What you need to know:

• Brad Simms, founder and CEO of ‘business agency’ Gale, the fastest growing agency in ‘challenger holdco’ Stagwell’s fleet, flew in Australia to give a keynote to agency bosses yesterday. It was more gut punch than navel gazing.
• He says agency bosses are too often administrators presiding over flawed models that have a couple of years left to run, massive churn and far too narrow in scope.
• Get upstream or be “de-positioned” by management consultants he warns. We’ve heard that before, but Simms says seismic pressure coming at brands from consumers is forcing a focus on hard proof of incremental growth and business-moving strategic advisory.
• The biggest challenge for agencies is they are not aligned for solving the new business pressure coming at their clients over tougher consumer demands for better customer experience – and it's not just about marketing technology. It's the new frontier for brand and business differentiation and competitiveness.    
• He says agencies need to hire 30 year-old consultants that have been “hanging with CEOs, defending huge business transformations” after seven years in market rather than rely on agency middle-rankers to move the needle. “They're in a completely different stratosphere of conversations in organisations.” After more than doubling revenue last year, perhaps Gale can afford to take that approach.
• Meanwhile, he agrees CMOs are also guilty of losing broader skills and becoming too narrow and tactical rather than strategic. Why else would industry be talking about bridging the gap between senior marketing and senior management?
• Simms has built packaged models of services – CRM, loyalty program management, influencer and creator bundles – to complement media and says they are driving higher profitability, though selling them to procurement teams remains a work in progress.
• He’s also built an MMM-like ‘constraint optimisation tool’ that delivers results in weeks, not months, or years.
• While industry – and clients – have been talking about broken models for years, most big brands don’t have appetite for disruption. Beyond the very biggest brands, Simms sees it coming within 30 months. Between now and then, he says it’s “incrementality” or bust.

The agency model has been broken for at least 15 years, spawning endless industry navel gazing. Brad Simms flew in from the US this week to deliver some more of that at Ashton Media’s Agency Leaders Symposium, and didn't hold back. He told the audience agencies are too often “poorly run”, overseen by administrators instead of leaders, are lacking in upstream business strategic nous and have commoditised themselves by going too narrow while being wedded to old school head hours billing models in an industry where “a quarter of your humans are walking out the door every year”. He gave the traditional agency model three years max before the game’s up. Move up the food chain, diversify, advise, or it will lose any cache it has left. Quite the inspirational keynote.

But Simms and Gale appear to be walking the talk – or at least trying. The agency, which Simms founded in 2014, is the fastest growing in the Stagwell stable (the 'challenger holdco' which houses the likes of 72andSunny and Anomaly with circa 13,000 employees and revenue of circa $2.7bn in 2022) with revenue last year powering 120 per cent and headcount now at 800 globally. The firm is increasingly moving away from the "flawed" head hours model by productising services – initially across AI, CRM, loyalty and creator/influencers – packaging bundles which Simms claims have lifted profitability and helped the firm diversify into more integrated business services.

According to Simms, broader and upstream is where the market is headed. He thinks it has to, because brands are about to face unprecedented customer pressure that in turn may finally kill off legacy service models. It's this coming wave of higher expectations on business from consumers on how companies interact and service them which is spilling to agencies. More is needed of them, says Simms. Right now, marketers and agencies, he suggests, are thinking too small, getting caught in the weeds and missing the bigger picture.

“I have a lot of appreciation for the marketing effectiveness conversation. But from my perspective, that's a tier two conversation – whether your ad has this many stars or whether there was wear in or wear out, or whether we should have 60:40 ... It's all great conversation. But for me, that's like the second level conversation that as an agency competing against other agencies, it's easy for me to deposition it, because when you're having that conversation, ultimately you become an advertising agency.  You've given up the ground on a marketing agency, and a marketing agency needs to be a business adviser – because the ultimate growth engine for 90% of our clients is the marketing department,” says Simms. “Agencies have given up that ground and become basically advertising agencies – and advertising is one part of marketing.”

Over the last 15-20 years, the comms holding companies have “basically commoditised the industry ourselves, and then we feel better about it by talking about marketing effectiveness at the lowest end of commoditisation”, Simms suggests.

“I am a big advocate of media mix models [MMM] versus multi-touch attribution and the issues with last touch attribution … I'll jam with you all day on that. But frankly, none of that matters. … The only thing that matters when I sit with CEOs and CFOs are the words “incremental value”.

Advisory notice

For agencies, there’s a simple test to understand whether they have a long-term future. Simms told Mi3 he put it to the Agency Leaders audience this way: “If your client has one more dollar to invest, be honest with yourself, would they call you and ask you your advice on where to put that? If the answer is no, because they know your answer is going to be put it into media because I'm the media agency, or put it into CRM because I'm the CRM [partner], then you fail the adviser test. And frankly, you're a commodity,” he said.

“So use that test to expand your offerings. You don’t have to be fully integrated, but at least integrated more so that you can field that question for your clients. That's a litmus test for me,” said Simms.

