Maurice Lévy on the remuneration model and why agencies and clients must make a stand together. By Kate Magee
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Cost-cutting was also a factor behind last summer’s “Mediapalooza”, in which $30 billion of media money from clients including Coca-Cola, Fox and Visa went up for review.
“I have never seen a war on price like the one we have seen during the Mediapalooza,” Lévy admits. “It’s just incredible. Clearly, we have reached a peak.”
Ratcheting up the pressure on agencies is the Association of National Advertisers’ investigation into media rebates and transparency issues in the US.
Lévy believes the investigation is something to be approached with caution but adds: “As far as we are concerned, we feel extremely comfortable. We don’t consider that we have any issue based on the rules that we have. We are transparent on everything including on programmatic.”
In such a cloudy climate, how can agencies avoid a race to the bottom?
One of the most damaging restraints for creative agencies is being paid by hours spent rather than value created. Lévy argues that accepting this payment system was “the big mistake of our industry” because it means agencies are not properly rewarded for their contribution. It also leads to difficult fee negotiations where clients can quibble over the number of hours they need and how much agency employees are paid.
“It’s the wrong approach because you are considering that the value of what we bring is limited to the number of hours that we spend,” he points out. “The idea and the value we bring to a brand is something that cannot be measured by hours.”
Lévy argues that advertising is an industry where people’s creativity should be nurtured – people should be given the possibility to spend time in museums, cinema, theatres. Adland also needs to invest in the development of younger talent.
“On top of the hourly fees, we are asked to limit our corporate costs – for example, the cost of head office. We are doing a lot,” he insists. “The advertisers are doing a disservice to our industry. They are not helping us to help them in the future.
“It’s a very wrong approach. I was always against it but I had to follow the leaders – I have no choice. It’s one of my biggest frustrations.”
Of course, charging for output rather than input is a better business model for agencies, but it is not so easy putting that into practice.
But Lévy believes a change will benefit both clients and agencies.
The first thing is to end the US investigation positively: “Then we have a clean slate and can start all over again with a relationship based on trust and confidence.”
Lévy thinks advertisers and agencies should sit down together and come to an agreement that is good for the industry as a whole – one where agencies are compensated fairly on flat fees and clients pay a licence to use an agency’s ideas. In return, clients will get the most from their “trusted partners” to help them build their brands and fuel growth.
“We need to invest in our businesses. That is fundamentally in the interest of advertisers. The way some advertisers are behaving is just a big mistake. They will suffer from the backlash of this in a few years’ time,” Lévy says. “It’s better to sit down now, revisit how we are operating and build a new type of relationship.”
Surely even Lévy’s rivals would not disagree with that.
