In agency-client contracts, the clause of conflict often becomes a cause of conflict. For decades now, agencies and clients have been mutually distressed about this aspect of their relationship.
For starters, let’s define what the conflict clause often is. It’s a condition that prevents the agency from working with competitors of the client entering the contract. It’s designed to avoid conflict-of-interest between two clients for the agency.
Over the years, this clause has evolved into being far more one-sided than it was originally conceived to be. This clause was born in an era where clients retained one full-service agency, for their entire business as a long-term partner. Today, it is more like a roster of 6, each performing a specific and/or specialized function. Yet, the conflict clause is applicable to all agencies on the roster.
In the hyper-fragmented marketing landscape of today, if every client needs more agencies on its roster, by corollary every agency needs more clients to continue growing. So how does one protect the clients’ interest in this, without putting a noose around the agency’s neck?
In my view, we need to isolate the two aspects a conflict clause attempts to safeguard -- ‘Confidentiality’ and ‘Exclusivity’.
Confidentiality is the very foundation of trust in a relationship (thus non-negotiable), and it’s only fair for both clients and agencies to continue demanding it from each other; whether it’s a short term assignment or a long term partnership.
Exclusivity is a flawed demand in today’s context, for a few reasons. Consider these…
Trust Deficit – when you ask your agency to be ‘exclusive’, you are showing little trust in their ability and/or intention to protect your interests. With that as the starting point of a relationship, forget exclusivity and don’t hire that agency in the first place.
Quality of Partners – if you need to maintain a healthy roster of, what is now fashionably called ‘club agencies’, you’re not really offering exclusivity of your own business to any of them. Expecting multiple partners to be loyal, when you’re allowed to cheat will impact the kind of partners you’ll end up with.
Industry Expertise – Say you are a pharma brand. How do you expect your agency to become a pharma-expert if their entire perspective, knowledge and experience about pharma comes from one company, yours?
The false premise of a buyers’ market – Exclusivity is a demand, not a need. The reason behind this demand is based on the assumption that there are more agencies than brands in the market. Unfortunately, India has more top brands than top agency brands, especially in some of the more active categories. If you want a top agency to manage your brand, exclusivity would be a problem.
Rather than spend valuable time and energy arguing over a conflict clause, here’s an approach you may find useful. Consider these scenarios…
1. If you want exclusivity from one agency, be prepared to reciprocate
2. If you’re seeking exclusivity from multiple agencies, be prepared to pay for that privilege
3. In all other cases, drop the demand for exclusivity because it may be an unviable proposition, at least for agencies of scale and caliber
Focus instead on protecting confidentiality. Here are some things to seek from your agency, exclusive or not
- An iron-clad NDA that clearly defines confidential information, and the obligations linked to it. Make it mutually binding rather than one-sided
- Discuss the need for ‘separation’ at three levels
o People – For the key personnel from the agency who work with you, define the kind of other clients they shouldn’t work on
o Location – If your business is really a category of cut-throat competition (think e-commerce), seek a separate location from where the agency will run your business
o Server – Impose restrictions on your agency to ensure server-level separation, in case they were to handle a competitor
You’ll be surprised how far your agency is willing to go to accommodate your ask, if you take this line of conversation at the beginning of a partnership. Show them you care about their business and they would more than reciprocate that spirit.
The Author is Vikas Mehta Group CMO, President, Group Marketing Services. MullenLowe Lintas Group India
The views expressed here are solely those of the author and do not in any way represent the views of the publication