“If you really understand where growth is coming from, then you really understand where that dollar needs to go. And if you are actually advising across multiple channels, then your answer doesn't feel like it's conflicted.”

The problem is, too few agencies really know where growth is coming from (Simms says marketers can be equally guilty) and, especially if constrained by the hard business data brands are willing to share, are stuck tinkering at the edges with models that need a total overhaul. Buying media, he says, is a case in point – but rethinking that model led to Gale to more easily sell more diverse templated services.

Buy the bundle, not the hours

“We started buying media four years ago. And the thing that we discovered when we started buying media was that the commission model is completely broken. I didn't even know what media was,” says Simms.

“I literally was like what's an effective commission? What do you mean you charge commission? That is completely whack. So when we realised how messed up that model was, that triggered us to say, Okay, we're going to do the FTE media model. And then we thought do we even want to do FTE media model, or are there ways in which we could do a package offering?” says Simms.

“It’s not a package… But we have tranches of media that are basically FTE, so if you're $40 to $60 million [in media spend], it's this fee, which includes this many bodies, and no matter where you are in $40m to $60m, it's that [rate]. If you had a [spend of] $60m to $80m, it's that [a different rate],” says Simms. “That is not the definition of what we use right now. But that started us thinking that we could sell blocks of things for outcomes and customise around the outside. And so about four years ago, we started down this path.”

Those template “packages of value” start to “break the people-to-revenue headcount [model]” says Simms. They include a CRM package, a package to operate a brand’s loyalty program, “we also have an influencer and a creator [bundle] which we charge by the quarter in which you get an influencer manager, you get a business manager you get a creative person and you get a boosted media person – it’s a package,” says Simms.

“Now, clients don't just buy the package. You need to put account services and strategy and sometimes it's two packages … but …we've created this hybrid approach where [we can say] ‘we know this is your problem, or this is your opportunity – we're going to get after it’,” adds Simms.

“They are going to evolve – because it’s almost never that two clients’ growth agendas are the same – and you can’t create a cookie cutter package … You need to create the chassis and put stuff around the outside.

“It’s not perfect. It is still painful sometimes and procurement conversations are still problematic, but it is getting towards better than ‘I'm going to give you a person for $100 an hour’, which frankly is a terrible model.”

Going in above the CMO?

Given all the talk of going upstream, how many of Gale’s client entry points are top level?

“If you look at two of our largest clients, like our milk client [MilkPep], which is the milk industry in in the US, it's the CEO. If you look at something like a Hard Rock, Jeff Hook is the COO. So I would say it's varied. It's not exclusively the CMO, but I would say 60 to 65 per cent of our revenue comes through a CMO.

In our very largest media account, we're often presenting to the CEO and the CFO. We're not funneling that through the CMO … because we feel it's our responsibility to enable the success of the CMO and that has to be outside of just marketing because there are more executives you need you need to bridge that gap.”

How many clients are prepared to share broader business intelligence data that allows a holistic view versus just marketing and advertising?

“I would love to say all of our clients, because that would be a very definitive statement. The reality is, is not all of our clients, but I would say it's probably about 75 per cent.”

The reverse chemistry test

Simms has a reverse litmus test for marketers whenever the firm is asked to pitch for business.

“What I say to the CMO when I first meet with them is ‘tell me about the three to five objectives that the CEO is focused on for this year’. If they can't answer off the top of their head, that's not a good fit. Then I say ‘tell me what you're doing to map to these three to five objectives for the CEO’. If they stumbled through that, right away I know that’s not a great client for Gale,” says Simms.

“For me that’s the reverse chemistry check: is that CMO dialled-in to the fact that marketing is the lever for growth in most businesses? Marketing drives growth, that's its job. If you don't know how the CEO is defining growth, and you're not super crystal clear every morning on what you're doing, how it's connected to what the CEO is defining as growth… Man…”

Leadership vacuum, consultant call

Agency leaders, says Simms, too often lack leadership, which is what he yesterday told the Agency Leaders Symposium. “I basically called out the CEOs and said ‘If you're a CEO of an agency, and you don't feel like you can sit down with the CEO of your largest client and defend your work at a business level, then frankly, you're not a CEO of an agency. You’re basically an administrator, like, what do you do?’”

Agency leaders must also “realise you have a problem”, says Simms, and start hiring people who can help solve it.

“There's a tonne of great consultants out there that I know would love to work in marketing. You have to commit to go out and bring them into your organisation, figure out how to use them, figure out how to empower them and figure out how to change your narrative,” he suggests.

“The talent exists. You can go to any one of the consultancies and grab someone that's been there for six or seven years, hanging with CEOs. They're not six or seven years in agency time, they're six or seven years in consulting time. They're in a completely different stratosphere of conversations in organisations. When you’ve spent six or seven years at a Bain … the acceleration of capabilities and growth in the consultancy space is epically different.”

While media agencies in particular tend to hire in entry-level juniors and grads to fill holes left by persistently high churn rates, Simms implies that’s likely to exacerbate problems.

