Oceans apart in business sense

Research comparing advertising agencies in the UK and US show home shops have the creative edge, but when it comes to business practices and cost-control, we should look to our American cousins

The fierce battle over Tesco’s advertising that is being fought out between US advertising agency Interpublic Group and British adman Sir Frank Lowe appears to be drawing to a close (MW last week), but this tug-of-war has thrown the spotlight on how business is won and lost, both at home in the UK and across the Atlantic.

Maconomy, a global provider of marketing business solutions, commissions research each year that lifts the lid on agency machinations in the US and the UK. The 2005/06 Agency ProfitWatch, conducted by Loudhouse, reveals key similarities but also major differences in the commercial cultures underpinning both nations’ creative output. One key difference is the reasons that lie behind calling a pitch.

In the UK, alarmingly, 44 per cent of UK businesses say a change in client contact is the main reason why clients repitch business (this figure is just 14 per cent in the US). One-to-one relationships are more critical in securing repeat business in the UK than in the US, as evidenced recently. But the US market is more subject to repitches as a result of the involvement of the procurement or management team (28 per cent), unsatisfactory account management (24 per cent) and client/agency personality clashes (18 per cent).

Yet, one similarity between how US and UK agencies work is how procurement and finance departments often act as an unwelcome “gooseberry” in the client/agency relationship, with 82 per cent of UK respondents and 75 per cent of those in the US saying they feel there is an increased influence from these departments.

Procurement and creative executives have historically been perceived as being as alike as chalk and cheese, but the influence of procurement and finance departments appears to be a trend that is here to stay. It is up to agencies to raise their professional game and create a spirit of partnership, as opposed to a “them versus us” attitude.

Another similarity is that the creative sector “over-services” client accounts by 15 per cent on average across both regions. The issue of over-servicing may never be eradicated, but UK creative shops are looking to reduce it to eight per cent and their US counterparts are aiming for nine per cent. Such targets are only realistically achievable if agencies are prepared to return to basics – without compromising the innovation and flair for which they are famed.

It is generally recognised that high production values have been a constant in the US, especially in producing programming that is successful the world over. Where the UK is concerned, it could be said that creativity is the main drive, resulting in a product that may consciously avoid mass appeal.

The research shows this approach is mirrored in the creative services sector, and begins to separate the two in terms of agency management practice. US shops use more automated processes, more online reporting tools and have a greater focus on cost control than UK ones. For instance, 58 per cent of US agencies offer “live” job reports online for client access, against 21 per cent in the UK.

Combine this with the fact only 37 per cent of UK businesses are able to capture 91 to 100 per cent of time, compared with 52 per cent in the US and it becomes clearer still that the US is leading the way in agency process efficiency. This is not to downplay UK efforts, the harsh reality is that UK agencies are generally smaller and have less cash to dedicate to the operational side of the business. However, the agency that truly makes its mark in terms of profitability must seek to show creativity and manage efficiency in equal measure.

Cost management is another key aspect of agency success that the survey examined, and it seems that in this respect too the UK has something to learn from the US. In the UK, 51 per cent of agencies place a higher priority on increasing revenues than managing costs, compared with 32 per cent of US agencies.

Although no agency can survive without a focus on revenue generation, such practices can be to the detriment of an agency’s bottom line. Chasing revenues is critical to growth, but in general business terms it should maintain parity with cost management.

There is a smaller, more dynamic pool of businesses operating in the UK and it appears that change has a greater effect on client relationships as a result of this close-knit community. So, while personal relationships hold strong sway in the UK, agencies would benefit from tightening processes to ensure that controllable factors such as budget and schedule and the inevitable scrutiny of procurement departments do not jeopardise future business.

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