MAD MONEY for MAD MEN - Which 50% Of Your Ad Budget Is Your Agency Wasting?

MAD MONEY for MAD MEN - Which 50% Of Your Ad Budget Is Your Agency Wasting?  

Most marketers may know the proverbial saying from John Wannamaker – the father of modern advertising: “I know 50% of my advertising dollars are wasted, I just don’t know which 50%”?

I’m writing this article because of the feedback, emails and phone calls I received from last month’s article: “The Death Of A Brand as We Know It”.
The quote above speaks to the reality that many marketing programs are not easily justified on basic return-on-investment measures, and that advertising in particular ends up being a leap of faith because it’s expensive and the direct benefits are VERY difficult to quantify, if at all….especially today!

A major, top 100 retailer called me about the article and through our discussion it became “painfully self-evident” that he had no clue what was happening with his advertising/marketing strategy…except that it wasn’t working anymore like it used to.  As we talked, I related to him how I thought consumers were “consuming media today”. I could tell, through his deafening silence, this was a “deer in the headlights” moment for him. After I thought about our discussion for a few days, I became quite frustrated and angry that his agency was NOT his best friend anymore because they were pushing old strategies and tactics, making the same old MAD MONEY in the new retail world order.  

For the record, I owned agencies in the 80’s and 90’s. We were extremely successful with clients like Gerber, Pepsico, Ragu, General Mills and many small and large B2B clients. I have also directed the inside marketing for several large companies, so what I’m about to share with you comes from both sides of the isle…Agency & Client side.

You probably hire an agency for a few different reasons. Some of which are:

1. They have a track record of growing businesses.
2. The landscape and multiple channels for “messaging” are confusing and you need someone to help guide and direct your stores messaging
3. You just don’t have the time to learn & invest in this confusing landscape.

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So here are my thoughts, or should I say “RANTS” about how your agency is not your best friend anymore, if they even were in the first place.  

Basically, ad agencies and marketing firms are glorified salesmen and middlemen—they make their MAD MONEY off of MAD MARKUPS and Commissions.
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 If you check ADWEEK, Advertising Age, BRANDWEEK, etc. accounts are listed by "billings" or how much clients spend on media each year…or how much YOU spent with them. When an agency takes on a client, they usually handle creative, media placement, consumer research, etc. For doing so, they mark everything up, especially the media placement—usually by about 7%- 17.5% give or take. Why 17.5%? I dunno. Maybe it’s the most agencies think they can get away with before anyone asks questions. In the old days, at my former agency, we marked up ALL “costs” 15% and then we applied an additional mark-up of 17.65% on top of that. That was then however, this is now and the “Ad” world is very, very  different today!

There are a couple different ways agencies get compensated for their “efforts”. These are:

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read the rest of this rant here