With increasing pressure on budgets and expenditure outside of the retainer such as production the prime area of incremental revenue creep for agencies, it is important that there is a rigorous, but not onerous, process to ensure financial compliance from the agency. Here are a few basic steps to achieve this.

1. When briefing a project to the agency, agree on the set-up of the job-costing module that collects the information for billing, to allow analysis between jobs, not just within them.

2. Set up reporting structures to receive the information in a format that allows analysis of data at your end.

3. Ensure that all estimates and/or budgets are set up using the agreed model, without exception, to provide a consistent data base for analysis.

4. Ensure that the estimate and/or budget are included in all reporting and within the job costing system to allow variance analysis.

5. Whenever variance to the budget or estimate occurs, ensure the agency provides detailed reasons or justification.

6. Ask the agency to provide regular details on each job, including the stage of the job as a percentage of completion and the expected final cost of each job, including any variation from the original. This enables you to foresee final costs and review your annual spend.

7. The marketing department should manage and monitor each job down to cost type to ensure transparency of information and accountability of the agency.

8. Have monthly meetings with the agency to discuss any over-runs and credits to estimates.

9. Make sure a meeting is held with your Financial Controller to discuss expected future marketing spends and timing of spends. Source approval for on-going marketing activity.

10. Contact TrinityP3 as we provide assessment, reconciliation, benchmarking and analysis of job costing to ensure that the agency is billing to the agreed agency remuneration.

Many marketers find that managing the agency’s estimate and invoicing systems confusing and complex. What has been your experience with being able to manage agency financial arrangements? What has worked for you? Or what is the worst example of poor compliance you have seen?

Why not share your experience here with a comment?

There has been much discussion on pitch processes in the industry globally in the past 12 months. In the UK ISBA and the IPA have launched a website called TheGoodPitch while in the USA the ANA and the 4As have released a best practice paper on the pitch process.

In 2007 we introduced a new method or process for selecting agencies, based on methodologies being used in Europe for many years, it became the basis of our “next practice” innovation. Rather than the traditional “beauty parade” where you provide the agencies with a brief and they come back and parade their wares, we started recommending a process that included a strategy workshop.

This process has had huge results for our clients who find that the process provides an opportunity to really get to “test drive” the agency and see how they think, how they work and how well the marketing team and the agency team work together.

It has also had huge support from the agencies who find the process more engaging. It allows the agencies to really get to understand the marketers and their requirements and so leads to a better “fit” between the two.

The benefits reported back to us by both marketer and agency are:

1. Better insights into how the agency work and how the marketing team and the agency team work together
2. Better understanding of the culture and cultural fit of the two groups leading to better understanding of chemistry
3. Eliminates marketer concerns about who did the work (common in the traditional process)
4. Get to evaluate the agency team and identify the people you want working on your business
5. Faster process as co-creation process of the workshop takes less time than the traditional “beauty parade”
6. Creates a more realistic environment for assessing and evaluating the agency

Of course, this process does not suit all marketer and marketing procurement requirements. If you are selecting a service provider or a specific output then there are other methodologies to achieve this. The skill is matching the right process to your needs.

What are your experiences with the pitch process? What works and what does not work?

I have written before about the perception of marketing by CEOs (73% of CEOs think marketers lack business credibility) and CFOs (‘Being “good for the brand” is not a business case) in organisations, but two things this week made we wonder if the same CEO and CFOs are right about the lack of business and financial acumen in marketing and the advertising industry generally.

Firstly, I read a report about marketers based on the IBM CMO Study. The report showed that “Marketers in Australia and New Zealand say that financial skills and an understanding of technology and social media are the things they need the least to be good at their jobs”.

But secondly, it appears it is not just marketers. I was sent a link to an article in Campaign Brief which announced the promotion of Young & Rubicam Brands ANZ CFO Adam Foulsham who has been promoted to a senior finance posting in New York.

