Whose agents are advertising agencies?
Look truth in the eye, you will know.

More than a decade ago, before I joined this industry, I read about a guy by the name of Volney Palmer. Palmer was one of the earliest known 'advertising agents' in our trade's Mecca, the US of A.

Whose agent was Palmer? Back in the second half of the 19th Century, Palmer figured a very smart way of getting rich quickly, legally. He negotiated bulk deals with magazine owners and got them to issue him letters of exclusive representation on the promise of steady flow of non-subscription revenue. Then he went to potential advertisers, first timers mainly, and told them that advertising in magazines is sure to increase their sales several fold, and the only way they could advertise in some of the best known magazines, was through him alone and he had letters to prove his claim. He also told them that if they bought advertising space for a long period, say a year, and paid him in advance, he would sell them the space at cost. What's more, he can also help the advertisers save a lot of money by getting the magazines typeset the adverts themselves, no artist fees.

Lies. Lies. Lies.

Lie # 1: The magazines Palmer represented were by no means the 'best known'; the ABC was still decades away from being formed.
Lie # 2: He never intended selling any space at cost, he bought space as low as he could and sold them as high as the advertisers would pay and just claimed that was in fact his cost (there was no printed tariff card to disprove him anyway).
Lie # 3: He did not have the foggiest idea whether the ads would really increase sales, so he got magazines change the manufacturer's claims at the typesetting stage, and insert claims that were never meant to be there. That is how took birth one of America's largest ever categories, patent medicines, which were neither medicinal, nor had any patent. Often claiming to prevent or cure dozens of common and private ailments, patent medicines created more illnesses than they cured. But then that's another story .

Palmer and few other gents of his stature created so much havoc those days that they effectively postponed the growth of a whole segment of media owners - the newspapers, who refused to carry 'those adverts' in the fear that their literate gentry would reject any overt attempts to peddle them manufactured goods.

Jai Thompson: It was to save the whole advertising industry from being maligned and suspected forever and to bring in some semblance of credibility in the agents that a fellow called J Walter Thompson championed the system of Open Contract, which later came to be known as the 15 per cent system. Thomson's idea was simple; the agency brought wholesale business to the Media, who saved on the cost of approaching many Clients, and in turn gave the agency a wholesale discount of 15 per cent - no less, no more. It was a clean and transparent system, which worked largely because all media owners and all Clients followed it. Fifteen per cent having been assured, the agencies then focused on doing what they were perhaps meant to do - try and make each ad work harder and smarter than the previous and then the competitor's. This was when interesting concepts like USP was born.

Every new concept has to degenerate over time, as did this one. Someone wrote that while the battle raged to grab consumer attention in the face of a really debilitating depression, under pressure to deliver continuous revenue growth (does that sound familiar?), and comfortable in a percentage remuneration system, agencies did what, in retrospect, sounds absolutely expected. Find ways of increasing the Client's spend (15 per cent of 2X is double of 15 per cent of X, if my Maths serves me right). Result: Bigger ads, more ads in every campaign, more campaigns every year and so on.

The Fallacy of Composition, which states that what is true for an individual, is not necessarily true for the group the individual belongs to, for once failed. Most advertisers believed, often on prodding by their agencies, than you got to shout louder than your competition to be able to ram home your message into your consumer's mind. So what happens when everyone tries to shout louder than the next guy? Overall noise is louder than ever, which means you have to shout even louder, which means….sshh…more 15 per cent money for everyone to share. (The eagerness to shout louder grew so fast that this guy called Ogilvy actually had to remind advertisers and agencies that the consumer was not a moron; she was their wife. Joke goes thus: When poor David was old and haggard, one of the fellas from his old agency asked him in a party what he meant by that statement - what was the difference anyway?)

What per cent is your soul? Having just crossed Thomson's century, as respectable-sounding newspapers create havoc in Client minds about whether they should pay their agency 15 per cent or 5 per cent, just by writing largely superficial stories and half truths, I am very tempted to go back to the fundamental truth of Thomson's Open Contract System.

So whose agent was the advertising agency? What do you think? Feel a little shifty? Slightly queasy? Face it pal, the 15 per cent did not come from the Client, it came from the media owner. And it kept coming for close to 8 decades. That's the truth of our life. While we kept claiming we were the Client's Agency, we kept working for the Media Owner on the sly, sometimes without realising it, mostly without admitting it. Insecure to the core, but pompous nevertheless, we refused to face the fact that the folks in the big boardrooms we make our presentations to, are actually paying our salaries.

Are agencies the only ones to be blamed for this? By no means. Advertisers accepted the commission system because it was simple, conventional and comfortable. It also made them more certain of their total payout, than other alternatives. It's a shame that even now, many advertisers are quite comfortable in the percentage system, all they are trying to do under pressure, is to cut it down so that they can save money. To me it shows a certain lack of willingness to think.

This is where it gets politically incorrect. So if you are the sensitive type, please click here to go home.

Prostitutes Vs Doctors: A professor in college told us that Advertising was the second oldest profession in the world. It took me several months in the business to understand why. Do you know why? Because the prostitutes needed someone to tell the world about their service. Is it any wonder that we in advertising sometimes behave very close to the practitioners of that oldest profession? (No offence, from now I will say sex worker)..

