Digital Gabe
Cutting Edge Commentary On All Things Media

Reinventing The Agency Paradigm

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There’s an interesting reinvention happening between clients and their agencies which is changing the relationship dynamics all the way down to how agencies are compensated for their marketing work.  The easiest way to understand the pivot is to imagine agencies no longer charging clients a fee based on the percentage of media placed, and instead billing a flat amount for the portion of marketing work they’re doing.

The EU telco Deutsche Telekom was the first to recreate this wheel when it overhauled its agency footprint at the beginning of the year.  The image below illustrates how Deutsche compartmentalized its marketing work.  WPP, which is effectively the AOR, still “steers” the media strategy by contracting to perform the Media Strategy & Steering work on the left side.  Then Deutsche is free to contract buying and attribution work with other agencies (or straight with publishers), however they see fit – noted in the middle and right sections of the graphic.

Besides being able to control their marketing costs by using flat fee contracts, Deutsche Telekom can achieve complete transparency on who’s charging what, because they literally contract with and pay each vendor directly.  While it’s too early to know if this new paradigm will work or not, the model has already caught the attention of other brands.  Global pharma marketer GSK just put its AOR in review and seems intent on implementing the same structure.  If you work on the agency side this one’s worth keeping an eye on.

 

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