Mark Ritson: We’re all killing our businesses by giving the hard work away for free

In every part of the marketing industry – from creative agencies to strategy consultants – the traditional business model was to make money on the execution while doing the most valuable bits for free. Now that model has fallen apart.

Ritson head scratch small

A lovely long lunch with a couple of advertising people remains one of the great unadulterated pleasures in life. Like cigarettes at midnight or urinating on your lawn, it is a lovely combination of illicit fun and the magic of bygone days.

So it was last week as I launched into a third cocktail and my two lunch companions bemoaned the state of modern marketing. “Yes, I do feel your pain,” I nodded as I cancelled the rest of my meetings with a drunken swipe across my iPhone. “It must be awful.”

The conversation we were rather blurrily having is one I, and perhaps you, have had before. Most good advertising people these days are obsessed with the fact that they give most of their best work away for free.

The great strength of a good advertising agency has always been the synergy of an amazing planning team who can work out what you need to say to customers and then an amazing creative team able to articulate it in 30 seconds or less. None of that made money for the agency of course. Like most marketing people, they gave away the valuable service for free and made their margins on the superficial stuff. It was when the ads were made and commissions were charged that agencies could finally see some coin.

READ MORE: Why agencies’ reluctance to talk about rebates is making marketers nervous

But times have changed. The need for great planning and creativity is as big as ever in client land, but the days of charging millions for the execution of the campaign are now long gone. Freelancers, client procurement and pesky modern technology all mean that agencies cannot make their money as they once did.

It is a similar story over at media agencies. Once upon a time they laughed at creative agencies because their model was so much more profitable. Buying media on behalf of clients meant you could make money on the commission you charged them, the tasty surcommission you received from the media owners you bought from and – if you sat on the client’s media budget for 30 days before paying out – a nice little earner in an escrow somewhere to boot.

Media agencies similarly gave away their most valuable skill – namely, media expertise and planning – and made all their money on the relatively inane task of buying it. But once again life has changed in recent years. Client procurement has squeezed those commissions and ensured no more 30-day holding periods. The recent attention on surcommissions does not bode well either.

READ MORE: Marketers must take responsibility for media buying and fix the ‘disconnect’ with agencies

And it’s exactly the same tale at the big market research agencies. At one time they worked with clients to devise ever more intricate systems for understanding consumers and measuring brand equity. They did most of that work for free and then made the money from the mundane business of recruiting a sample and getting them to complete the survey.

But the growth of independent customer panels means that all the smart clients I know are designing their own questionnaires and going straight to the panel firms to execute the research. Questionnaires have got shorter, quicker and (if I’m honest) better now that clients are going direct.

Newspapers are in a similar bind. They used to make money by literally selling paper. The whole journalism, writing and opinion stuff might have been the difficult part but papers only made money from the relatively simple printing bit. As print circulations decline, the difficult challenge of getting people to still pay for the thoughts and opinions of journalists appears entirely beyond the capabilities of most mastheads.

And so as my long lunch progressed, my agency friends interrogated me about the manner in which I managed to make money from strategy. I sensed their despair when I told them most of my consulting money comes from training – like most marketers, I do the difficult bit of designing the content for free and then make my money on the execution.

In a final act of desperation, my lunch mates asked about several of the top-tier strategy consulting firms I had worked with. How did they make money from strategy? Again I had to disappoint. These firms might charge a little for boardroom time but, alas, they too make most of their money from junior associates billing thousands of hours executing the strategy in endless supply chain rationalisations and organisational reviews.

We concluded the lunch in disgraceful shape. The only sober thing in our taxi on the way home was the thought that the most difficult stuff seems to be given away for free only for the easy work to then bring in the cash. The problem for marketers is that despite the hard stuff never being in greater demand, the easy stuff no longer pays the rent. How many long lunches are left I wonder?

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Comments
  • Alice Thwaite 10 Aug 2016 at 4:44 pm

    Irony not lost that this fantastic article is available for free on Marketing Week.

  • Sventana 11 Aug 2016 at 5:44 am

    touche, alice!

    as both an ex-agency person and ex-client, my take on the problem is that clients often think they know what they want, and are in a hurry to just get it done – so the focus and budget easily shifts to speedy execution. Another key problem is simply a lack of strategic thinking at both client and agency levels, coupled with an unwillingness to admit uncertainty around objectives. Both parties often think it’s better to charge off and get stuff done without asking whether it’s the right priority.

  • Grazina Ajana Szewczyk 11 Aug 2016 at 12:38 pm

    Creating a free report or a free course is fast and effortless now, there are so many tools available that make it possible. If you can create a product without spending a lot of time or money you can give it away free of charge. Not everyone is interested in getting new products anymore even if they’re free and high quality. The expectations rise, and the perceived value drops…

  • Michael 12 Aug 2016 at 8:59 am

    I cannot for the life of me understand why the creative industries continue to pitch for work. Perhaps it’s a lack of clear differentiation between what they offer and therefore clients feel the need to see what they’re going to get in advance of paying for it? Why give away your most valuable skills.

  • Timm 12 Aug 2016 at 9:44 am

    Michael nails it below imo. Free pitching is the root of the problem for creative businesses. It was worth doing ‘in the good old days’ which the article refers to, but no more. Clients however, have become so conditioned to the practice that they now expect it. And many agencies are so desparate for business that they continue to do it.

    No-one wins from it. Clients don’t respect, or value, creativity and agencies become resentful. Once everyone refuses to pitch for free creative agencies might regain the recognition and respect they deserve.

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