What Agencies Can Learn from Warren Buffett about Pricing their Services

“You can determine the strength of a business over time by the amount of agony they go through in raising prices.”– Warren Buffett

UnknownI’ve been hearing a lot from my clients and friends in the agency business about the erosion of their margins for years now. What Mr. Buffett alludes to as it relates to agency services is that if you’re not creating real value for your clients, and figuring out how to charge for that value, you’re never going to grow your margins. Many are wondering how we got into this mess in the first place, and how we’re ever going to get out of it.

My friend and colleague Ed Klein, who’s sat on all three sides of the table as an Advertising Director and VP Marketing at Coca-Cola; Principal at Hauser Group and 22squared; and as a search consultant has some insight to help us continue the migration away from the hours based fee structure.

Ed: “Thanks Mike. There’s an evolution in our industry that’s taking place right now. It can become a revolution if everyone gets on board and starts changing the conversation 36918c8with the client community. The good news, clients are open to and wanting the change! They didn’t get into Marketing to manage an agency’s profitability. The only reason they ask to see proposals in the form of FTE’s, blended rates, overhead and profit is that we trained them to do it that way. Think about it, what other business opens the kimono so wide that their customers can calculate not only the costs behind your operation, but right down to the salary of many employees.”

 Palma: “How do we get out of this?”

 Ed: “The big headline is pricing deliverables based on the value created. I love the
Warren Buffett quote because the best agencies in the world right now are more profitable than at any time since the days of massive commissions on media. It’s because they understand that the value they’re creating isn’t related to their time, it’s directly correlated to the value they’re creating for their clients, and no one has trouble paying for that.”

 Palma: “How should agencies go about determining the value they’re creating, and how do they price from there?”

 Ed: “The best news in the movement to what economists refer to as value based pricing is that from the outset of any engagement, you’ll be discussing your client’s goals and objectives, not your overhead and profit margin. Agency’s need to understand the value they’re creating to set a price. That conversation will lead to a deepening of their understanding of their client’s business, and their client’s belief that goals and objectives will be aligned. From there, agencies will calculate their costs, (not for client consumption), to build Pricing proposals, (not fee proposals), that protect and grow their margins. There is an element of art as well as science in pricing, as we can all understand when we think a little harder about what we pay for clothes, food, and other professional services. The strongest proposals will always come with options, so that all negotiations will be based on the pricing structure you’ve presented, not the slashing of your FTE’s, overhead, blended rate and all the other drivers of your profit margins.”

images-1As Jack Torrance said to the bartender in The Shining, “Words of wisdom, Lloyd…words of wisdom.” By the way, Ed and I will be launching a major initiative next year, disrupting the new business model and revolutionizing the agency search process, so stay tuned to mikepalma.com.


What’s Wrong with Ad Agency New Business Conferences: 4 Things

Obsolete Boondoggles in the Modern Age of Training

 It’s late in the fourth quarter and the time when  agencies invite me to visit and take a look at their new business efforts from this past year. I run a diagnostic test that examines what works and what doesn’t at small-to-midsize independent agencies. This requires some painful Q&A.

The first question I ask the agency principal is “What did you do to win new business this year?”

The first answer I usually get is, “Well, we went to NY in the Spring for a new business conference.”

Me: “How was it?”

Them: “Well, we won’t be going back.”

I’ve heard this so many times over the past 6 or 7 years that I’ve lost count. Of course, I ask why; and the reasons are invariably the same.

  1. It’s expensive.  When you add airfare, hotels, NYC restaurants to a conference imagesregistration fee you’re making a minimum investment of $5k per key employee. It might be worth it if you know it worked. But…
  2. Disseminating the content is challenging. Assuming someone took great notes, it’s still difficult to capture all the elements necessary from a live setting. The learning resides with one or two agency people. Cascading the information accurately throughout the agency is a common complaint I hear.
  3. The content is dated and similar every year. For those few agencies that do go back a second time, they pretty much get the same old playbook with a new wrinkle Unknownhere or there. Chaucer said “There is nothing new under the sun.” Boy was he right
    about New Business Conferences.
  4. The content is not effective in the modern economy. The “big takeaway” at these conferences is that your agency needs to be a category specialist. It’s a round peg/round hole approach.  It was somewhat relevant in the awful and fear-driven economy of 2008-2011. But, it’s a weak application today in the booming, modern economy. You’re paying a ton of money for content that was born in a world prior to uber, AirBnB, Amazon and Facebook.

Please make it stop. There has to be a more cost-effective, internally efficient and fresher way to impact your agency’s business development program. There has to a better method led by proven coaches that actually won new business at an ad agency like yours. There will be…and just in time for 2018. Stay tuned to mikepalma.com



How Technology & Artificial Intelligence Are Changing the Workforce

Ad Agencies in The Age of Automation

“Hey Siri, can man replace himself.”   Siri: “Ask Watson.”

