The Ad Agency Dilemma – Retail Leverage Friend or Foe?

By Vince Young

The Dilemma

Most challenger brands have very lean marketing departments. There is simply not enough manpower for marketing departments to adequately develop the roadmaps to a better tomorrow (strategic business plans, future product marketing efforts, and market/consumer insights) while simultaneously delivering the product management, marketing communications, customer initiatives, and profit demands of the here-and-now.  So what do we do? We rely heavily on our creative agency partners as extensions of our own marketing departments.

Our problems become their problems. Here in-lies a potential conflict – an ad agency is a business and its goal is to encourage its clients to spend as many marketing dollars with the agency as possible. While this is a very understandable desire, it may limit the challenger brand’s ability to use its marketing dollars to gain retail leverage as sometimes critical investments need to be made to support the retailer which may cut out the agency’s interests.

Friend or Foe?

Retailers tend to support vendors who support the retailer’s need to drive store preference and sales. Retailer-specific or co-operative marketing initiatives where the retailer may ultimately develop the key shopper marketing insights, the campaign creative and lead the media buy are often meaningful parts of the challenger brand’s marketing mix to gain retail leverage, but may limit how much the 3^rd party ad agency generates from the challenger brand client. Such activities include co-operative mass media (TV, print, on-line), in-store TV, retailer dot com and loyalty program support, new-store opening programs, and private retailer shopping events.

What Is A Challenger Brand To Do?

So how can challenger brands motivate ad agencies to support its need for retail leverage?

1. Check your agency’s “Retail Leverage” I.Q. – As part of the traditional agency capabilities pitch, have potential agencies articulate their view of how you and your retailer make money and how the agency’s capabilities can help drive mutually-beneficial thinking to grow both. Typically, the best ad agencies for challenger brands at retail are challenger agencies themselves. Don’t engage an agency based on the case studies that they present on how they have a client portfolio of mega power brands. Rather, demand real-world examples of how the agency has demonstrated an understanding of the successful approaches of challenger brands at retail. Ask how they have helped challenger brands fortify a position at retail and how they contributed to brand deployment & demand-generation. Demand an account management and creative team who is expert at retail product launches, promotional design & programming (ideally, in the same classes of trade as your own), and co-operative marketing initiatives. Lastly, ask potential agency partners to illustrate the measures that they take to keep themselves current on retailer needs and challenger brand leverage strategies (such as reading this blog).
2. Teach your ad agency about your business – not just your brand. Too often, agencies only get the download on brand strategy or the inputs of a project brief. Take the time each month to share with your agency (account management & creative) all of your key customer presentations as well as the most important internal reports that detail the state of your business.
3. Implement an Incentive-Based Agency Fee System – Any agency that claims to be expert in brand strategy, creative design and retail programming for brands in need of retail leverage should be rewarded for the successful in-market performance of the brands they support. The converse is true as well. Include stretch goals in agency retainer agreements that tie incremental agency payouts based on the brand’s performance in key retail performance measures such as market share, share of retail shelf, and share of voice (weekly retailer circular ad share). This will surely motivate the agency to think and act in a manner that maximizes their value as a partner to gain retail leverage.

What best practices have you seen or experienced where challenger brands and ad agencies have partnered successfully to generate retail leverage? I welcome comments from brand marketers, retail merchants and agency executives!