Many advertising agencies are starting to hear more and more that they are too expensive.

advertising cost

What’s the real value of an idea?

Having worked with many of them we know most ad agency rates are reasonable. The real question is how can our industry overcome this so-called cost objection and convert more prospects into wins?

The economic downturn has pressured clients to trim expenses and evaluate the value-added contribution of their agencies. Most agencies have had their fees questioned and many have experienced the discomfort of fee/rate audits. Often agencies are responding with examples of results achieved and service quality, and question the appropriateness of this examination.

But this view overlooks the client perspective. While the marketplace has become more tactically driven and project-based, many traditional agencies have not adapted their organizations and services to match the needs of the client.

To be effective and profitable your agency needs to present itself in a manner acceptable and appropriate for the circumstances. Not show up to every client/prospect meeting with the same team. If its a tactical meeting, only the tactical folks should go. Strategic? Bring one or two of your best strategic thinkers. No more. No less.

Agencies in this situation must understand that they are in three separate businesses that are often non-complimentary – Strategic, Execution Management, and Production. Many traditional agencies have acknowledged this and have launched separately branded consultancies (strategic) and design studios (tactical). This approach enables a tactical response to an agencies organization and fee structure.

The Impact of Agency Structure:

  1. Agency structure either supports the operations of the agency or makes it more difficult.
  2. Agency structure is not neutral. It either helps or hurts the agency.
  3. Many successful agencies can make unsuccessful agency structures perform but the cost in energy, stress, margins and efficiency is often very high.

Structure is a tool that supports the agency brand. Agencies that are masters in the Art of Operations can work in any “structure.” Operations knowledge, information reporting, metrics and incentives are the key to understanding what structure will work best for your agency. Developing a comprehensive operations strategy is the first step.

Just one more thought on this ongoing dilemma.

Photo Credit, David Niblack,