“Stand & Be Counted” by Arthur Anderson, Adweek

Published Sept 26, 2005

Account management is a discipline on the defensive that needs to prove its value-add to advertisers or risk extinction.

In days of yore, when advertising agencies were Marketing Advisers to the Kings (CEOs and boards of directors), top-level account management provided strategic planning and consumer research. But in the 1980s, when agencies began to cut back on talent and resources, their clients began to build internal expertise in strategy, marketing and advertising. This accelerated in the early 1990s, and agencies obliged, since their costs and margins were under pressure. Also, holding companies were calling many shots, media had been unbundled, and there was a shift in emphasis to creative “big ideas,” creative execution and production.

According to our firm’s agency economic model, for every $100 spent on account management salaries, $93 is spent on creative salaries. Another $48 is spent on research, account planning and production. Go back 20 years and the ratio was for every $100 spent on account salaries, just $78 was spent on creative salaries.

At large, sophisticated marketers today, relatively fewer and fewer dollars are being spent on agency account management than on creative. Although the numbers vary dramatically by account, our benchmarking data over the past three years show $168 invested in creative salaries for every $100 spent on account salaries. This is not due to the presence of more creatives; it is due to lesser account management investment.

Why is this?

Advertisers now engage agencies primarily for creative work, not account services. While they understand that account services can be a necessary component in an agency operation, they are increasingly having difficulty understanding the value-add from their investment in agency account management. Who are these account services people on my account? What do they actually do? What value am I getting from this investment? We hear these questions time after time when agency staffing plans are discussed. It has become clear to clients that account management drives as much of the costs of the agency as the creative department, and in an era of stewardship, this is increasingly examined.

The challenge to account management is to validate its contribution to great advertising and business results. Such terms as “return on advertising investment,” “accountability,” “stewardship” and “corporate governance” are viewed more critically than “facilitation,” “consumer insight” and “integration.” Properly resourced, a client can provide much of the account management in other ways. Agencies no longer have a monopoly on it. (Creative, however, is another story.)

There are good reasons why much of the agency account-management function can be removed, outsourced or replaced without materially impacting an agency’s creative, and more clients are pondering this. A wrinkle in this —one for which clients must take responsibility—is that hiring freezes force client marketing management to outsource positions to the agency. This reduces the client head count directly, but indirectly adds greatly to the client’s costs.

Here are questions that agencies and clients can ask themselves, and each other, about account management and how best to resource it for the benefit of the client’s brands:

1) Can we define the roles and responsibilities of the agency and the client and reduce it down in writing to how each is accountable to the brand and to each other?

2) What vital role does a specific account-management person play in obtaining client business results from the agency’s work?

3) Making the assumption that clients lead agencies, what client practices and processes need to change so the agency can work more effectively and efficiently?

4) How can it best be demonstrated that a specific account-management person adds value to a client’s account?

5) Is it in the client’s best interests to “insource” or “outsource” certain account-management roles … and to whom?

6) Given the right tools and resources, could clients become better equipped to manage the agency creative process than the agency?

7) Would it work better if some marketing-services functions were insourced to the client? This way, the agency could concentrate on value-added services and thereby deliver better value to the client. The agency would enjoy the better profits that go with higher-value services.

8) What can be done to change the agency’s model to yield more effective services to the client with better productivity?

9) What is the client’s return on investment in that portion of the fee that goes for account-management salaries?

10) How can compensation be restructured so that the agency is motivated to reduce redundant account-management functions, and in so doing, be rewarded with a higher profit margin?

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