Strachan agreed that having procurement staff experienced in marketing helps smooth the relationship. "There’s a great opportunity for clients to look at procurement through another lens," he said. "And that’s making sure the team that interacts and interfaces with agencies has agency background and experience."
Still, brands are inevitably motivated to cut costs. Look no further than Procter & Gamble, which in its recent earnings call said it hoped to save $500 million by trimming its agency roster.
And this pressure puts a continuous squeeze on agency margins, which have dwindled significantly in recent years. This decline has led to open secret practices, like the tendency for agencies to request kickbacks from vendor partners – rebates that aren't always revealed to clients, and which could, when brought to light, create friction between agencies and clients.
Strachan cautioned, however, against painting the entire agency world with the same brush. "If there were a few bad apples that have caused issues with clients, that doesn’t tarnish the entire industry," he said, adding he isn't concerned the rebate issue is a trend. Still, he hoped for more discussion on the topic.
"We all need to be concerned that our business practices are best practices and ethical practices," he said. "That furthers the trust and partnership between clients and agencies."
This issue became superheated at the ANA Media Leadership Summit in March, when former Mediacom CEO Jon Mandel railed against the practice. The ANA subsequently did damage control, and though the survey was completed in February – before Mandel’s red-blooded speech – Liodice downplayed the impact secret kickbacks might play.
“Yes, we still have some issues in the briefing process and in compensation,” he said. “The fact is, regardless of those issues, the relationship is strong and the belief in the strategic partnership remains strong.”
To that point, the ANA and 4As unveiled Friday a task force of agency and marketer execs to establish best practices in transparency. (Horizon Media's Bill Koenigsberg, Starcom MediaVest Group's Laura Desmond, GroupM's Irwin Gotlieb and Omnicom Media Group's Daryl Simm rep the agencies; Subway's Tony Pace, Procter & Gamble's Marc Pritchard, Unilever's Luis Di Como and L'Oreal's Nadine Karp McHugh rep the marketers.)
Nevertheless, the still-raging debate (Omnicom, Publicis and IPG had to field related questions during their respective earnings calls) underscores that compensation remains a heady issue. The majority of agencies and clients agreed or strongly agreed that agency fees are an important consideration in the relationship – but while 72% of clients agreed or strongly agreed compensation was fair, only 40% of agencies felt similarly (about a third agreed, a third neither agreed nor disagreed and a third disagreed).
This is another discrepancy that the ANA and its peers are going to have to deal with. Some salves like performance-based compensation seem great in theory, but the survey indicates at best a lukewarm response from both sides of the table. Liodice said it’s difficult finding the right performance metrics and it’s also difficult determining whether an agency can be accountable to those metrics.
Additionally, there’s a risk the agency might hone in on microtargets to meet certain performance incentives at the expense of the overarching goal. “The problem is sometimes these contracts get to be so complex and laden with so many areas of qualification, it becomes difficult to see the forests for the trees,” Liodice said.
At the same time, marketers need to ensure that their agencies are driving business results.
"We’ve always worked off of the understanding that I am paying for a service, and that service is to help me grow my business," said Strachan. "Performance-based bonuses or additional praise for work because you won a Cannes or Golden Lion? If my business isn't growing, that's a challenge. Performance-based contracts need a lot more dialog and discussion."