Case # 6: “GOTCHA!”
Doug Terry, one of the two account supervisors in your group, walks into your office one
fine morning and proceeds to tell you that the Marketing Director for High West Financial
Services, one of the clients in your account group, is questioning the agency’s billing
practices. Specifically, the client is questioning the hourly charge out rates for employees
working on the account under the agreed contract/services agreement.
As the Group Account Director on the High West business, you - along with the agency’s
CFO - handled the contract negotiations with High West that resulted in the approved
contract/services agreement that contains an Agency Fee Addendum. Per the contract, the
client has agreed that the agency will charge time-time of staff on the High West account
using “multiplier” of 2.50 on employee direct salaries to cover direct salaries, benefits,
overhead and mark-up of 25% (on direct employee costs). The formula for the
contractually agreed fully allocated cost charge out rate on High West is below:
Direct Salary + Benefits (20%) + Overhead (Direct Salary x 1.0) +25% (direct costs) = Employee Hourly
1800 Annual Hours
Charge Out Rate
Doug proceeds to tell you that the agency Account Supervisor (AS) on the High West
account regularly plays golf with High West’s Advertising Services Manager, and at some
point, inadvertently told her that she makes $62,000 working at the agency. And while
this all seems very innocent at the time, the client files this information away and quietly
goes to work. What could possibly go wrong?
Using the salary information provided, the Advertising Services Manager computes that if
the AS works 40 hours per week, that the AS’s time on the High West Financial account
would total 2,080 hours per year. Doing the math using the $62,000 salary information
she obtained purely through happenstance from the AS, the High West Advertising
Services Manager computes that the ASs charge out rate is $29.80/hour. The Advertising
Services Manager goes back and checks the “math” against the charge out rate of
$86.11 as outlined in the Agency Fee Addendum to the contract, and determines the
agency is overcharging High West $56.31/hour for the AS’s time on the account.
The Advertising Services Manager goes to the Marketing Director with this information,
and the Marketing Director immediately calls Doug to set up a meeting the following
morning at 9:00 a.m. and wants a “full and transparent review” of the agency’s billing
practices and charge out rates for employees on the High West account. How do you
respond?
THE BIG QUESTION
Is the Advertising Service Manager’s assertion regarding the agency’s “over charge”
correct?
THE BIG QUESTION
Is the Advertising Service Manager’s assertion regarding the agency’s “over charge”
correct?
YES _____
NO _____
The rationale behind your answer:
● Our case submissions are to be no longer than four (4) double-spaced,
typewritten pages. And please use a sans-serif font (e.g. Helvetica, Tahoma,etc.)
at a size no smaller than 10.5 points.
● Case Analysis Outline
○ Using the following outline:
■ Purpose: Statement of the problem or key issue
■ Background/Situation Analysis
■ Discussion of Alternatives
■ Recommendation/Rationale
■ Action Plan/Next Steps
■ Contingency Plan
limit your analysis to five (3) double-spaced, typewritten pages.
● Purpose: Statement of the problem or key issue
Some examples:
The purpose of this correspondence is to outline the recommended approach,
budget and next steps for implementing a 49/59/69 value menu
pricing test in paired HB and LB index markets during Q3.
The purpose of this memo is to provide the results of the Q3 49/59/69 value
menu pricing test in the paired HB and LB markets and outline the impact and
implications of the results for the upcoming FY planning and budget.
Using Q2 competitive advertising spend data, the purpose of this memo is to
provide an analysis and recommended funding levels required to match
competitive SOV in “heartland” markets.
The key to the purpose is to clearly articulate why you are providing this analysis and
what will be the outcome(s). Be succinct in your approach and use words that paint a
very clear picture of the issue at hand.
● Background/Situation Analysis
This is where you paint the picture of why there is a problem or an issue in the first
place. Again, you need to succinctly and clearly state the facts, as well as address
“why we are where we are”. The latter can be driven internally (people, product,
process, legal, financial, etc.); by a client and/or competitor; etc. In writing the situation
analysis it is imperative that you pay as much attention to the “facts” as presented in
the case as to the “facts” that either seem to be missing or are somewhat conspicuous
by their absence. Is there an underlying issue or concern that is at the heart of the
issue that has not surfaced or being considered? This is a foundational element of your
analysis, but remember, you are not writing Tolstoy here.
