What price loyalty?

A logical approach to business relationships would be to keep and nurture the ones that work but dump the ones that don’t.  But then, who said that logic and business have ever been good bedfellows?

For creative agencies, the single most common reason for a relationship ending is a change in the decision-making process.  More often than not, that means a change in the decision-maker.  New person, new broom, new approach, anxious to impress and stamp their authority.  A predictable package of clichés and an all too frequent predictable outcome.  A change of agency.

If the new decision-makers bring in agencies with whom they’ve previously worked, you could argue that this is a form of loyalty.  But you’d be wrong.  That’s about expressing a personal preference of how to get a job done.  It’s completely fair but it’s not loyalty.  It’s also often quite dumb.

Relationships reflect a lengthy mutual journey along a shared learning curve.  The agency often invests heavily in their own learning to better understand how to provide a consistently high quality of creative and strategic thinking to support the client.  This is likely to involve understanding the client culture as much as their product and market.  Such investment involves time, energy and a good deal of frustration.  Some clients simply take a little longer to understand.

Relationships, by definition, involve at least two parties.  So the investment is as much the client’s as the agency’s.

When the return on an agency’s investment is to have that learning summarily dismissed by being dumped, the personal angst is surpassed only by the below-the-belt business blow.  Income loss is unwelcome even if you hadn’t had it for long but it’s almost impossible to measure the impact when the relationship is measured in years, or even decades.  Those of you who’ve been there will know.

But the dumbness of some agency changes is more to do with the loss to the client.  For a moment, let’s take two steps back and look at this from an impartial perspective.

Imagine, if you will, that a company has appointed a firm of legal consultants to help it with its ever-changing compliance issues.  The firm provides a complex matrix of consumer services in a highly regulated industry.  Getting anything wrong could proves costly in reputation, market share and financial sanctions.   It takes a full year for the team of legal consultants to get under the skin of the client’s issues and how best to manage and safeguard them.  Everything then runs smoothly.

The company then appoints a new person to the role of Director In Charge Of Appointing Legal Consultants (okay, this lacks a little imagination).  She / he decides to review the arrangement and eventually appoints a firm with whom they’ve previously worked.  It takes another year to refine the process but they eventually get it right.

Let’s assume both legal firms do a good job.   The company has just wasted a huge amount of internal staff time by repeating a learning process (with a new supplier) which they’ve already successfully completed.  And they’ve paid the new supplier a huge amount of money to navigate their own learning curve.  That’s what’s dumb.  And that’s why it’s unlikely to happen in the circumstances described.   You just don’t mess with lawyers.  Unfortunately, it happens all the time with creative agencies.

The example uses lawyers to make a point.   There’s no doubt that every moment each legal firm spend on the client’s business is charged.  It’s a real cost.  For creative agencies, this may not be true and loads the burden of waste on to the agency side.

The dumbness stems from the rationale behind the change. 

Statutory change prevalent in large corporations and the public sector is effectively a mandatory requirement to throw away the investment in relationships and mutual learning.  At best, the process wastes huge amount of industry time, even when the incumbent is re-appointed.  Repeating a theme from a previous article, this is exactly the opposite of what government should be doing to support UK businesses.

Change for change’s sake is the ‘new appointee’, ‘new broom’, ‘let’s be seen to be making difficult decisions’ genre.  It’s usually more about personal ego than good business practice.  It is often disastrous for the client as well as the agency.

Change related to under-performance is the only legitimate set of circumstances where logic and business meet.   Best practice suggests that great clients only contemplate change when there are shortfalls in business goals.  Why re-invest in new relationships if you don’t have to?

If all changes were performance related, none of this would matter.  But they’re not.  Are they?

My last client job before I switched to agencies was with Playtex.  We were the industry’s biggest spenders on TV with some famous badly dubbed American made commercials.  ‘Living Bras’ were the butt of comedic material and we were a sought-after brand for big agencies.

I was approached by the fledgling Saatchi agency and a young account director called Tim who went on to become a much respected advisor to the political elite (you work it out).  I had been in post for a short period, only two years out of University, and keen to put my personal stamp on the job.  Dumping the design agency which had been supporting the company for the previous fifteen years wasn’t that relevant to me.  Appointing Saatchi’s seemed like a cool thing to do.

I was young, I was inexperienced and I was certainly dumb.  I was prepared to throw away the learning from a successful relationship, which had produced consistently superb work and on-target campaigns for over a decade and a half before I arrived.

Luckily for me, Saatchi’s produced some poor speculative work with an estimate four times the cost I was paying the incumbent.   The poor work was out of character but the costs weren’t.  They quickly offered me a 65% discount (revealing that they really wanted to get us on their client list) but the work still wasn’t good enough, so I declined.  As naïve and potentially disloyal to the incumbent agency as I was, I just got lucky and was forced to do the right thing.

My humble request to all client decision-makers is to urge them to treasure the benefits they get from long-term relationships with their agencies and consider change only when they need to.  For successful clients, new products and new markets will always provide scope for adding new agencies to their roster.

The price of discarding loyalty can be as high for the client as the abandoned agency.  Let’s all stop being dumb and leave good relationships alone.

 

 

0
  
Ray Hanks
02.07.2012