An agency offering its services for free – madness or genius?

Free ideas from ad agenciesLast week, an ad agency in the Netherlands revealed a peculiar idea to drum up new business. It offered its services for free.

Well, not quite free. A “pay what you want” special offer for a limited period of 40 days.

Although it sounds risky, the results for the agency named Buutvrij for Life were impressive. The agency picked up 152 new projects for clients including Red Bull, Oxfam and the Belgian Olympic speed skating team, no less. It grew its business by 70 per cent when “other agencies were going out of business”. It also reckons it earned thousands of dollars worth of free PR.

But would this approach work in Asia? Mumbrella asked three pitch doctors for their views.

Here’s the case study video:

Shufen GohShufen Goh, principal, R3

It’s certainly a clever marketing idea, and if those numbers are real, 152 new projects in 40 days is impressive, and 300K free publicity makes it sound compelling enough. I hope the agency is already anticipating any negative backlash, as the free negative publicity may cost even more when they struggle to deliver on it.

Asian marketers still have a strong mindset of negotiating agency costs as if it’s a sport, so I believe the proposition of ‘pay what you want” will seem very appealing. I can see it working for a large segment of small spending clients who do not see agencies as valuable strategic partners. Likewise for agencies who have cracked a transactional business model, this saves the hassle of negotiation.

Putting a value on your agencies’ contribution to your business is a  larger and more strategic conversation than a lot of big advertisers are re-evaluating. Does output based remuneration model (ratecards based on output, labour-based fee) inherently incentivise agencies to be less efficient (more hours) and produce more materials (TV copies, prints ads, online banners..etc)?

Coke pioneered Value Based Compensation to overcome some of these challenges. In our experience across all types of remuneration models, the more accountable agencies are to their clients’ business goals, the more valuable they are to clients.

Darren WoolleyDarren Woolley, managing director, TrinityP3

The current agency remuneration model is broken. The focus on cost rather than value means that downward pressure continues on agency fees globally. But reports of a Dutch agency offering free creative ideas shows just how broken it is and worse still, how much of a con it has become.

Free ideas is aterrific publicity stunt, but the truth is many agency are making the bulk of their margin in production, rather than their fees and retainers. So it works to give it away. Because you will get the clients in and then simply make your margins on producing the ‘idea’ for them, substantiated by the reported 70 per cent agency growth.

It would be interesting to see if under an arrangement of free creative, or pay what you want, if the creative process gets as bogged down in strategy meetings, research and the like, of if the clients are more inclined to go with the agency recommendation, after all it is free?

This is a very common behavioural economics phenomena. Professor Dan Ariely had a friend offer online a widget for $5 and free delivery, a widget for $2.50 and $2.50 delivery and a free widget with $5 delivery, almost all took the last option because they perceived no risk if the widget did not perform. It is highly likely the same is at work with this offer and that perhaps more agencies should consider this so that clients will not worry and mess with the idea, after all they are not paying for it?

Richard BleasdaleRichard Bleasdale, regional managing partner, Roth Observatory International

Many of the key tenets the agency sights are really basic philosophies that any serious agency should operate by:
– Instead of starting with what’s the budget? They started with what’s the problem?
– They unleashed an explosion of creative work
– They didn’t focus on billing money, they focused on building trust

Now, this is a limited time promotional offer, rather than a long-term business strategy. It’s worked in a highly depressed and pressurised market situation, where budgets were being cut. In terms of its suitability for Asia, from a promotional/new business perspective, I would think it could travel well and work short term.

However, from a strategic business perspective – I don’t think its right for Asia. And to be honest I don’t think its necessary. Can you imagine a firm of lawyers, accountants or even one of the large consulting firms doing this?

The danger it runs obviously, is it promotes and accelerates ‘the race to the bottom’ in the industry, where the market is fixated on price and not on value.

My gut is that any agency that is not prepared to standup for the value of its creative thinking, will not in the mid to long-term become the agency it aspires to be.


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