Creative thinking has never been more critical. Now is the time to put a price on it

Creative thinking has never been more critical. Now is the time to put a price on it

Agencies are failing to charge for their own services. They need to stop this before it's too late.

If Covid-19 has taught business anything, it is that top-table creative and strategic thinking should be valued as highly as cash flow right now. Helping brands find the right way to show up in the pandemic is crucial and agencies of all types are bringing their A game to this challenge. 

Marketers are being forced to stop pushing products and services and switch their messaging during this crisis, and so are leaning on agencies for a whole range of creative thinking – not just brand ideas, but interpreting data, allocating budgets and staying in touch with rapid changes in consumer sentiment. 

As with many consequences of the pandemic, this altered dynamic is an acceleration of a shift that was already taking place in marketer/agency relationships. But payment models are still lagging behind. Agencies have long been attempting to escape the ancient, outdated system of getting paid for time and move towards a model that compensates them directly for ideas and intellectual property. 

This is why the rise of the management consultancies has felt so threatening to the industry – not because consultancies can think better than agencies, but because they have permission to charge for that thinking. 

Agencies’ strategic planning skills are like gold dust right now. Agencies are developing bespoke crisis workshops and guiding clients through the process of putting the outcomes into practice – for instance, using their connections and investigating options for brands to partner charitable organisations that are supporting key workers at this time. 

They are applying their thinking outside traditional communications channels, investing in research to help clients understand the rapidly evolving consumer mindset and guiding the process of adapting their tone of voice accordingly. 

But because of the existing remuneration structure, some agencies are failing to charge for their own services and they need to stop this before it’s too late. However, they can’t do it on their own. Even a collective push on the agency side is unlikely to make it happen, because for every agency that is prepared to put its head above the parapet, another will undercut it by offering to work at a reduced fee. 

Many agencies are stuck in a cycle of poor renumeration, just when their talents are at a premium. We are hearing that many agencies are forgoing revenues in the short term by recommending to their clients that the way forward isn’t traditional communications (their bread and butter) but actions that demonstrate brand purpose. 

Agencies want to do everything they can to help clients through the crisis and, too often, many end up making an investment in the spirit of partnership, hoping it will build long-term opportunity and goodwill. Those kinds of rewards are all well and good, but they won’t pay to bring back furloughed staff, keep redundancies at bay, build a long-term business model or protect the small but vital ecosystem of creative partners and specialists that agencies rely on to deliver distinctive communications for brands. 

Brands should take some responsibility for this too. They need to work with agencies to define what they value most – top-table creative and strategic thinking – and allow agencies to charge them fairly for that. There is no silver bullet when it comes to designing an outcome-based arrangement, where brands are paying for perceived value rather than cost. We have seen some progressive attempts, including an agency being paid based on footfall increases in store. It is about aligning advertiser and agencies’ interests and priorities. 

Agencies have long agonised over this issue and some have cut their margins to the point where future investment in the talent that brands look to their agencies for is almost impossible. It’s up to both agencies and brands to step up and co-operate to put an end to this crippling cycle. Creative thinking and game-changing ideas are going to be even more important on the other side of this crisis and we need to protect the means by which they are developed. 

Victoria Fox is chief executive of AAR

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