Before hiring an Agency Search Consultancy, it’s imperative to understand how they get paid. As the client, you have the right to know if they are receiving kick-backs or payments from agencies and if their interests are divided.
The 4A’s and ANA also emphasize the importance of transparency in their Best Practices Guidelines for Agency Search Consultants. In fact, Clarity of Agency Search Consultant Compensation Practices ranks number 2 in their top 10 recommendations stating that, “Agency search consultants should make their compensation practices clear to both marketers and agencies involved in an agency search and overtly identify how and by whom the search consultant is compensated.”
Let’s be clear: Agency Search Consultancies are for profit businesses and, just like any business, they have the right to earn an income. Some consultancies generate revenue through a mix of revenue streams, including agencies, brands and vendors.
Some financial practices of Agency Search Consultancies include getting paid a certain percentage of revenue from the winning agency over a defined period of time (potentially with additional stipulations). They might get paid by an agency on a piece of business won for a year after contracts are signed, then again if the client renews. If that initial client refers the agency new business or if goes to a new company and hires the agency again (you guessed it), they get paid.
Some charge agencies for an introductory call to be included in their “database”. Some databases have annual fees. Some get paid by agencies to “review” their creds presentation in more of a “pay to play” arrangement. Some get paid after an RFP concludes for recruiting services to help staff an agency once it has been selected. Some get paid by vendors to introduce them to an agency or client.
We’ve been told stories of consultants intentionally stacking “lions” versus “sheep”, so that the client identifies their intended winner (yikes). We’ve also been told stories of agencies only being considered for reviews if they will attend a consultant’s events, which vendors pay the consultant to attend to meet the agency leads.
These could be tales of scorned agencies, half-truths from industry gossip or exaggerated war stories from consultants and agencies themselves. Nonetheless, these conditions sound more like a mob contract than consulting services, in our opinion.
TENX4 DOES NOT DO ANY OF THIS.
For anything RFP-related, Tenx4 does not accept payment from agencies. Not a dollar. Not a penny. Nothing. Brands pay us. Period. We do this for a really (really) important reason.
Here’s why: We do not have financial ties to agencies, which allows us to make recommendations and act solely in the best interest of our clients.
Why should this matter to a Marketing Team looking to hire an Agency Search Consultant?
- Inflated Agency Fees: You are likely not receiving the best pricing or discounts, as the agency needs to account for the consultant’s fees with your partnership. AND they will likely not negotiate cost savings on your behalf, since the consultant makes more money from the agency if the agency makes more money from you.
- Divided Motives: The consultant may have ulterior motives with recommendations, shifting decision making committees towards agencies who will pay them more.
- Agency Shortlist Limitations: The consultant may only include agencies who will pay them in your agency review process, excluding agencies who might be the right partner for you.
- Service Level Impact: The agency may not be able to staff or service your account adequately, as the consultant is siphoning off revenue from already thin margins, impacting your ongoing selected partnership.
Agencies should also care about how an Agency Search Consultant is compensated. Agencies spend countless hours responding to RFPs, creating the perfect pitch deck, strategizing and designing spec work, etc. If a consultant will only include agencies in a review who pay them or if there are financial biases created, there are inherent challenges with this arrangement.
Why this should also matter to Agencies:
- Biased Practices: Agencies offering higher payments to consultants might be favored in the selection process, creating unfair bias and conflicts of interest.
- Wasted Time & Money: Participating in a review takes a considerable amount of time and money. If the consultant has more lucrative financial partnership with your competitors, you are likely wasting your time (and money) participating in the review.
- Missed Opportunities: You may miss the opportunity to work with clients who are a great fit for your organization, simply because you are unwilling to pay the consultant. The agency's opportunities should be evaluated on merit alone, not influenced by payment arrangements with consultants.
- Lost Revenue: You’re paying the consultant a portion of your revenue, taking budgets away from team compensation and other financial obligations.
Similar to our beliefs about why Marketers & Agencies should care about how their Search Consultant is compensated, the 4’s and ANA’s Guidelines go on to recommend Fair Consideration of Agencies Without Regard to the Financial Interests of a Search Consultant, stating that, “It would certainly not be as objective a process for the marketer if only agencies with a commercial relationship with the search consultant were considered for a search; the best agencies could be left out as a result. And it would be biased against an agency that does not have a commercial relationship with the consultant, which objectively may be the best potential partner for the marketer. It’s a foundational responsibility of an agency search consultant to have a strong understanding of the broad agency universe as well as the capabilities of specific agencies, whether or not the search consultant has in existing or prior commercial relationship with an agency.” (Sorry for the long quote, we just thought it all was important to share.)
As we said, Agency Search Consultancies are a business and have the right to make money. You, as the client, also have a right to know if their interests are divided. It will be impossible for them to remain unbiased, if their payment depends on your choice for partnership. This might mean that you (transparently) pay more for the Agency Search Consultant to manage your agency search in the short-run, but it will save you hugely in the long-run with unknown costs to your business.
We always say, “We don’t have a horse in the race” when it comes to which agency our client selects. We’re not clouded by any self-interest and we don’t muddy the waters with financial ties to agencies. Our intentions are pure: We help our clients find the right partner, based on what is best for you (not us).