Why brands are happy to pay more for their agency partners

Going to market for a new agency partner has typically been driven by a few factors; be it consolidation, centralisation, dissatisfaction, or cost saving. Often taking the lion’s share of the marketing budget and too commonly seen as the more commoditised part of the marketing mix, media reviews, in particular, have often been triggered with a cost saving in mind.

However today, with the vast proliferation of channels, content and data, the agency remit is rapidly expanding. That is, brands are needing much more than planning and buying capability and are increasingly coming to AAR to help them find agency partners who will help shape their entire marketing ecosystem, leveraging expertise in data analytics, creative innovation, customer experience and technology integration.

Brands are recognising the value of these skillsets and are often willing to pay a premium for partners who can help them better organise and leverage their data, build robust effectiveness frameworks and drive greater impact across the full spectrum of owned, earned, and paid media.

In the last year, I’ve worked with brands from a mix of sectors, maturity and budgets, but one thing has been consistent: the need for their agency partners to add real value first and foremost, not savings. This shift has been reflected in the last ten media reviews supported by AAR, where 70% of them resulted in an increased agency fee (versus incumbent).

This trend of paying more for the right agency partner has also been stimulated by the increasing need to prove effectiveness, not just efficiency.

One of the most noticeable trends during the last few years of transformation, has been the move by brands to in-house certain aspects of their marketing models, largely in response to the need for greater efficiency during turbulent times.

However, as businesses adapt to the new landscape, a clear focus on effectiveness has emerged. It seems that now, more than ever, brands are poised to reap the rewards of driving efficiency and start proving impact.

Of course, this feeds into the ongoing industry debate about measuring effectiveness in
advertising - and the pitfalls of over-relying on strategies that prioritise short-term results. When an agency can demonstrate a compelling business case for long-term marketing investments, brands will have no hesitation in paying for their services.

Recent coverage from the American Marketing Association highlights that the IASB (International Accounting Standards Board) has acknowledged the need to recognise the impact - or ‘asset’ - that comes from investing in marketing. However, we know this will always require a careful balance. While there is undoubtedly a net positive impact of advertising on a brand's business performance, the inherent challenges of attribution will always mean that some level of trust is required.

While it's encouraging to see other industries waking up to the power of marketing and the results it can deliver, it's our own industry – wonderful, yet often challenged - that should, and will, lead these breakthroughs.