The Conversation

Agencies and marketers need to reset their relationships

Impending economic turmoil means that more flexible performance-related payment mechanisms need revisiting

By jeremy Lee

As working life takes a significant step towards getting back to normal perhaps it's also time for agencies and marketers to reset relationships. 

With UK inflation expected to hit 6 per cent this spring - largely driven by an impending and eye-watering increase in energy prices - we're about to hit a tough time in the economy. Businesses and consumers are understandably looking at ways they can cut their cloth accordingly.

The IPA's recent Bellwether report has downgraded its annual adspend growth forecast for the year by 1 percentage point to 5.2 per cent as post-pandemic confidence among its members has been rocked by the prospect of inflation-induced consumer jitters and concerns about the resilience of supply chains.

Agencies have already faced their own inflationary costs on salaries (some of it self-induced from the need to replace those who were cut in the short term and some of it structural following the "Great Resignation"). They could be bracing themselves for more fiscal pressure if their clients seek to cut fees in a bid to mitigate increased costs elsewhere.

Last week Creative Salon spoke to intermediaries and procurement specialists who refute this doomsday scenario, however. In fact, there was heartening news - as long as agencies are prepared to take a more commercially-savvy approach and, in the words of Xeim Engage's Richard Robinson "thump fists on the table" during negotiations with clients.

But it's not all about playing hardball. It's time to revisit more sophisticated payment mechanisms that are linked to output rather than timesheets.

Of course, payment by results has been talked about for years but little progress has been made. The best agencies (and marketers) have nothing to fear if the oncoming cold wind of inflation forces both parties to introduce more sophisticated measurement metrics and puts a greater value on the impact that advertising provides to them and to the UK economy.

These could strengthen commercial relationships into real partnerships between agency and clients - and that should be in everyone's interest.


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