My son is coming to the end of year five in his primary school, but like many in his year group he has already finished the year six curriculum. As a parent governor in the school I know the teachers quite well, so I asked my son’s teacher:
“Why does the school push them so hard?”
… I didn’t want to criticise him, this was genuine curiosity.
“Train hard, fight easy, that’s our motto.” his teacher replied.
Of course, this military maxim makes a huge amount of sense. Training is easier than fighting, so if we train hard then when we have to fight, we’re both more confident and more capable, and of course we’ll achieve better outcomes. And sometimes, if it is clear that you’re well trained, confrontation can be avoided altogether.
The idea of expending greater effort on preparation to make execution easier is nothing new. Abraham Lincoln famously noted:
“If I had eight hours to chop down a tree,
I'd spend six sharpening my axe.”
But when it comes to advertising agencies and their negotiation with clients, this lesson often appears to have evaded them.
Most agencies do very little in advance of negotiating with their clients. One prominent marketing procurement leader once remarked to me:
“It never ceases to amaze me how agencies turn up to negotiations having done no preparation whatsoever but expect to hold their own against those who negotiate for a living.”
Indeed, I have often negotiated for clients and spent days in preparation only to see it was patently obvious that the agency had only spent a few hours at best. I’m not talking about preparations like PowerPoint decks and resource plans on Excel spread sheets, I’m talking about negotiation strategy.
And in this respect, many, many agencies need to sharpen the axe.
The successful and the victims
Not so long ago, when my friend and former colleague Tom Lewis was Finance Director of the IPA, he undertook some research among member agencies. Tom found that the most commercially successful agencies were the ones that took responsibility for the commercial outcomes of their negotiations. Less commercially successful agencies were the ones that self-identified as victims of tough client negotiations.
There are usually two losers when agencies fail to negotiate well with their clients. Obviously, the agency is one loser, but it is also far from uncommon for clients to end up buying less for less. While it may appear that only the price of working hours is changing, it is also the client’s relative priority in the agency and the talent assigned to them. Procurement in particular – because they are mostly incentivised to achieve a saving – are not so much getting an Audi for the price of a Vauxhall, but they’re getting a Vauxhall car for Vauxhall money when marketing needed an Audi.
We know what we’re doing
Many agencies have argued that their people are already skilled negotiators – they negotiate over work, time and money every day (they’re in the persuasion business after all). Indeed, many are very charismatic and persuasive people. But that can only get you so far. There are some big challenges that most agencies routinely fail to address and they find themselves on the back foot when they’re at the negotiation table:
Why should you charge 20% profit when your clients routinely only make 5%?
Why won’t you make more of your revenue performance related?
Why are your people more expensive than our benchmarks?
And the great unasked question: “Do we even need a win-win deal?”
… and these are just few of the regulars that agencies tell me have tripped them up.
So although tactics at the table are useful, and charisma is better to have than not, it is preparation and strategy that will make the greatest ground.
Better still, what if clients wantedto pay agencies fairly? What if agencies could explain how it would actually be in their clients’ best interests to do so through non-confrontational, reasoned and robust strategic discussion? I call this Procurement Whispering.
Am I having my cake and eating it?
Many times I’ve been asked how I can train agencies in negotiation, and consult and run pitches for clients in marketing and procurement without having conflicting interests. The foundation of both procurement whispering and How to Buy a Gorilla is the establishment of shared interests. Everything else is built on this foundation, so the point is that there is no conflict.
We start with the client’s business problem, that’s the shared goal; then we define the agency’s contribution to the optimal solution of that problem – all the time remaining objective, strategic and value-oriented.
Because, as Sun Tzu noted in the much quoted Art of War:
“The supreme art of war is to subdue the enemy without fighting.”
Though when you align interests properly, there is no enemy.
How to Buy a Gorilla - The ultimate guide to selecting, paying and working with agencies for more powerful advertising.