The sad indictment of the advertising industry is the ill-informed, narrow-minded and nasty anonymous comments. (Typical of the Campaign Brief which seems to champion anonymous gutter sniping and bitchiness as some higher form of free speech)

These are comments that appear to be made by members of the creative department. Bitter, twisted, ignorant comments about the business of advertising.

It makes me wonder if they do not realise that marketing and advertising is a business.

At least there were some voices of reason here. “GFC”, “Can’t touch this” and “Groucho”, thank you.

To the others, it is a sad reflection on the industry and Campaign Brief continues to be a sad representation of the industry media.

What do you think?

The secret to developing a fair and sustainable agency remuneration model is  having a process that is based on what you want the agency to deliver. In this case the agency can be any agency from media to pr to traditional creative agency and digital.

The foundation of the remuneration model is being able to define and quantify the scope of work. If you can quantify the scope of work then the choice of remuneration models can then be selected based on the best model. These models include:

1. Spend based models – including media commissions etc
2. Cost based models – based on the cost of resources
3. Output based value models – based on the price or value of the output
4. Outcome based value models – based on the value created by the contribution of the output

There are a number of ways to measure the success of remuneration models but one that I am particularly proud of is the success of the client agency relationships that are founded on our accountable and transparent agency remuneration models.

But it is not just our marketers who find the process successful, so do the agencies.

And at the very business-heart-of-the-agency, the CFO appreciates the process too.

I have found the issue with determining the right model and the right level of agency remuneration requires a discipline from both marketers and agencies in determining the right metrics on which to define the relationship and the outputs. Often the agency is focused on resource levels and cost recovery while the marketer is more focused on budget management.

If there is one area we have been particularly successful in, it is helping both the marketer and the agencies become aligned to a common metric which is the scope of work. What the agency produces is at the core of the relationship. Once this is determined, then the way you value this can then be discussed.

What are your issues with determining agency remuneration? And what solutions have worked for you?

Music is a powerful component in television commercials. The right music track can increase the cut through, become the nemonic of the communication and help target a specific audience. Yet music copyright, performance rights and mechanical rights are often misunderstood. Here are some ways to avoid trouble when either licensing or commissioning music.

1. Avoid using copyright music in concept testing unless you can afford to licence it. Where possible get some initial feedback on “availability”. No use getting excited about the unobtainable.

2. When briefing a composer, use a number of tracks to communicate a musical style rather than one track – it lessens the chance of your composer directly copying someone else’s musical work.

 
3. Beware when agencies or composers talk about creating a “sound-a-like” track as this is a high-risk strategy. If it sounds like the original track, then chances are it probably infringes the copyright.

4. Insist that the composer warrants that the work does not infringe the copyright of others when they create an original piece for you. That way if they weren’t as creative as they promised, you can deflect the damages bill elsewhere.

5. When re-recording a track you have licensed, make sure the vocal treatment and arrangement is different to the original recording. Licensing the publishing rights does not extend to the master rights, and your new recording mustn’t infringe the copyright in an existing (perhaps famous) recording.

6. Consider the merits of licensing the original master recording for that well-known publishing copyright you have licensed – there is more value in your target market concentrating on the product and mood created by the music, rather than worrying why their famous female artist suddenly sounds like a guy.

7. There are no musical formulas such as the notes per bar for distinguishing copyright. The ultimate legal test is how the final track sounds compared to the original.

8. There are always other music options. If that “must have” unknown obscure track is expensive, it might be worth searching for another unknown obscure track that is just as appealing to your target market, but with a lower price tag.

9. When negotiating the use of a music copyright, list all of your potential “wants” up front. You can’t negotiate mag wheels and leather trim for free after you’ve bought your car. Licensing music is similar.

10. Contact TrinityP3, we can provide advice and information on ways to use music cost effectively without the risk of infringing the rights of others.

We have assisted many marketers and their agencies with negotiating the murky waters of music composing and licensing.

What issues or questions have you found when dealing with music? Share your experiences and comments here.