Why Hire an Advertising Agency Instead of Going Direct?
One of the questions I get often is why a business owner should hire an advertising agency instead of dealing directly with the various media vendors themselves. They are referring to the website developer, the search engine marketing company, the radio station, etcetera. Business owners often claim that by “going direct”, they save money in agency fees and can stretch their advertising dollars further. While this might make sense on paper, in reality, there are significant inefficiencies and indirect costs associated with “going direct”.
Before I go into the list, however, let me explain that I have been on both sides of the advertising agency/direct seller fence. I spent several years with CBS Radio selling news and Dodgers radio advertising to local Los Angeles businesses. I have personally experienced every one of the pressures I’ve listed below. I have also argued against every one of these eleven items. (I’m sure this list may be very unpopular with my friends still in the radio advertising business.) However, I left CBS to start my own marketing agency for the specific reason of having the freedom of offering whatever marketing solutions I felt were the best fit for the customer. Despite the many ups and downs in the marketing agency business, I have slept much better at night. I know I can truly keep my customers’ best interests in mind.
In the 8 years since I have owned an agency, I have become firmly convinced that most business owners would be better off hiring an advertising agency instead of going direct. I may not be objective per se, but I have a lot of real-life experience to base this conclusion on.
Here’s the list.
1. Agencies Have More In-House Expertise
An agency employs or partners with multiple people who are specialist in various marketing mediums and techniques. This collectively gives the agency a significantly higher level of expertise than any business owner or single media rep. It is extremely rare (I’ve never personally met one) to find a media account executive or manager who fully understands the intricacies of all the various advertising methodologies. Likewise, a business owner is never going to know as much as the specialists an agency can bring in to work on their marketing plan.
2. The Time-Value Savings an Agency Provides More Than Offsets Their Fees
Business owners who go direct regularly spend significantly more time during the week on their marketing. They get bogged down in the minutia of their various marketing efforts when they don’t let an agency do the detailed work. This is time that they don’t really need to be spending. Overseeing the marketing and making sure that the plan is in line with company goals is the business owner’s responsibility. Micromanaging every detail of the marketing plan is generally NOT the best use of their time. Usually, there are more productive things the business owner can do. The loss of productivity due to marketing micromanagement plan usually costs them far more money than their agency’s fee.
3. An Advertising Agency is More Objective When Choosing Marketing Techniques
Most agencies aren’t beholden to any specific media station or marketing medium. Therefore they are more at liberty to make the best choice for the client based on the situation at hand. The opposite is true for the newspaper account exec or the radio salesperson. They are under compulsion to sell certain things in order to fulfill management’s quota for the month.
4. An Advertising Agency Can Negotiate Lower Media Rates
If an advertising agency regularly buys media, media reps are under pressure from their management to keep their business. Since an agency can choose from ALL the stations that market to the desired demographic, they are free to choose the station that gives them the best deal. Competition between stations means lower advertising rates. As a result, agencies often pay less direct retail clients. There are some exceptions to this, but as a general rule this is true. (NOTE: the retail sales reps and their managers will almost ALWAYS tell you that this is a lie… In my experience on both the station side and the agency side, it’s absolutely true.)
5. Advertising Agencies Have More Relationships at Media Outlets
This is related to number 4, but is for a different reason. Agencies generally have relationships at many media outlets that they’ve cultivated over time. They can leverage these relationships at all the various to get a better deal. It’s less about competition for your business and more about who you know. One of my biggest pleasures over the years as an agency person is being able to buy media from friends at various stations that I used to work with at CBS.
6. Agencies Are Not Under Pressure to Sell You a Specific Kind of Media
Radio, TV, Print and Internet Marketing reps are under pressure to sell you whether their product is good for your business or not. Once or twice a year, most media outlets have a “fire sale” where they sell specific advertising packages at discounted rates. There is tremendous pressure on the station account execs to sell as many of the packages as humanly possible. While some of these packages are actually good deals, the advertising agency is not forced to use them if they don’t make sense for the client. Again, the agency’s motive is the client’s success, not winning the sales contest.