“Alexa, what is the meaning of life?”  Alexa: “The meaning of life depends on the life in question.”

Unknown-4For most boomers like me, our first exposure to automation was
at a NYC-based restaurant named Horn & Hardart. I remember well how cool it felt to put a coin in a machine, open the window and pull out a slice of real New York cheesecake. Horn & Hardart called their restaurants Automats and they changed the way we ate and drank forever.


Well, a similar revolution is adrift in the business world today and it’s built upon algorithms that improve company productivity, and therefore, profitability. These automated systems are most influential on the workforce: human resources, employees, talent.

If you haven’t begun the process of automating your business, it’s probably already too late. Somebody else in your category already has. You can laugh, but taxi companies also laughed when a technology-based livery company with a goofy name took the cash and hassle out of the personal transportation industry. This isn’t some futuristic bullshit. This is real and this is now.

How does this apply to creative agencies? Let’s begin with our only commodity/inventory: people. With all the hubbub over a commitment to training & learning — how do we know what’s really working? Most agencies throw money at seminars, conferences and “summits” (Really? That’s a pompous name for a money-making boondoggle) and assume they’ve done their part. But the keys to the kingdom rely on:

  • Measuring company impact of increased investments in Learning & Development.
  • Understanding emotional drivers of the people within your company vs. job responsibilities.
  • Connecting company performance and employee performance

How do agencies do that? Well, I’m excited to introduce LiiRN, a company Unknown-2revolutionizing today’s workforce. LiiRN is the brainchild of brain child George Swisher, one of the few men I have referred to as a “partner” in my 28 years in the advertising business. George and I have worked with dozens of agencies, helping them grow and get smarter.

This Fall, LiiRN is coming to a General Assembly near you. George will be hosting free Lunch & LiiRNs in NYC, Atlanta and LA in the next few weeks to educate you on  how technology and AI  are changing the workforce. What you don’t know can kill you. This hour with George will change your life. Here is the Eventbrite. Don’t miss it.





10 Regional Agencies That Sell Things

Remember selling? It’s gotten a bad reputation in the creative community

UnknownExcuse me, but I thought the purpose of advertising was to sell things. There’s a rumor out there that “people don’t want to be sold.” Don’t believe it. People want to buy. They want to be sold. Just ask any good salesperson.

That’s why people spend so much time online researching stuff: hotels, airfares, automobiles, clothing, food, beer, booze. And that’s just the essentials, I haven’t even mentioned the special interests: sports equipment, musical instruments, cigars, Bibles…people want to buy what they need and what they want. That’s why advertising exists.

In the rush to create content that “doesn’t sell,” we’ve lost our reason for being. When I 663id_146_044_w1600look at agencies for my reviews, the first question I ask is, “What do they sell?” When I look at creative people to recruit for a job, I ask the same question. And I’ve learned not to entirely trust the case studies and the portfolios.

As children, when asked what we wanted to be when we grew up — we likely answered “astronaut,” “baseball player,” “teacher,” “nurse.” As we grew up, the answers often changed to, “lawyer” or “doctor,” etc.. NOBODY said “I want to be a salesman!” But, almost everyone winds up being one; even if you are a lawyer or a doctor.

You don’t need me to tell you BBDO or Ogilvy sell things. But, if you’re an underdog/challenger brand requiring priority attention and service — please allow me to identify 10 regional agencies that actually sell things. These are the sleepers, the needles in the haystack:

SANTY  Scottsdale, AZ  Arizona was once the place where ad people went to die. Not so anymore. These guys are change-driven and help you manage change but they never lose sight of the prize — they sell.  What they sell: Snacks, Pizza, Ice Cream

BLUE SKY AGENCY  Atlanta, GA  This 25 year-old shop prides itself on being the go-to agency for growing Southern brands. But, they are all about the sale. What they sell: Hams, Braves tickets, Hotel rooms, Natural Gas

TOMBRAS GROUP  Knoxville, TN  No longer a “sleeper,” but I could not omit them. True, they connect data and creativity for business results, but if they didn’t sell things very well, that would just be another hollow agency tagline. What they sell: Beer, Baked Beans, Health club memberships, Cake, Insurance (Did I tell you I have the utmost respect for insurance salesmen?)

&DONOVAN  Greenville, SC  This agency takes hard-core sales to an art form (and a science experiment). They combine sales content with technology to form a method they call Contology. Sounds good, but “Can you sell me this pen?” as the Wolf of Wall Street said. The answer is yes. What they sell: Tacos, Beer, Cars (Did I tell you I also respect car salesmen?)

