So Anheuser-Busch has come up with a new approach to compensating its marketing agencies, and the trade headlines say it "...whacks retainers..." as a casualty of the InBev-directed strategy to put the screws to said partners (oh, and trim $1.5 billion in costs that need to get trimmed).
I say let's toast Anheuser-Busch.
The old set-up let projects slide and change, perhaps even due to legitimate issues sometimes, which then let agencies add hours to their monthly retainers. It seems that A-B also regularly reimbursed certain costs that may have included agency charges or mark-ups.
Now, agency compensation will be tied to specific projects, with specific deliverables and due dates, and explicit front-end declaration of costs. Agencies, and their client, will have to live and die based on how strategic and smart they can be about the branding and marketing tasks before them.
Those bastards at A-B.
The easy interpretation is to see this as an efficiency move, having nothing to do with the efficacy of branding and marketing (or, worse, damaging it, whatever it is). But I'd like to suggest that it's all about doing better marketing, and that's good news for advertising agencies, and any other vendors who chase that sort of work. Here's why:
- The project approach better pairs costs with expected returns. The digital revolution has transformed what was once the ongoing, analog wash of communications into the quanta of Internet search and online campaigns, so much of the marketing work was getting "product-ized" anyway. Looking at an expenditure, and matching it with an expected outcome (whether sales, or some enabling other behaviors), benefits both parties in the deal: agencies can't bill wantonly, and the client can't blindly add revisions. Limiting scope-creep helps everyone, not to mention enabling better work output.
- It orients everyone on same outcome, not competing purposes. A big, still-unresolved bugaboo for the ad business in general is that many agencies think their job is to create great advertising. That's wrong: they're supposed to help their clients sell stuff, and advertising is one of many tools to help accomplish that goal. Imagine if the stated objective of a project were "to win an award at Cannes?" It sure would make everyone deal with it, up front. I suspect that the outcomes that'll drive most projects for A-B will have little to do with qualitative praise from the industry (or media), and lots to do with generating consumer behaviors. Again, welcome to the late 20th Century already.
- The focus stays on deliverables. Retainers are based on a process approach to financing, while project budgets are focused on deliverables. The criteria for any budget decision (or change) in the physical world's supply chain are based on the impact on outcome, quality, speed, etc. Most marketing agencies are rewarded for qualitative values -- i.e. likability, retention, and lots of the nonsense metrics that get applied to the stuff they produce. (Hummm...) -- versus the objective reality of their output. Projects mean a focus on making things happen in the real world. It could be carte blanche for hating your agency (or your client), and yet still loving your collaborative results. Once more time, welcome to how the rest of the business is run.
Perhaps last, though not least, cooperative updates to client-vendor relationships, as a general rule, are better than the surprise changes, which usually amount to the former firing the latter. No client is going to cut budgets they feel are beneficial to the company's bottom-line, so a whack at A-B's agencies means that A-B thinks there was some fat to be cut. Bone? Naw, probably nowhere near, and the brand isn't anything physical anyway.
If it's a problem, where's the learned epistle from an agency exec defending the retainer, cost-overrun, Mad Men-era model?
Tell us how the former arrangement helped A-B sell any beer. In contrast, that's exactly what the new deal might just do.
I say let's toast Anheuser-Busch.