Michael Farmer: The Opportunity of the Crisis for Advertising Agencies

Since the Covid-19 entered the global scene, a new reality is transforming many industries, and Advertising is no exception. For this reason, COR talked to Michael Farmer, renowned Advertising Business Consultant, who emphasized the great opportunity to wisely use this time of crisis is to measure the Scope Of Work, and boost dialogue with clients in order to achieve better results in a win-win scenario where fees are being re-negotiated, and agencies to charge the work what is really worth.

For the author of Madison Av. Manslaughter we are facing an already critical reality: “the industry has been in crisis for 50 years. Covid-19 is just pouring gasoline on an already burning building. In this context, no one is quite sure what to do, but “everyone seems to be focusing today on cost reduction as the only strategy,” Farmer questions. But the reality is that already in the last 15 years, agencies have considerably reduced their size, staying with small teams, to a point where the number of people is insufficient to do the increasing workloads.

The truth is that, today, advertising, like many other industries, is facing the uncertainty of the post-crisis, for which Michael Farmer considers that it will take “very intelligent people to face a market that is already beginning to behave in very different ways”. 


The Reinvention of the Agency

The WPP, Omnicom, Publicis and IPG consultancy started working in this area in 1992, when employees were paid through commissions. Over the years, clients began to globalize and gave way to labor-based rates. In 2005, digital media became more important, followed by social media. The problem for the specialist is that fees and agency staff are not negotiated around workload. 

In many cases, agencies have been so desperate to keep their income that they simply became passive and were willing to do whatever the client asked. That’s why he believes that “this crisis should be used to get agencies to re-engage with clients on the quality of the scope of work, and on the amount of work that that scope represents, so that fees and resources can be properly allocated.”


 The Agency Mentality

The former CEO of Bain, UK, Germany and France says that “this is a time when the senior executive of an agency needs to re-familiarise himself with the work that has been done for each client, because it is not just about reducing costs or finding new clients, but about understanding how the agency makes money”.  Along these lines, Farmer says that if he were a CEO in an agency, he would be thinking about how to keep his most senior team.

For Farmer, the way an agency thinks should integrate two concepts. On the one hand, the business mentality, where measurements, metrics and workload of all staff are considered. And on the other hand, a very strong motivation to start getting price premiums based on superior services that lead to positive results for clients.


Big vs. Small Agencies

With respect to agencies that do not operate globally, Farmer believes that today they have certain advantages over larger agencies, as the latter are under pressure to meet the campaign budget and generate a large amount of revenue. A smaller agency can develop a much more intimate relationship with clients, and that can generate positive results.


Generating Bonds with the client

With regard to the agency-client relationship, Michael Farmer says that clients should not pay for ideas, but for a work package that they believe will influence their performance in the marketplace. “Unfortunately for many agencies, an idea is a positioning statement, or it’s a slogan. The problem is believing that an idea drives sales, when in fact it is the scope of the work”.

In order not to be understood as a commodity, Farmer suggests not to sell a creative project or its execution, but to work together to offer better results for the brand in its market.

The greatest risk to agencies is that they are used as intermediaries. So, what should be done is not to separate the ideas from the execution, that the ideas are so good that they boost the sales of the brand. The spirit of every agency should be something like this: “Our mission is not to do creative work, nor to execute for you, but to work in partnership with you to deliver better results for your brand.

That’s right, as after a work of understanding together, Michael suggested to us what for him is the key to success in this new model of work. He also insisted that the ideal scenario does not require a higher turnover, but a scope of work where the agency can value its work not as a commodity but as an essential.


You can see the entire video-podcast here:

Recent Posts

Leave a Comment

16 − 3 =