7. Agencies Only Succeed if You Succeed
Station reps make their commissions based on the sale. While keeping a business as a customer is easier than getting a new customer, sales reps are constantly pressured to get new customers and sell new packages, no matter how many companies have already purchased from them. Most media reps are rewarded for how much NEW business they’re able to bring in. There is less incentive for a sales rep to grow their current customers. As a result, there is massive turnover in direct media clients.
The opposite is true for the advertising agency. Of course advertising agencies like to get new customers. However, advertising agencies are considered more successful when they show success in growing their current clients’ businesses. When companies keep their advertising agencies around and are happy with their performance, agencies are very happy.
8. Advertising Agencies Are Often the Same Price as Going Direct
This is due to a couple possible scenarios: 1) Agencies can often negotiate lower media rates from vendors, so that the media cost savings offsets the agency fee. 2) In some cases, the agency may not charge ANY extra fees because they are getting an agency discount of 10-15% from the media outlets. They charge the same price that the media outlet would charge the business and keep the difference. This is a win-win for both the client and the agency.
9. Agencies Are the Buffer Between the Business Owner and All the Media Sales Reps
Business owners are inundated with the constant barrage of media sales reps trying to sell them something. While I do know business owners who get a real ego kick out of this, most business owners want to be left alone to run their business. This is true even when the business owners know there may be something worthwhile to look at.
When a business owner hires an advertising agency, all those sales reps must speak with the agency instead of the business owner directly. (Media account execs hate this! I know I always did.) This takes the pressure off the business owner to listen to every pitch. This also spares the business owner the guilt of having to constantly saying ‘no’ or avoiding account exec phone calls. By referring all media sales inquiries to the advertising agency, the advertising agency is able to look at all the options and choose from the best one. Though I have seen some agencies too arrogant to look at new ideas, most agencies welcome the information because it gives them more tools to use to help their clients.
10. Advertising Agencies Can Provide Trusted Counsel to the Business Owner
Sometimes business owners need someone with marketing expertise who is not in their organization to bounce ideas off of and ask questions without the risk of getting a completely self-serving answer. It’s very difficult for station sales reps (in my opinion) to give advice that doesn’t benefit themselves. They have a manager waiting back at the office to ask them if they closed the deal. They are under significant pressure to get the sale.
On the other hand, the advertising agency is not primarily paid on the amount of advertising they sale. Rather, they are often paid a flat fee, which means that they can offer advice that is not influenced by the desire to get the sale. I cannot count the number of times business owners have asked my honest advice about major marketing decisions because they knew my answers wouldn’t be financially motivated.
11. Media Outlets and Stations are Hunters; Advertising Agencies Have More Farmers
Media sales reps are under compulsion to close new deals with new customers all the time. As I mentioned earlier, they are not always rewarded when they get repeat business from their current customers. Sometimes, once a company has been advertising for a certain amount of time, the account is taken away from the account exec who brought in the client and given to someone else. As such, the account executive is constantly expected to bring in new customers (like hunters).
Advertising agencies prefer to nurture their new clients and help their client’s companies grow. Advertising agencies become more successful and grow in reputation when they’re able to cultivate and grow their current customers (like farmers). This often results in more new customer opportunities coming their way. This is not common with station account executives.
Two Sides to Every Story
I’m sure there are plenty of other reasons why hiring an advertising agency can provide distinct advantages over going direct. Feel free to add to the list in the comments below.
That being said, I remember the days when I argued against every one of these eleven statements. In fact, I mostly believed my arguments… at least in the beginning. I’m sure there are plenty of station and print account execs who can argue these points more successfully than I ever did. I encourage any counter arguments below.
My personal opinion is that for most businesses who actively engage in advertising using radio, cable, TV, print, direct mail, search engine marketing, email marketing etc., are better off hiring an advertising agency to help them achieve their marketing goals. I guess it makes sense that I believe this passionately since I have dedicated the last 8 years of my professional life to this cause.
