Tuesday, February 09, 2010

A Letter To Neal Grossman, Newly Appointed Chief Compensation Officer For TBWA

First off, Neal, congratulations on your new appointment. Not only is it a new position for you, it is a new position for the industry. Which means, and I don't mean to add any extra pressure on you here, Neal, but you’ll be setting precedents with everything you do.

It’s quite a title, by the way — Chief Compensation Officer. Of course, we all knew it was only a matter of time before the industry came up with an “anticurement” officer to go head to head with marketers’ increasing utilization of procurement officers.

As I understand it, your job is to oversee fee discussions with your agency’s current and prospective clients, proving to them that what you’re charging for services and/or production is truly justified.

I know, people are probably joking with you that your job will be to somehow maintain the triple macchiato latte on set, but I think you and I both know that it’s a bit more serious than that, don’t we Neal.

I mean, what you truly have to do is somehow prove that what your agency is charging is worth what the advertiser is paying.

In other words, what you have to come up with, Neal, is a fair way for your agency to be held financially accountable.

That’s the bad news.

The good news is that you work for a company like TBWA; a company known for its creative chops.

Which means you can tie accountability into creative acumen. How so? Let’s say you propose a sixty-second commercial to one of your clients. As you sit across from their procurement officer, who is slicing and dicing the production budget like a Benihana chef, what if you offered the following suggestion?

That any profit to the production company, as well as agency fees, would be contingent on how long the commercial actually involved the viewers.

In other words, instead of cutting money out of the production up front, have a portion of the amount of money paid to the production company and agency be contingent on results. The result in this case being the amount of viewer time spent with the commercial.

The arguement that you're going to get, Neal, goes something like this. Why time spent? Does time spent lead to sales? And while your answer is that common sense seems to indicate that the more time spent with a commercial, the greater the chance of convincing someone to buy the product, that's not really the point here, Neal, is it?

The point is that the client is paying for sixty seconds to be produced. Which means that the client is actually paying for sixty seconds to be watched. If only ten seconds are watched, then the client is getting a poor ROI for production dollars spent. If all sixty seconds are watched, then the client’s ROI on production dollars spent is exceptional.

As you know, Neal, clients pay extremely well for “exceptional.”

In other words, what I'm suggesting is don't quibble with the marketer’s procurement officer over direct costs. Quibble over profit.

All this model asks TBWA to do is earn their profit before putting it in the bank.

Will clients play this way?

When I sat down with a large CPG client and explained the way it worked, they agreed to pull back their procurement people. They liked the fact that the digital platform allows them to use return path (second-by-second) data to help them underwrite the cost of commercial production.

But what they gravitated to even more, Neal, was the fact that what this truly does is it allows the viewer to become the procurement officer.

And that’s the reason why you probably won’t initiate this process, isn’t it? After all, if you eliminate the need for procurement officers, you also eliminate the need for Chief Compensation Officers.

And, the way I look at it, the last cost you probably want to elimninate is yours.

Best of luck to you, Neal.

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