BE BRIEF; BE FOCUSED; DO NOT RECOUNT THE CASE; GET TO THE POINT / KEY
ISSUE(S) OF THE CASE QUICKLY.
● Discussion of Alternatives
By delineating for two or three alternatives in clear and concise declarative
sentences, you make it extremely clear for management to understand the
courses of action you have researched/developed and are available to them for
consideration. Depending on the complexity and variables associated with the
alternatives, it may be worthwhile to develop an outline of the “pros” and “cons”
so that management can easily see the risks and rewards associated for each
alternative, and the potential impact/implication each has on the business as a
result. You will need to consider whether or not this level of detail is required
literally on a case-by-case basis.
● Recommendation/Rationale
Once you have analyzed and put forth alternative solution scenarios, you are
now ready to make your recommendation. It is now time for you to step up,
stand up and to put it on the line. This is the point in the process where you
make a strong, persuasive and well-articulated argument supporting your
recommended course of action derived from the list of alternatives you have
developed. This is not the time to be wishy-washy. If you do not deliver a strong
and impassioned argument, you will not sell management on your
recommendation. Now this does not mean you can concoct any impassioned
argument and win – you need to support you recommendation with facts,
observations and anticipated outcomes.
Your recommendation should be a straightforward statement followed by bulletpointed rationale points.
● Action Plan/Next Steps
Once you have made a decision, now you have to activate the support plan.
This is the next step in your case study write-up. The key items for management
will be a clear outline of the timeframe and the funding involved in implementing
the recommendation as stated. These are crucial items for management
alignment and approval.
For example, going back to the “…match competitive SOV in the ‘heartland’
markets.” scenario from the Purpose section, the Action Plan/Next Steps
section might look something like this:
To implement the match competitive SOV levels in “heartland markets requires
the following next steps:
1.
For the “heartland” markets, authorize incremental spot TV spending of
$9.25 million and increase T&R spend from $65K to $81.7K for the balance of
the year by 6/1;
2.
Develop and approve media plan that details the incremental spend by
6/15;
3.
Develop and approve updated creative rotation in “heartland” markets for
balance of the year by 6/15;
4.
Update and finalize T&R budget for balance of year by 6/15;
5.
Upon approval of SOV match plans, activate & air by 6/30;
6.
Measure impact of SOV match plan in “heartland” markets during Q1.
In addition, given that we are doing business in the “age of accountability” you
will most likely need to put in some performance metrics and/or milestones
against which you can gage the progress, traction and success you are making.
Be realistic …be honest…be confident. And remember, nothing in this business
happens all that quickly, so set realistic expectations for implementation and
measurement.
● Contingency Plan
While you recommendation has been well thought out, based on the facts at
hand, and vetted at various management levels within the “organization”, there
are unforeseen twists and turns in the economy, competitive landscape and the
consumer. And while you cannot predict the future, you do need to have a “Plan
B” --- what you would do “if”. Your contingency plan need not be long. Just
simple statement along the lines of: if this happens (or does not happen), we will
do this. Again, you need to give management some reasonable assurance that
you have the backdoor covered.
● In Closing…
The case analysis process is designed to give you the opportunity to take a
crack at solving real world problems. And as you move forward into the world of
advertising you will find that your day-to-day activities will really be nothing
more than a series of “mini” case studies. However, the case studies in the real
world will not arrive all neat and tidy in a pdf format. Enjoy.
★ Case #1: Congratulations, You’ve Been Selected
1. Advertising Management Today
2. Managing People In An IMC Wo
★ Case #2: New Business Knows No Clock
Managing People
★ Case #3: What Am I Going to Do With This Guy?
1. Managing People
2. Performance Management
★
1.
2.
3.
Case #4: Help Me Get There From Here
Advertising Planning 1.0
Advertising Planning 2.0“
Client-Agency Relationships” (ADV 330 Reference folder)
★ Case #5: Stick To The Core or Go For More
1. •Agency P&L
2. Your general business sense & perspective – “What would you do, and why”
★ Case #6: Gotcha!
1. Agency Compensation
Note: there is a “right” and “wrong” answer for Case #6 so tie the lecture to
the fact pattern of the case
★ Case #7: Play or Stay?
1. Agency P&L
2. Agency Compensation
•Your general business sense & perspective – “What would you do, and why”
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