Broadcasting Telecasting (Oct-Dec 1957)

have dug into the information deeply enough to see the general tenor of the conclusions and recommendations." He said that often the top management of clients doesn't fully believe in advertising and, among other sins, doesn't hire qualified advertising personnel or give them the authority they need, gives the agency inadequate information and then second-guesses both its own advertising department and the agency. Ad managers, he said, not only are handicapped by these shortcomings of their own management but sometimes have faults of their own, including poor liaison between agency and management, demanding agency services not really needed, failing to evaluate agency services systematically, and, again, second-guessing. Among the faults of agencies he listed: failure to learn enough about the client's market and business, reluctance to explain recommendations or, on the other hand, yielding too easily to client criticism. Prof. Frey also undertook to prick some popular balloons. He branded as "fallacious"— even if sincere — contentions that the media commission system is the only practical one because a value cannot be placed on creative effort; that elimination of the 15% media commission would discourage creativity on the part of agencies and reduce their incentive to give their best efforts; that a fee basis of compensation would involve continuous bickering between agency and client, or that cost accounting adequate to show an agency's profit and loss by accounts is too expensive. His preview offered only one recommendation for media — that they review the whole question of compensation objectively — but he told newsmen the final report defi nitely would contain others, both on this and other subjects. He made clear again, however, that the final report will not recommend any particular formula for agency compensation — a matter for case-to-case determination by advertisers and their agencies individually — but will, for example, make recommendations as to how agencies can improve their services. Prof. Frey also denied that the report will or should be "the definite study" of advertising. He said: "The changes in marketing that have made this study imperative are going to continue and make a similar study imperative 10 or 15 years from now." Of mutual agency-client-media criticism turned up in the study, Prof Frey said: "In talking to us and writing to us, advertisers were critical of agencies and vice versa. Advertisers and agencies were criti the 15% media commission method is the only practical one. 2. If the 15% media commission were eliminated: a. Creativity on the part of agency personnel would be discouraged. b. The incentive of agency personnel to put forth their best efforts would be reduced. c. Advertisers would be unwilling to compensate agencies adequately for their services; advertisers would buy the lowestpriced service, disregarding quality. d. Most dire prediction of all — agencies themselves would be eliminated. e. The services now performed by agencies for media would no longer either be performed or performed as well. 3. A compensation method that is best for agencies is best for advertisers. 4. The installation and maintenance of a cost accounting system adequate to show profit and loss by accounts is too expensive to be practical. 5. A fee basis of compensation inherently involves continuous bickering and haggling between agency and client. The everyday client-agency relationships would be considerably altered. What needs to be done in the light of such conditions as these? Most needed, in our opinion, is a willingness on the part of all segments of the industry to recognize that the problems do exist and to face up to them objectively, plus a determination to use the abundance of available creative talent and ingenuity in the industry in solving them. Where the problems exist, they must be solved on an individual client-agency basis. The buck can't be passed to others in the industry, to the industry as a whole, or to outsiders. And the problems should be attacked now. Tomorrow may be too late. There is not time for complacency. Client top management must make up its mind whether it really believes in advertising or not, recognize the nature and demands of the advertising job and select an individual qualified by experience and training to fill it, give this man authority and responsibility, require that the agency account executive be a member in full standing of the company's marketing team, insist on a carefully integrated marketing program with advertising properly proportioned to the other components of the mix, require that marketing and advertising needs be carefully ascertained and the requisite services to fill them be purchased from the best qualified source, insist on a form and amount of compensation fair to both seller and the company, and support reasonable efforts to improve methods of measuring the effectiveness of advertising. Parenthetically, if advertising's effectiveness could be measured to a greater extent than is now possible, problems of working relations and compensation would shrink considerably in size. The role of the advertising manager is perhaps adequately Broadcasting implied in the foregoing comments. In general, he should see that advertising objectives are clearly denned, use them constantly as a basic measure of the worth of agency recommendations, insist that recommendations be accompanied by "reasons why" and any alternatives considered, maintain contact (along with others in the company marketing department) with all members of the agency team, restrict his demands on them solely lo services really needed by the company and best provided by the agency, and continuously endeavor to find the best method |l of agency compensation — one that is mutually satisfactory. Agencies could make a great contribution to advertising generally by refusing to service accounts whose policies stand in the way of a fully effective performance by the agencies, and by individually or jointly "selling" advertising and the agency function to businessmen. On the day-to-day operating level, our survey reveals need for better ways of measuring and improving the quality of their services. Agencies should have profit and loss statements by account. Forty per cent do not have cost accounting in this respect today. Agencies should take initiative in searching for better compensation methods, remembering that for the client who is dissatisfied with media commissions as the basic method of compensation, such arguments as "It works," "It's simple," and "It evolved naturally" have little or no weight. The vaunted current flexibility of compensation arrangements in general means little to the advertiser (or agency for that matter) who finds the flexibility too limited to meet his specific requirements. SELLING THEMSELVES SHORT Parenthetically, again, we think that too many agencies underestimate their ability to command the prices their services merit under any method of compensation and also underestimate the willingness of advertisers to pay adequately for a high quality of service. || As for media, our only recommendation at this time is that they, too, study this whole subject of compensation objectively, reviewing their policies and practices with due regard for the interests of both advertisers and agencies and with the ultimate objective in mind of making all advertising more productive. We believe that advertising is a most important activity in our economic system. We believe it has made, and is making, a great contribution to our economic welfare. We believe that advertisers, advertising agencies and media deserve great credit for this contribution of advertising. But equally we believe that complacency with the status quo is highly undesirable. Advertising faces even bigger challenges ahead. Current approaches, policies and practices may not be adequate to meet these challenges. That is why we think this taking count of stock is worth-while. We play only a relatively minor role in making it worthwhile, however. The major role must be played by you. November 4, 1957 • Page 29