Seven questions to ask before renewing an agency

Procter & Gamble cut its agency roster from 6,000 to 2,500 and said it saved $750 million. The questions behind that overhaul apply to any agency renewal.

Agency renewals often happen by default. The contract date arrives, the relationship feels fine, and the paperwork is signed.

That is a missed opportunity. A renewal is the moment when a client has the most leverage to ask what it is really paying for.

Procter & Gamble’s overhaul of its agency relationships is a well-documented example of what those questions can reveal.

What P&G did

In January 2018, P&G’s chief financial officer, Jon Moeller, described the changes on the company’s second-quarter earnings call. As Marketing Week reported, P&G had already cut the number of agencies it worked with by 60%, from 6,000 to 2,500.

The company said this had saved $750 million in agency and production costs. It planned to halve the roster again, to 1,250 agencies, and targeted a further $400 million in savings.

CNBC quoted Moeller explaining the logic: “We need the contribution of creative talent and are prepared to pay for that. We don’t need some of the other components of the cost.”

P&G said it would move to more “fixed and flow” arrangements, open up the sourcing of creative and production talent, and bring more media planning and buying in-house.

The waste P&G targeted

Moeller also described the media waste the company was trying to remove: excess frequency within and across channels, ads that were not viewable, ads served to bots and ads placed next to inappropriate content.

He said these efforts had cut waste while increasing reach by about 10%.

P&G is one of the world’s largest advertisers, so its scale is unusual. The questions behind its decisions are not.

The wider evidence on hidden costs

A UK study adds weight. In 2020, the advertisers’ body ISBA published a programmatic supply chain study carried out by PwC with the publishers’ association AOP.

It traced spend from 15 advertisers through agencies and ad technology firms to 12 publishers. On average, publishers received 51% of advertiser spend.

A further 15% of spend, about one-third of supply chain costs, could not be attributed at all. The study also found contract terms and data definitions were inconsistent across participants.

The study covered a premium part of the market. Its authors noted that it took more than a year to obtain the data.

Seven questions to ask before renewing

The following questions are our recommendations, drawn from the P&G and ISBA examples.

1. What exactly are we paying for? Ask for a breakdown of fees by service: strategy, creative, production, media planning, buying and technology. P&G’s distinction between creative talent and “other components” is a useful starting point.

2. Where does our media money go? Ask what share of media spend reaches publishers or platforms as working media, and what goes to fees, technology and intermediaries. The ISBA study shows this can be hard to answer, which is itself a finding.

3. Do we have access to the data? Confirm that contracts give you rights to log-level or impression-level data, audit rights and the ability to share data with an independent auditor.

4. Which work could be done another way? Some tasks may be better handled in-house, by specialists or through flexible arrangements. P&G’s “fixed and flow” model keeps a core retained team and adds capacity when needed.

5. What has the agency changed our mind about? A good agency challenges the client. Ask for examples from the past year where the agency’s advice changed a decision.

6. How is waste being measured? Ask how the agency tracks frequency, viewability, invalid traffic and brand safety, and what it has done about each.

7. What would a competitor offer? Even if you plan to stay, a light market check gives you a benchmark for fees and capabilities.

Keep the relationship human

Cost is only part of the picture. The best agency relationships produce work that a client could not produce alone.

P&G’s own framing made that point: it was prepared to pay for creative talent. The aim of a renewal review is not to squeeze every supplier, but to pay properly for the parts that create value and stop paying for the parts that do not.

Timing matters

Start the review at least three to six months before the renewal date. That leaves time to gather data, run a market check and negotiate without pressure.

Agree in advance who will lead the review. Include procurement and finance, but keep marketing in charge of judging quality.

Lessons from the case

The P&G example is from 2018 and reflects a very large advertiser. Smaller firms will not cut thousands of agencies or move buying in-house overnight.

The lessons still apply at any size. Know what each fee buys, insist on data access, separate the creative contribution from the commodity services, and look for waste in media delivery.

The test

If you cannot explain to your finance director what each part of your agency fee pays for, and what share of media spend reaches real audiences, you are not ready to renew.