Beware the Intermediary ‘Opportunity Racket’
A cautionary word to advertisers: a good intermediary helps you find the right agency, but many employ shady funding models that compromise their basic duty of impartiality.
You might remember the famous Peter Cook and Dudley Moore sketch in which the latter plays an actor auditioning for the role of Tarzan. We could imagine Moore’s agent only put him forward to keep him sweet; there’s only one problem - he only has one leg. Or as Cook puts it, he’s a “unidexter”.
Unfortunately, when it comes to client/agency intermediaries - aka pitch brokers - this kind of conflict of interest is no laughing matter.
Good intermediaries offer a valuable service, helping you select the right agency for the job. But this must be based on impartiality. If an intermediary is influenced by anything other than your interests, then you could have a big problem.
Follow the money
It may seem like a straightforward exchange of fees for pitch services rendered, but many intermediaries have more than one revenue stream, which raises a number of issues:
Many intermediaries charge agencies membership fees - so you’re only getting access to part of the market.
Membership fees will be ultimately recouped from you through recharged agency overheads, so you’re paying through the back door, or indeed paying twice assuming the intermediary is invoicing you, too.
Worse still, the bigger agencies often pay higher membership fees, so there’s a clear incentive for the intermediary to keep them onside.
Non-member agencies are routinely offered the opportunity to pitch in return for signing-up if they win, so their new-business victory is a win for the intermediary, too.
And if all that wasn’t bad enough, at least one intermediary offers you their services for ‘free’, but then recovers their consultancy compensation from the winning agency in the form of a finder’s fee.
Just let that sink in for a moment.
Firstly, if you’re not authorised to engage an intermediary directly but use this as a workaround, then this isn’t ‘free’; it’s fraud. Secondly, you don’t even know how much your pitch management is costing the winner (and therefore you); or, finally, whether any of the other pitching agencies would have earned the intermediary a higher or lower fee.
Why agencies lose too
You might wonder why agencies don’t cry foul at this uneven playing field. In short, they can’t. Just like a protection racket, there’s too much at stake. In this opportunity racket, they can’t afford to opt out, so whistle-blowers are rare.
Off the record, however, it’s a different story - which is damning in itself.
Many agencies reconsider their membership fee after hearing nothing from the intermediary all year, only to be mysteriously invited to pitch just before their renewal date. Even more suspiciously, the opportunity often casts them as a ‘wild card’ which is a flattering euphemism for not fitting the profile – flattering to a ‘one-legged Tarzan wannabe’ anyway.
Other agencies worry about goodwill, fearing that opting out of membership after a fallow year will poison the well should they decide to come back.
No wonder this murky system persists.
Time to protect yourself
In fairness, the intermediary market isn’t some grand conspiracy. The subscriber model wasn’t designed to create these conflicts. But it should be deeply troubling for marketers.
Thankfully, though, not only are efficiency and transparency growing trends, but the COVID-19 crisis might also hasten some long-overdue change. Given the uncertainty and increased financial pressure, many agencies will look at the various intermediary fees with an eye on cost/benefit and conclude they’d be better off out. The resultant shallowing of the agency pool in each intermediary’s walled garden will exacerbate all the issues I’ve highlighted.
So what can you do to protect yourself? As ever, much power resides at the top of the supply chain. Here are three tips.
Have a clear sourcing strategy so every agency on your longlist is an informed choice - no ‘wild cards’ - you don’t need an intermediary to pluck names out of a hat.
Demand total transparency of pecuniary interests from the intermediary before you start - something The HTBAG Company does as standard.
Only pay the intermediary directly - no “free” agency-pays services, no agency membership fees mean no limited view of the market and no conflicts of interest.
Agencies are also realising that the current system doesn’t help them. As Marketing Week have explored, many are rethinking their lemming-like, pitch-for-anything behaviour so now’s a good time to change how you engage with them directly.
Time to raise standards
Ultimately, intermediaries play a valuable role. But they only have one job - to find the right agency for you, not for them. You wouldn’t want your doctor’s salary paid by a drug company.
I’m sure most intermediaries would vehemently reject any suggestion of impropriety or a lack of impartiality. But every business is influenced by how it makes money, so, if they do then just like Moore’s wannabe Tarzan, they don’t have a leg to stand on.
And lest this be seen as a self-serving accusation of sharp practice from one intermediary to the rest, I’d welcome the opportunity to debate. Name your time, place and video conferencing platform of choice.
Let’s raise standards together.
Founder - The HTBAG Company
Author - How to Buy a Gorilla