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| Thinking about hiring an Ad Agency? ................................................................................................................................................................ |
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Our small company recently had an Advertising Agency come in and pitch us on the merits of hiring them to oversee our advertising and marketing activities. While their pitch was very convincing, it also looked very expensive. Is it worth hiring them? One of the first and most important lessons I ever learned when I entered the corporate world was: Never trust agencies. Now having spent over a decade, hiring and managing them I understand this more than ever. Not to say that all agencies are bad, or untrustworthy, I've had many great business and personal relationships with agencies and their people and believe that when you have a good fit of business needs, personnel and market conditions the right agency can help your business immeasurably. With the current economic slowdown, many agencies have lost a significant amount of their traditional business and are looking to smaller accounts to make up some of the difference. This is providing both opportunities and risks for smaller companies. The opportunity is that you may have access to a more experienced and resourceful agency team than when the economy is strong. The risks are that the agency might drop the smaller accounts when the economy picks back up and probably more importantly, that the expense of hiring the agency may overwhelm your budget. My experience is that agencies put on great "dog and pony" shows where they come in and tell you about all the great work they've done for their clients and get you to imagine how well your company or brand would look if they get hold of it. The pitch is often dazzlingly high tech with senior managers from the agency showing you multimedia PowerPoint presentations, mounted examples of print advertising, and copies of really cool direct mail pieces that they have developed. One thing, as you pointed out in your question, that is often glossed over is the cost of these campaigns. As a small business, though, the decision to hire an agency should focus on a few key business issues and eliminate the emotion of the "pitch" as much as possible. First and foremost among these issues is: Does your business need an agency? One thing you learn quickly is that almost every agency pitch that you see will try and convince you that you need one, and I know from experience that you always come out of them feeling that you've just seen the future of your company and these people know what it is. The reality check is to ask if that's really what you need? If your business is successfully growing at a comfortable rate and with positive cash flow, I'd be somewhat hesitant to turn over all of my marketing and communications to an agency. You're probably better off making sure you have a strong marketing professional on your staff and developing relationships with local design resources who can do things on a project basis. As you grow, however, you should re-evaluate whether you need a full-time agency every few years. Second: Can you afford an agency? As you mentioned, the pitch that you got from the agency looked very expensive and the campaigns that they showed you probably were. Hiring an agency is never an inexpensive proposition and should always be carefully reviewed before signing on the dotted line. Many times an agency will couch things in terms of "reach", "frequency" or "page views", in the case of a Web Site, but rarely in terms of total cost. Since agency expense comes directly off the bottom line it is important to make sure that you have the budget resources to cover these added costs, or that you don't have to cut some other critical service in order to pay for the agency. Again, it can often be cheaper to hire a competent marketing professional and work with local designers on a project-by-project basis than hire a full-time firm. In all fairness to agencies there are some very good ones out there who can work at a very reasonable cost. In the past I have hired and worked with agencies that in today's vernacular would be considered "virtual." By this I mean they didn't have a huge building, large staff or comfy conference room. These firms generally had fewer that 5 employees, a small office, or home based office and a strong network of contacts in the area. While I wouldn't turn over a large corporate marketing program to an agency such as this, they can be a great solution for a small company looking for a minimal agency solution. Because of their structures they generally don't have the high overhead costs of a larger agency or have to support exorbitant salaries for senior executives. As a shameless plug, an example of this type of firm is EC Stewart Design and Communications where I reside. We have two principals in the company who work out of home offices, yet are able to accomplish almost anything a larger agency can do at a much lower cost. We've structured our business to serve small clients and would most likely refer a large company to a bigger agency. If you're looking for a larger agency with a lower cost, you may also want to look at agencies in Canada. I had a wonderful experience hiring and working with Ogilvy & Mather Toronto while managing marketing and communications at a medium sized corporation in North Carolina. Through O&M Toronto I was able to get the global resources of one of the largest agencies in the world at a significantly discounted exchange rate. The Toronto office, while being relatively large, was also small enough that I didn't feel my account was getting lost in the shuffle of IBM, Barbie or KFC (some of their other accounts). While probably not an option for a small company, it can be a good option for a medium sized one and something to consider. The final question you need to ask yourself is: Do I trust the management of the agency to care enough about the success of my company and not just the amount of business I'm doing with them? This may sound like a somewhat jaded attitude, but I've been in enough agency pitches to understand when I'm seeing a real opportunity for my company and when I'm being sold on a real opportunity for the agency to make more money. Agencies are businesses just like any other, but all business practices and ethics are not created equally. Most agencies are run by hard working professionals who want to do what's best for their clients, knowing that if they do a good job, they'll get more business as the client's business grows. Others are looking to make as much money off of your business as possible as fast as possible. I personally felt the sting of this with one Houston based agency that a boss of mine hired. The owner of the agency was a slick salesman who talked a great game; name dropped like crazy and likes to quote the latest fad business book out of context. He and his account team came in and pitched our executives on the need for us to run a series of product launch events… very expensive launch events. He promised his agency would defray the costs by getting other companies to help sponsor the event - this way our cost would be minimized. These were events that included large multimedia presentations, television and newspaper advertising, famous bands like the Temptations and The Commodores and lots and lots fun party time. Unfortunately my no-vote was overruled by the neophyte executive team as my boss bought into the idea hook line and sinker. To make a long story short, the agency never made any effort to solicit other sponsors, the contract that my boss signed made us responsible for any and all costs incurred and there was no follow-up program put in place to track the success of the events in the long term. In the end we paid somewhere in the neighborhood of $1 million for three events and the company had nothing to show for it except a few photographs and a useless list of invitees, since the actual attendees were never tracked. There were a number of other factors that made this the worst agency experience of my professional life, but I think you get the picture. So back to the original question of whether an agency is worth hiring, I'd say take a look at your business and answer these questions:
Good Luck! 
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 If you have any comments about this column, or have a question you'd like answered, you can write to Andrew Hayden. |