BRIGHT RED/TBWA  Tallahassee, FL  Speaking of “sell me this pen,” these folks actually do sell pens. Hey, if you can build a 160-person agency in Tallahassee and sell it to Omnicom, you can sell anything.  What they sell: Pens, Hotel rooms, Vacations, Burgers, Socks

FIZZ  Atlanta, GA  A real wildcard, they do Word-of-Mouth marketing. This is not to be confused with idle chatter. Their conversations sell. One-of-a-kind solution. When your advertising is not working, try this and count the money. Triple-digit ROI. What they sell: Beer, Milk, Energy drinks

quench  Harrisburg, PA  Nestled (or maybe Hersheyed) in the heart of America’s “snack belt,” these guys move food and beverages by the SKU off the shelf. You want to sell packaged goods? Check out this joint. What they sell: Tunafish, Beer, Iced Tea, Vegetables

SCOUT  Atlanta, GA  Recently acquired themselves, these guys put the “human” in humanizing your brand. And they get real humans to spend with brevity. No dog whistles here. What they sell: Bread, Carpet, Shrimp, Frozen seafood

ADMIRABLE DEVIL   Washington, DC  Some startups are more compelling than others. This one really grabbed my attention. What’s in a name? Everything. What does their name mean? That’s for you to figure out; but when you do it could change your life. What they sell: Apparel, Fishing tackle, Accessories

CUSTOM NYC  The only NYC agency to make the list. Why? They are different from any other agency I know. Why? They focus on complicated technology platform offerings and simplify the messages so businesses understand the value and benefit. The result? Companies buy.  What they sell:  Technology platforms

So, sell me this pen…https://www.youtube.com/watch?v=ftFAbPnNYrg








The Conversation: Palma featured on The Perception Channel

Adman grants rare interview to one of the world’s leading tech design firms; sounds off on ad agency biz dev, headhunting & golf

It’s been a long time coming. I’ve always been a little leery of spilling the beans on my personal life. I’ve been even more reluctant to divulge trade secrets. But, I was honored to do this video feature for  Jeremy Lasky and Danny Gonzalez of PERCEPTION and The Perception Channel. They are the best in the world at what they do, and at being nice guys.




2016 Review: Agencies of the Year, MVP’s, etc.

That was the year that was

unknown-1 “Father Christmas, give us some money 
Don’t mess around with those silly toys   
We’ll beat you up if you don’t hand it over
We want your bread so don’t make us annoyed
Give all the toys to the little rich boys.”Ray Davies  

War is over…the war on Christmas, that is. We enter the era of bullies and reverse Robin Hoods that steal from the poor and give to the rich. The advertising industry should feel right at home.

9 big wins:

  1. AT&T consolidating its billion-dollar business with Omnicom
  2. Sprint goes to Droga5
  3. Grey hooks Pfizer
  4. Goodby Silverstein snags Chrysler
  5. Wieden + Kennedy adds Chobani
  6. W+K also adds Duracell
  7. Chik-fil-A fires Richards Group after 20 years; hires McCann
  8. Nationwide Insurance hits up Oglivy
  9. McDonald’s signs up with We Are Unlimited — a pop-up agency fronted by Wendy Clark

5 impact hires:  


  1. Spence Kramer, W+K alum, named CEO at JWT Atlanta
  2. The peripatetic Bobby Pearce named CCO at David & Goliath
  3. Wade Alger goes to TBWA/NY
  4. Beats by Dr. Dre hires Perry Fair as SVP/Brand
  5. Mike Lear leaves Martin Agency for Erwin-Penland

Scandal of the Year

The bombshell allegations made against JWT Global CEO, Gustavo Martinez — doubtlessly the juiciest story of the year.


Okay, you don’t need me to tell you what you already know. Sure, Wieden, Martin, Crispin, Droga and BFG9000 are hot stuff. But who made the biggest breakthroughs in 2016?

Agency of the Year (Network division): Bright Red\TBWA

curtis   The Southeast outpost of global creative powerhouse TBWA, Florida-based Bright Red killed it in 2016. New business wins included:  Cayman Islands, Krystal Burgers, Youfit Health Clubs, and Gold Toe Socks. Significant hires paid off the likes of Jason Hatfield, EVP, Director of Client Services,  Jenn Kennedy, VP, Director of Digital, Suzanne Flowers, Director of Social Media, also moving up was Andy Jorishie to EVP, Strategy Director. Curtis & Carrie Zimmerman have built a winning team and culture.

