We All Lose in the Race to the Bottom With Agency Fees, Especially Brands

By Kristen Abramo, Managing Director at Anagram

Whether you’re watching the latest recession warnings or reading about the looming Fed’s new monetary tightening policy that could lead to a significant downturn, it’s hard to ignore that the world has slid into a global recession.

The current context is marked by budget pressures, perhaps most especially on agency fees, accented by the looming fear of emerging generative AI tools, creating pressure to reduce costs and man-hours. In fact, brands have been doing their best to squeeze agencies for some time now, demanding that they do more for less—and it’s about to hit a fever pitch. The average agency retainer and commission is at a low ebb in recent history.

This race to the bottom is hitting agencies hard, and it may hit brands even harder.

The media landscape is changing, and agencies and brands need to keep up

  1. Good agencies are strategic partners, not cost centers. And investing with their agency can lead to real savings through efficiencies in media and operations.
  2. Media today is in constant flux. The way media is monetized is changing as we know it, almost in real time. The lines between earned, owned, and paid media are blurring, as are the lines between journalist, editor, analyst, and creative, especially with the spread of the Gen AI tool. Paywalls are on the rise, while channels such as email, YouTube, and LinkedIn are outperforming many trades on organic distribution.
  3. The diversity of channels and data-powered insights is overwhelming. Ad-supported streaming, seller-defined audiences, dynamic creative optimization and an increasingly fractured and complex omnichannel landscape are just some of the everyday decisions brands have to negotiate. Meanwhile, cookies and mobile ad ids are giving way to a diverse range of data and contextual solutions for targeting.

The friction caused by operational silos is becoming untenable and everyone needs partners to help them interoperate across what portends to be even further fragmentation—not only just of supply, but of currencies and measurement methodologies. It’s a complicated landscape and brands need a guide.

Good agencies understand all of this and can help navigate what works and why.

Admittedly as agencies we’ve exacerbated the race to the bottom and are partly responsible. We built a business model that made it okay to participate in a new business pitch uncompensated and invest thousands of dollars to compete for a piece of business. But that’s not sustainable, not in the hyper-competitive future of high speed and scar resources

Agencies have a vested interest in helping their partners navigate this newfound complexity; and are now presented with the opportunity of uniting in new partnership dynamics to drive improved results. Today’s media and advertising fragmentation make data, technology and services more essential than ever before, and by leveraging the industry’s collective data-driven expertise, alongside respect and commitment, agencies will usher in a new chapter of agency-brand partnerships.

It’s time to get back to that, before we all lose (brands especially) in the race to the bottom.

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