Wednesday, August 1, 2007

You mean it's not about the hammer at all?

Ad agencies and (and creative thinking firms) do not make money on production.

There. I’ve said it. And I’m not taking it back.

There is no valid business model that can work well for – or be fair to – both client and agency that is dependent on the agency making its money on production. And I’ll fight you about it if you want.

Just like the notion of the 15% media commission as agency compensation, the idea of fees and markups related to production as sources of income for an agency needs to disappear.

Clients need to pay their agencies for what it is they really do – or should – receive that is of value. Ideas. Thinking.

That’s what we sell. (Ahem) Creative Thinking. Ideas. Solutions. The pressure needs to be on us to deliver solid thinking and good ideas. Our compensation should never be based on how long it takes us to do something any more than it should be based on how much we spend on a photographer or printing. Exactly how frequently is it acceptable for the client’s and the agency’s best interests to collide?

There’s an old joke that has been told in many variations that goes something like this:

A customer takes a car to a mechanic, complaining that the engine makes a loud clanking noise when idling. The mechanic opens the hood, starts the car, and listens for a moment. Then he grabs a hammer and hits the engine sharply. The noise stops.

"That'll be $100." he says.

"What? " complains the customer. "You just hit it with a hammer. Anybody can do that."

"True, “ says the mechanic, "That's why I'm only charging you $5 for labor."

"Then what's the other $95 for?" demands the customer.

"That's for knowing where to hit it."

And that, boys and girls, is the business we’re supposed to be in. Knowing where to hit it.

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