Have you ever wondered what most of our Clients really want us to be? Consultants, like Doctors, that's what. Funny thing is most of us know it, most of us claim to be consultants, but we still behave like the other type. Here are some of my favourite examples.

How many Doctors have you met who pitched for your 'business'?

I guess if they pitched by telling you how they have cured XYZ ailment of ABC guy, we would say okay. But how would you like it if your physician drew up two equally convincing sets of prescriptions and when you asked which one you should take said, "I like both. You can run with either!" Or "My recommendation is we should run an experiment and find out which one works. Then we will know the other one was not right"?

How many Doctors do you know who expect a percentage of your chemist's bill as their remuneration?

The reason we pay our Doctors is so that she can get us fixed at the lowest cost, not so that she can play golf with the chemist.

Imagine if the chemist suddenly decided to give a higher percentage on aspirin than on digestive? What will the Doc do?

Now think about this. How many times have we recommended to a Client to pull out money from Above the Line and put in Point of Sale or Public Relations or Direct Marketing? Rarely, where is the Open Contract on all these media?

How many Doctors do you know who have readymade prescriptions that are thrown at you the moment you walk in?

Yet, how many times have we heard of campaigns with the interchangeable logos, and scripts with interchangeable brand names? How many times have we allowed Clients to fast-track a campaign out of us in two days? How many times have we agreed to create media plans without even meeting one customer?

Try telling your physician 'C'mon Doc you can do it!' or 'I have deadline to catch, hurry up on that test, will you?' and you will see what I mean.

How many specialists do you know who will guarantee you exclusivity?

Imagine your cardiologist saying 'Sir, in the 10 days that I will take operating on you, I will not see another patient nor will I offer my counsel to any'. Will you let her even think of your heart? Hell no, I won't. I want her to be so busy looking after patients such as me, before, during and after she is on to me, that I would be reassured I am not her test case.

Ditto with lawyers and management consultants.

How come we are so eager to offer exclusivity to our Clients at the drop of a Stetson? Clients want zero-conflict. That has two aspects - confidentiality and exclusivity.

Confidentiality is a valid business expectation, which encourages Clients to share sensitive information with us.

Exclusivity is something we have created in the past as a way of holding on to something that perhaps is not rightfully ours ("Please stay with me because you are the only one I have in the category, never mind what product you are getting"). I am convinced that no Client's interest is served by withholding the agency's future source of revenue. Clients would rather have a great product than a poor but exclusive one.

How many Doctors do you know who will agree to be paid in return for advising how to raise our children, in addition to writing a prescription?

Why do some of us agree to write brand plans or develop market maps for Clients free? Or do research at our cost? Value additions, did you say? Say that again?

Time to Change the Mindset: That's what I believe. It's too dangerous to be politically correct with the guys who pay our salaries. Saying yes without meaning to may mean just postponing getting sacked. Getting under the skin of Client's Business is no longer just a fun thing to do, it's now or else. Trying to cook up 'some ideas that may work for the brand' the night before the presentation is death. What we need is solid freshness and ground breaking ideas in our thinking. The times are tough folks and our Clients are paranoid about their business, trials, volumes, shares. We cannot afford to be paranoid only about our percentage.

So what do we do? I have my counsel (free to try, a million dollars to buy).

If you are in an agency…

• Refuse to treat advertising like a commodity. It's about understanding how fellow humans process information and make decisions. That's not a commodity; it's the closest you can go to Psychiatry, sitting on a chair.
• Stand up and say that you work for the Client. Media Owners are partners in delivering a product to your Clients, not the other way around. De-link your remuneration from the Client's media spend, and link it to your intellectual capital invested.
• Recommend what you believe is right, even if that may mean a lower remuneration.
• Most Clients believe there is no such thing as a free lunch, tell them you believe in it too. Do not throw away intellect free of charge. It's your Client, not your child. Allow the Client to do his / her job.

What if you are an Advertiser? Am I going to deprive you of my counsel? Naah!!!

So here goes…

• Don't throw peanuts, you know what you get when do that. Not tigers.
• Don't give your agency the status of 'commission agents' of the media owners. That's sick.
• Treat the agency and its executives like true physicians, not a chemist. If you need aspirin, you wouldn't go to a doctor, would you? Respect the agencies view, most of them know more about advertising, like you know more about your product. Your points of view may not match, but that's okay. Most of us differ with our doctor all the time, but pop in the pills anyway.
• Do not ask for free lunches (I cannot stop thinking about the time a Client told an agency, "We don't know enough about our products and who uses it and so on. You have to came back and tell us. If you don't, we will find someone who will. What was that? A noble attempt to make a virtue out of laziness? Gimme a break!)
• Never reward an agency for making you spend a lot of money. That's a commission agent masquerading as an agency. (The folks who say 'If my Client has to waste money, I'd rather he did that through me.')
• Pay for an idea and intellectual investment, that's all your agency has got. Do not create pitches, just to get free ideas. Hate to sound moralistic, but stealing really is deceit.

There we go. I have contributed more to advertisers than to agencies. Now who is going to pay me for my time? Can I see some hands please?

On a serious note, it's time for each one of us to look Truth in the eye. If we don't, some day folks may say Advertising is the World's oldest profession. That would be a really sad day.

[Published in 2001 on agencyfaqs!]