Some clients are tightening up their conflict policies, making it increasingly challenging for ad agencies to grow their businesses. According to AdAge, when Marriott recently chose to consolidate its buying power, it created a conflict policy that moved from a typical restriction against having Hilton as a client to a list of competitors ranked by tiers. To win the business, WPP’s MEC had to resign from some rival business in Asia Pacific.1 As agencies try to find revenue growth and as marketers find it increasingly challenging to grow their businesses in the recent economic environment, the pressure to agree to more restrictive conflict policies is mounting.
One of the ways some holding company shops may deal with this is by setting up a new business entity to serve a single account. Interpublic Group, for example, is preparing to add a third media agency in addition to Initiative and Universal McCann in order to create a firewall that will enable it to take on business that it has had to turn down before. For it to win an account like General Motors, a new entity is probably required.
NetSuite’s ERP system can help advertising agencies manage this increasingly complex environment. Its financial reporting quickly facilitates the roll-up of different subsidiaries for fast month and year-end close. It also provides auditable revenue management and real-time visibility into the financial performance of the business, regardless of how many unique entities are needed to successfully navigate the tightening conflict management requirements. For senior management, dashboards and powerful reporting and analytics enable them to stay on top of key metrics like revenue, billings, and receivables. In addition to an easy roll-up across the agency, executives can assess the performance across each subsidiary. Because permissions can be set for each individual, a function, or an account team, agencies can assure their clients that information is not being improperly shared within the agency, and an audit trail will confirm it.
The addition of new entities increases business complexity in other ways too. The conflict firewall precludes the sharing of some useful information amongst employees. So, how can top agency execs assess the relative performance of these entities and ensure strong performance when managers can’t have cross-account operational discussions? By using NetSuite cloud SRP, senior agency management can assess client profitability as well as compare the profitability of similar engagements managed by separate entities. This can help identify best practices that can be shared even in an environment where client specific information is closely guarded. Plus, with NetSuite cloud SRP’s powerful project accounting software, when it’s time to decide whether to agree to a current account’s tighter conflict policy, a well-informed decision can be made. For an existing account, information on the account’s current profitability can be used to decide how much to concede to tight restrictions and whether to raise a bid or compete aggressively for the business. In a situation such as Interpublic faces, agency management can use NetSuite’s financial information to develop a pro forma analysis of the impact of a new subsidiary and the new account on total agency profitability. Reduce how conflicted you feel about these conflict policies by becoming empowered with complete visibility into your agency’s financials. Learn more at www.netsuite.com.
Ed Marshall — GM of Services Vertical, NetSuite
1 “Tightened Policies on Conflicts Box in Agencies, Clients”, Ad Age, 12/5/11