Perspective... Hard times call for open dialogue with agencies

They tend to involve the marketing director and head of procurement telling the agency that this is going to be a tough year. Budgets are being cut, and, as a supplier, the agency is going to have to reduce its price. 

It’s true that this year doesn’t have revenue drivers like the Olympics. It’s the second calendar year of a global economic crisis, and in many regional markets consumers are feeling the pinch, while adspend is being slashed by more than 30 per cent in some cases. 

Marketers, unsurprisingly, are using this uncertainty to review agency remuneration. Some are reassessing agency partnerships altogether. Each conversation - pitch- or fee-related - is inextricably linked to the current economic crisis. 

Clients will seek reduced fees this year, and that’s to be expected. They need to be doing as much or more with less. And, yes, they expect their agencies to work harder and be more effective.

But there are limits to the squeeze. The majority of agencies in the region are fairly lean, having trimmed costs and margins to deliver a competitively-priced service since the rise of the client procurement director. 

For most local offices, there is little fat to cut when recession places additional pressures on fees. The fact is, of most of the reviews we are currently seeing in Asia, not all those partnerships had run into trouble and not all of them were brought to an end. 

In many cases, clients are conducting reviews only to hand the business straight back to the incumbent. Others just want to take the temperature of the market and be seen to be active. 

While there is admittedly more scope for innovation in a pitch environment and it is often the easier route for getting better value out of an agency, it’s not always the long-term answer a brand needs. Marketers lose knowledge and intellectual property, and it can take months for a new agency to fully understand the brand’s needs. 

This probably isn’t going to be the year that agencies start to play hardball with clients. Few can afford the luxury of pushing back. Neither will it be difficult for clients to find agencies that will do anything, at any price (at a reduced quality level, of course). 

But this economic crisis should at the very least provide an open door for much needed-conversation that could lead to better conditions for agencies in Asia and their clients. 

We can expect more procurement-based reviews this year. But, it’s worth remembering that while client and agency relationships may be played out within a corporate framework, with heavyweight business objectives and large sums of money in the balance, they are still essentially human relationships.

Hewlett Packard is the latest in a series of mega advertiser to consolidate its business at a holding company - Omnicom. It’s a continuation of a trend that began when HSBC consolidated its global creative and media duties within WPP Group.

But, unlike the HSBC pitch of 2004, which highlighted a lack of cohesion within Omnicom, the HP win underlines the holding company’s strength in a region that has come to play a greater role in global reviews.

PHD’s lead in the review has surprised many, not least because of its scale and profile in Asia. But, if this performance is anything to go by, there is little doubt that Omnicom’s youngest can match the credibility of its more established rivals in Asia. 

The downturn in the economy is likely to fuel more of these pitches as clients turn to holding companies to put together agency teams or create new units to service their business as they seek out cost efficiencies. In Asia, we’ve already seen Venetian Group teamed up with WPP for a full-service offering. 

The big question now is, who will be next?