Agency of the Year (Independent division): Tombras Group

It’s a family affair in Knoxville, TN at this 60 year-old legacy shop that has completely transformed into the agency that connects data and creativity for business results. Dooley Tombras, the third generation heir leads the charge (more on him in a bit). 2016 wins include Drakes Cakes, Coca-Cola Journey, Clayton Homes and Suntex. Key hires included Nigel Carr as Chief Strategy Officer, Rusty Howard, SVP Director of Social; Al Moffatt, SVP Special Projects and Ty Thornhill, SVP Group Account Director.

MVPGerry Graf, BFG9000

The work is sick good. It’s the place every creative in America wants to work. And the Notre Dame alum is a great guy.

unknown    Rookie of the Year: Dooley Tombras, Tombras Group

Don’t let the “aw shucks” persona fool you, this kid is a killer. Miami Ad School grad via Vanderbilt undergrad, look for this guy to build the next great Southeast agency.


Ad of the Year (heavyweight division): “Got No Strings” Beats by Dr. Dre

Have you seen it? What a spot!

Campaign of the Year (middleweight division): Duluth Trading Company  Men’s Cartoons

I love this stuff. This is what great retail advertising looks like.

Worst Ad of the Year: Duluth Trading Company   Woman’s apparel

Somehow, Duluth Trading Company won the double-whammy: Best and Worst of 2016. This is what pandering to the female outdoor demo looks like.







How to Retain Top Talent: 5 Tips

Doesn’t it seem that our world has become one big talent show? Turn on the TV (painful, I know)…The Voice, Dancing With the Stars, American Idol, X Factor, You’re a Star, The Glee Project, America’s Got Talent are just a handful of wannabe-celebrity talent shows. Or just log on to Facebook for daily videos of kids and cats performing stupid tricks. We can’t escape the exhibitionist mentality so pervasive in today’s society. In a winner-take-all world, everybody seems to want their fifteen minutes of fame.


The creative advertising industry has its own version of talent shows…we call them Awards Shows. Cannes Lions, One Show Pencils, Effies and Addys have replaced the erstwhile Clios that crashed due to its inherent overindulgence of egomania. But, our industry has never been exempt from “Hey look at me, I’m a star” syndrome. This is not a criticism but a commentary. My core business is delivering talent. Like the pizza man, I am part of the food chain, a ghost in this machine and my comments reflect 27 dreadful years of experience. Every time I try to get out, they keep pulling me back in.

Creative agencies are purely the sum total of their collective talent base. Without talent, there is no point of differentiation. Without talent, there is no value proposition; just boring processes. It’s funny how clients and search consultants insist on a certain critical mass of total employees yet they only want to pay for a few. But, that’s another post. This one is about keeping the talent you have recruited intact. Recognizing top talent is relatively easy. Identifying top talent is, as well. Recruiting the talent is tricky, but do-able. Delivering talent? Tough. Maximizing top talent? Very difficult. Retaining it — the toughest challenge of all. And if you lose it, it’s wasted on YOU.

So how do you do it? Nobody asked me, but here are a few tips:

  1. Program the hire for success from the start. Most unsuccessful hires can be traced to the early days of the employee’s tenure. Do you have an onboarding process? An agency orientation? A mentor program? Everybody needs a mentor. Have you prepared your current employees for an impact hire? It amazes me when an agency hires top talent and the candidate shows up unannounced for their first day of work. Or worse, when they have to supervise folks that have no idea who they are. Too often, an introductory email is sent out weeks following the hire and there is little definition of the candidate’s role.
  2. The 100 day review. When things break down, they break down fast. It’s critical to conduct reviews early and often. Simple questions like, “how does the actual job compare to the job description?” And, “are you more excited or less excited about the opportunity than when you accepted the offer?” At 200 days, the questions become more personal and specific, “are you challenged?” “Are you still having fun?”
  3. Everybody has an opinion. On operational issues, on creative issues, on cultural issues, on social issues. When I ask an employed job seeker why they are looking to move, too often they say, “nobody cares about my opinion, I’m just a hired gun.” Or worse, if they’re asked for their opinion — it isn’t valued and they feel ignored. Seek opinions from top talent…constantly.
  4. Decisions, Decisions. Nothing pisses off top talent more than evasive partners and colleagues that make passive-aggressive decisions. Or worse, are completely indecisive. Tomorrow never comes for them. They feel they are wasting their talent trying to catch jellyfish. Be decisive in defining roles. Dictatorship is okay as long as it’s fair and benevolent.
  5. Promises, Promises. In my experience, and that’s more than 1,000 hires; it breaks down far more often on the agency side than the candidate side. It hurts me to say this, because the agencies are my client (they pay everyone); but it never helps long-term to “sell” a candidate on an opportunity. If anything, under promise and over-deliver. There’s nothing worse than investing in top talent, introducing them to a key client and losing them because the reality of the opportunity differs from the perception.