken about this:
“There’s a third component to compensation and agency-client relationships and it’s the media companies. They used to be a resource for agencies; there was a friendly ‘help us help you’ approach. They were partners and integrity was part of the partnership. Now the media companies have more or less declared war on agencies. They go direct to the client at every opportunity to cut agencies out of the media picture and make more money.
“They misrepresent their assets to clients and the word from the top is to get more direct business, no matter what. As a result, the three-way agency-client-media relationship, in too many cases, has become adversarial.
“Media companies would like clients to see them as agency replacements (back to misrepresenting assets and capabilities) when all the media sees are more profits. This is a very unfortunate turn of events in the last several years, making life for everyone way more difficult and complicated than need be and relegating thinking and great creative to the back of the bus.”
at February 17, 2024 12:53 PM PST
In Radio Sales for 14 years. Have always worked well with agencies - working together for the client kind of a thing. In both my current station and prior station - the mosjoirty of Agency business is paying a gross rate ( net + 15%). Have not noticed a huge change myself in attitudes -However, agency money down currently over last year. From the article -the reps calling on client -I will and do call on these guys when and where I can. In my mind it is to my and in many cases the customers benefit to deal directly with a radio station...plus commission is greater for local direct!
Agencies treat us like a baby treats a diaper, which is why change is always happening at the agency level. That being said:
We have adapted to the agency mentality. We know what they buyer wants/needs top look good to the customer. So.... we work it. Free remote? Sure at XX dollar level (remotes are our highest profit item). Free Digital? Sure (why not, its 100% worthless anyway). Plus we send times in advance every night to all of our customers. Makes the agencies feel special.
We KNOW what they are going to say. We KNOW the average Agency Radio Buyer is someone who hired on and wants to produce TV commercials but is stuck at the local radio desk. We get it. But money is money. Build enough into the spots so you CAN be the one who gives away what they want. Need to meet an unreasonable CPM? Be ready to walk em and sell ads locally.
I worked the agency side for ... 15 years. They really are not evil incarnate! And they do facilitate revenue into local markets.
In the past and still today, it is possible to build a relationship with those agencies or their media buying subsidiaries in which the planner/buyer people have been fairly static and/or agencies that have adopted a media 'partners'approach. Some agencies - same planners/buyers or not - are purely transactional. It is often looser with unrated markets like mine, less formulaic and buyers are more open when not juggling GRPs and CPMs.
With agencies you really have to accept a couple of things. First - like any advertiser who has someone in-house handling advertising for the owner - part of your function is to help this intermediary look good to his/her boss. Even with the transactional buyers. So whatever business you do with them you want to talk honestly about what will make it work best. There is no down side to this. It is professionalism.The reason agencies beat you up for added value is to show the client how great they are at handling media. So be prepared to do this.To add social media, live mentions, overnites, 20% bonus spots, whatever when asked. Second - be easy to work with. Planners/buyers - depending on the account - track hundreds (Menards) and many hundreds (McDonald's) of dayparted schedules for radio and tv. There are buyers who buy both. So when they send a blanket email to those on the buy requesting something by COB - send it by COB or earlier. Don't make them chase you down. You have no idea on the agency side how exasperating it is to gather something together like that and how unprofessional you look when you can't answer a simple inquiry as requested.
A few trends have emerged more recently. (1) Programmatic buying. You have to work the client or regional co-op to remain on the radar. Unrated markets generate no numbers (or only county-by-county) and unless the local stores complain, the money will continue to funnel to the major or rated markets. The satellite market buying has been harder to maintain. The one thing that is true about Millennials is an over-reliance on technology and Millennials are now filling the ranks for planning and buying, so they are... uncomfortable with local un-numbered markets.... (2) The Media Flight to All Things Digital Agencies love tv because they can charge more money for production, tv is more expensive than radio and they believe it's the ultimate forum to showcase their own creativity (hence the tendency to have really clever or funny tv ads that no one can remember the product or name they were made to promote). Now digital is the new sexy. Seeing this coming, some agencies hopped into the all-digital agency thing. Because businesses like banks love numbers, research, sourced traffic and the myriad kinds of reports some people can crank out about digital impressions and click-thrus, two of our local banks recently switched to far-flung all-digital agencies. We have not seen a penny since. In fact, we - in the community - really don't hear or see anything about them anywhere anymore. So we keep approaching these clients directly with promotion sponsorships (we get some) and are hopeful that at some point, they will figure out that digital is important but not the sole means of advertising delivery. (3) Agencies that work only thru rep firms...AAARRGGHH! This puts the rep firm between you and the buyer - never a good thing. Two clients in 2015 changed agencies and now the new agency stipulates they only work with rep firms. Rep firms ask for 15% on the gross - meaning your station would lose 30% to agency and rep firm. The switch last year involved an equal insistence that rates not be changed until an anniversary date so we were stuck paying 15% to the agency and now 15% on the net to the rep firm.(rep firms ask for 15% on gross) sans rate increase. Rep firms rarely present anything about your station(s) except rate so there is minimal chance to add a station or something like that to the buy. Purely transactional - but this has at least almost eliminated the added value back-and-forth...
Remember that McDonald's, BWW, Wendy's and other franchisees should be called on direct for sponsorships of concerts, community events, high school sports, et al. Even TSC, Shoe Sensation and others have regional managers that can approve something a local manager really wants to do. We put together a welcome bag of offers to hand college students each August - Borics, Qdoba, Jimmy John's and others participate in this direct, If you handle the agency as a manager or house, assign the local store(s) to a rep for full commission on what they sell direct at net.
Always provide gross rates (net x 1.1765) unless they specify differently.
at February 22, 2024 11:42 AM PST
Diane, thanks for the extensive and thoughtful reply. Evidently we share a fondness for Bob Hoffman, whose recent presentations to bodies of ad execs have been most enjoyable.
You're absolutely right about treating agencies (and, really, all clients) with professionalism. I hope that you're charging a sufficient premium to give away all the things you mention when asked, as you encourage sellers to do:
The reason agencies beat you up for added value is to show the client how great they are at handling media. So be prepared to do this.To add social media, live mentions, overnites, 20% bonus spots, whatever when asked.
I see no reason why advertising agencies should be given special perks that are not also made available to the local, direct advertisers (many of whom sign annual contracts with the station), and who in most markets constitute the vast majority of advertisers on the station. The alternative is to treat your best advertisers as second-class citizens (when the agencies are getting all these extras and your best advertisers are not).
Chris Rolando's approach makes the agencies look good, while ensuring that the advertiser (and not the station) is paying for the agency's services, without doing a disservice to his bread-and-butter advertisers.
An interesting time for Agency topic to come up. I just spent a month, and I don't know how many emails with an agency for one account. The demands were unreasonable, (asking for net rates that were 1/4 of what we sell locally), their justifications for demands had no legs to stand on, they "yelled" at me in emails (all capitol letters), would not have a phone conversation (in retrospect, I may have lost it in a phone call), and eventually told the client we weren't "working with them." Never in my 22 years have I seen anything like this, neither has our Sales Mgr or GM.
In the end, the client contacted us directly and we got the deal done.
And yes, our net rates are grossed up 15% for agency commission. Our stations didn't hire the agency, the client did.