“I don't want to be ageist but I'm hiring the 30-year-old that's been at a consultancy for six or seven years. Those folks are hanging with CEOs and defending super complicated business transformations already. You need to check your ego and bring some of those folks in and let them do what they do as opposed to [thinking], ‘but wait, how will they fit into my title structure?’ You need to rethink that.”

Myopic marketers need help

Marketers, agrees Simms, can be as narrow and myopic as some of their agency counterparts.

“It's a swirling black hole that's feeding off each other,” he suggests. “When people talk about turnover of CMOs, or they talk about bridging the gap between CMOs and CFOs and CEOs, they are basically just talking about marketers that have become very tactical and not strategic.”

That is precisely where Simms sees the opportunity for agencies seeking to withstand his prophecy of business model doom.

“It's a little bit of our job as the agency when the CMO is not there [strategically] to help them get there. That's our job, to nudge them there to bring them to that conversation … and that comes back to the advisory part.”

And if agencies don’t step up, he warns, the management consultants are waiting in the wings – and then the game’s over anyway.

“Who at an agency wants McKinsey to come in to basically start working with your CMO? That’s death. As an agency when that happens, you are done. You have basically been de-positioned by the consultancy that the CMO brought in, because they were under the pressure from the board asking whether every dollar us driving incremental value and you as an agency can't answer it. So they bring in Accenture and then you're done – and that happens more frequently than folks want to talk about,” says Simms.

Which is also why Simms thinks agencies and marketers need to fully focus on proving demonstrable growth.

Incrementality or bust

“Incrementality is the Holy Grail” when it comes to proving growth, per Simms. I.e. what did that marketing investment do above what would have happened anyway. The problem is, it’s really hard to prove incrementality within integrated comms.

“You have to have a very clear holdout group. You have to have a testing strategy. It has to be statistically significant, because ultimately, as a CEO and CFO, and I've talked to enough of them to know, what's at the back of their head is ‘if I didn't do anything would I get these results anyway?’ That is what they are always really wondering: ‘if I just cut this budget by 40 per cent, does it really matter?’ They might not articulate it, but we all know they're thinking it.”

Gale’s answer is an approach it calls a ‘constrained optimisation tool’.  Simms admits the name could do with some branding, but in essence, he says it’s a faster running market mix model (MMM). Even the fastest legacy tools, he says, are way too slow, while multitouch attribution models have become “impossible” in a world dominated by walled gardens.

“We can't wait like a year for an MMM. I know there are a lot of clients that wait a year plus two months for their MMM and they're like ‘what the fuck am I supposed to do with that?’ And there's a tonne of clients that still do that. A quarterly or a six month MMM is better. But a lot of our clients don't have that time. And so the constrained optimisation tool tries to bridge that gap a little bit … It basically takes a little bit of econometric thinking, a little bit of the creative and the audience thinking and tries to bring it into something in which we can optimise on every two to three weeks.

“We make some extrapolations around frequency and we make some probabilistic determinations on audience reach – you can't make them deterministically because of the world gardens – and we’re not yet perfect,” says Simms. “But it’s better than anything else out there. It gives a tool that operates and optimises on … effectiveness of media spend or creative or influencer or social or whatever.”

Crucially, says Simms, the constraint optimisation tool operates at a “marketing level, not just a media level. We are looking at CRM journeys, we are pulling data from Salesforce connectors, we are looking at pricing and discounting … that’s how you start to crack incrementality.”

Great. Why not call it an ‘incrementality cracking tool’ and solve the aforementioned need for some branding on the name?

“The reason we call it a constraint optimisation tool is because we find more often than not, our clients have some constraint in their business which is greater than their budget. It could be appointments, it could be inventory, there is some constraint that needs to be modelled,” says Simms.

“If you're a digital bank, for example, account opens are unconstrained because you can open as many as you want. But more often than not, we find that the clients we work with have some constraints that you need to model against if you’re measuring marketing’s impact on the business.”

Three-year countdown?

Despite years of talk about broken agency models and marketers whinging that their agencies are not delivering genuine growth, few of Australia’s big brands have done much about it, bar some in-housing and bespoke models. Many prefer size, scale and safety.

Simms, however, is convinced that’s starting to change.

“In the US there’s a tonne of organisations where it hasn’t happened either. But what I would say is the game is coming to this model. We could jam for hours about AI and increased customer expectations. All of these structural changes are starting to bring clients slowly to this integrated advisory model. It's not going to happen overnight. But I think in the next 30 months, we are going to see a radical transformation of what customer experience what customers want and how brands have to compete. And as that happens, brands are going to want that advisor in their CMO stable of partners,” Simms suggests.

“I think we're about to see a transformation in the next 30 months unlike a transformation we've seen, frankly for the last 15 to 20 years when it comes to customer and customer expectations. And I think that pressure is going to drive more and more brands – not all, it's never going to be a P&G or a Unilever, they're never going to get there – but underneath that top 10 I'm seeing more and more brands come the way of less partners more strategic advisors,” says Simms. “We’ve just got to be ready for them when they get there.”