What Big Companies Get Wrong About Small Agencies

The 2019 Ad Age Small Agency Conference is currently running a promotional campaign they are calling “The Elevator Pitch”. According to the website, they are offering small, independent ad agencies like ours the chance to spend five minutes pitching representatives from P&G (aka Proctor and Gamble, the behemoth packaged goods conglomerate that has been a prized target of big agencies for decades). While it’s a nice notion – the idea that P&G wants to meet “brilliant creatives” and “expand their agency network” with small agencies – I can’t help but wonder if the real cause behind their outreach is more cynical. P&G has been an industry leader in slashing marketing costs through in-house agency development and “fixed and flow” budget limits. And as revealed by the recently-leaked pitch requirements from the ongoing General Mills review, other top ad spenders are following suit. In response to these near-impossible demands, including 120-day payment periods and ownership over all pitch creative, traditional big agency networks are increasingly taking a stand against these clients. Why these profit-obsessed companies think small agencies might be a better fit for their changing model is obvious. Small agencies are their last best hope to cut marketing expenses through decreased fee structures and offset costs. And it makes sense: One of the many benefits of working with small agencies is that we should (and do) cost less.

But where does the death-spiral of lower and lower fees end? Are we just a road stop on the way to the bottom?

Of course, this debate is founded on the assumption that any small agency would sell their souls to work on vaunted brands like Cheerios, Haagen-Dazs, or Bounty. And why not? There is the prestige of working on brands the whole world knows. And then, there are the (supposedly) bigger budgets and agency fees.

However, the argument neglects the reality that small agencies are often small for reasons of their own choosing, and one reason may be to avoid the abuses and obligations of clients beholden to the insatiable appetite of Wall Street. Is it smart to hitch our success to a huge, increasingly-irrelevant brand like Yoplait, whose newest answer to declining market share is to partner with Dunkin’ Donuts for exciting new flavors? Would we not be better served joining forces with an up-and-coming, independently-owned brand like Siggis? Would small agencies fight over the opportunity to work on Dawn Dish Soap if we weren’t fairly compensated for that work?

Increasingly, agencies are being asked to shoulder the burden for the client’s poor business decisions. Ivan Pollard, CMO of General Mills, responded to criticism of the General Mills pitch process by saying,”we are in … business and managing our cash flow is a vital corporate function.” Isn’t it possible that product innovation or R&D would help you with that cash flow problem, rather than just squeezing agencies? Are agencies why your stock price has dropped 21% in the past three years?

While we’d prefer to sit back and ignore the happenings of the outside world, unfortunately the big client mindset is trickling down to our local clients. A recent RFP for a well-funded tourism bureau in our own backyard asked us to front the entire cost of working on their business for the same 120-day terms as General Mills. Yet another prospect asked us to work on their business for free, with the chance of compensation coming only upon individual unit sales of their product. The decision would have been easier if their product was more competitive or they agreed to assume at least some risk. Nonetheless, our sympathy is often with our clients: They are getting squeezed just as we are.

Let this not be mistaken for naivete. All companies exist to make money, as do we. The difference is General Mills, P&G, and others have established profit as their only single metric of success. While profit is a necessary and important goal, our independence allows to similarly value partnerships, long-term thinking, and mutual respect. And we have been fortunate to collaborate with clients that share our goals and values.

Ad Age has the right idea, but the wrong client. Small agencies need partners willing to help support us, not take advantage. The clients we want to ride elevators with are those willing to ride with us all the way to the top, together.