Consolidation, in-housing, and the search for specialty agencies are among the trends identified for clients using marketing agencies. These trends also influence the needs of the clients, as they look to establish strong relationships that can drive the growth of their businesses. Lastly, data management stands out as one of the main pain points that exist in the relationship between clients and agencies.
Businesses and Marketing Agencies — Trends
Clients Will Look to Consolidate the Agencies Hired
- According to a survey that included approximately 5,000 marketing service companies and around 50,000 marketing decision-makers, consolidation is one of the most important trends.
- It has been highlighted that clients want to reduce the number of agencies used to cover their marketing needs.
- This trend started to have implications for the market in 2017 as agencies began to form teams to address all aspects of what a client might request.
- In 2015, 50% of marketers were using just one or two agencies, a percentage that reached 70% in 2019. In addition, while in 2017 only 15% of clients were planning to hire fewer agencies, 35% of respondents were planning to do the same in 2019.
- Furthermore, a survey led by the World Federation of Advertisers (WFA) showed that 60% of clients are planning on decreasing the number of agencies they work with.
- AdWeek has pointed out that the convergence of media and creative content also drives this trend towards consolidation. Examples of clients that have consolidated the agencies they work with are Suncorp and Optus.
- Mark Ritson, a former marketing professor and brand consultant says that "increasingly global clients are consolidating their requirements as competition has grown."
- Jon Cook, the CEO of VMLY&R, a global marketing agency, states that "There’s a clear collection of agencies that work together that have efficiencies and can create integration."
- A recent survey revealed that approximately 70% of advertising and marketing agencies are responding to this trend, and believe consolidating could be the answer.
Specialty Agencies Will Survive... For Now
- Consolidation could lead to the disappearance of specialty agencies, with a report establishing that there has already been a decrease in clients preferring these services.
- It was observed that while 71% of clients looked for specialty agencies in 2017, only around 50% did the same in 2019.
- However, this does not mean that specialty agencies will disappear, but it is expected that there will be changes in the way they operate.
- Specialty agencies are expected to engage in contracts with other agencies as well as perform one-time projects with certain clients.
- The survey performed by the WFA found that although 60% of clients look for consolidation, 40% are looking to increase their relationships with specialty agencies.
- Specializations can be either vertical or horizontal, and digital agencies have emerged with sub-specializations such as SEO agencies or social media agencies.
- Interestingly, the WFA survey revealed that numerous clients do not consider digital as a specialization but a competence all agencies should have.
In-House Marketing Will Continue to Compete With External Agencies
- According to the WFA survey, 56% of clients are either bringing some agency activities in-house or are planning to do it in the near future. However, only 11% are developing or planning to develop a full in-house agency.
- Conversely, 46% of agencies do not expect any changes will take place in the percentage of their clients bringing services in-house.
- This is probably caused by the fact that this has been a slow-moving trend, and clients recognize bringing all services in-house is difficult to achieve.
- Interestingly, this seems to have a larger impact on agencies that identify themselves as digital agencies. 49.8% of digital agencies that participated in a 2019 survey pointed out client in-housing as a crucial problem.
- Brands that have developed in-house teams include giants such as Unilever, which uses a mixed model of in-house and partnerships with external agencies. Another brand with an in-house advertisement team is Verizon.
- According to Cheryl Maher, who is a lead executive at the SCOUT agency "Many of our clients have discussed this as an option, but size and a lack of confidence have kept it at a ‘what-if’ level versus actionable." She added that "One of our clients did add a content department in-house, and although this did not result in lost business for SCOUT, it definitely limited future opportunities."
- Todd Silverstein, CMO at the Drum Agency comments that in-housing "typically happens soon after the agency has drastically improved performance, ironically enough, at which point the client begins to muse on whether or not they could replicate that level of success."
Clients and Marketing Agencies — Insights
High-Quality Outputs and Relevant Knowledge
- Clients want to be able to fully understand what they are getting in return for hiring each agency. High-quality outputs are pointed out as their main concern in the WFA survey.
- In the United Kingdom, it was found that 16.2% of clients believed their ad agencies were helping them grow. The total growth for which the agencies were perceived as responsible ranged from 11% to 50%. This reaches 57.7% in Brazil, showing it is a generalized belief.
- One way in which clients want to obtain information about growth and output is the use of analytics.
- Interestingly, these high-quality outputs cannot be achieved if agencies are not savvy about emerging trends. Clients report that they expect the agencies they work with to be experts on emerging trends to be able to capitalize on these.
- Despite this, it has been found that 41.4% of agencies believe creativity is what the client wants the most, which shows an important disconnect and probably, a lack of communication.
- A Nielsen report found that 79% of marketers have plans to invest more in analytics, which highlights the importance of data.
- Furthermore, in response to the need for metrics and analytics, 93% of agencies recognize providing this will be important in 2020.
- Technology is not limited to analytics only, as 47% of clients expect that adtech solutions will increase efficiency.
Clients Look for Flexibility
- According to the WFA, one of the priorities for clients when looking for a marketing agency is that they can adapt to a flexible roster. As the majority of clients are working with more than one agency, it is necessary that all can be flexible enough to work in sync.
- A McKinsey report reveals that as the process of creating becomes more interconnected, agencies need to work together to achieve the goal of the client.
- A way in which agencies have shown flexibility has been the offer of different pricing models. Therefore, 43% of agencies surveyed during a 2018 report stated that they offer a combination of pricing strategies.
- Drew McLellan, from the Agency Management Institute, has stated that "Clients seem more comfortable doling out their budget project by project" instead of getting involved in a retainer contract.
- It has been proposed that agencies can adapt to this is by offering a subscription model, which is easier to cancel than a full retainer.
- In the WFA survey, 74% of clients stated that they wanted to establish a true partnership with agencies with the goal of working on their brand.
- It has been proposed that despite increased automation across all industries, clients prefer human relationships in which a genuine desire to help their brand grow is perceived.
- These relationships can also develop when the client has an in-house team, and they are even more important in this case.
- Long-term relationships can take place between in-house and external experts, driving continued growth.
- It has been reported that 37% of clients in the United States are opting for an in-house/external mixed model when it comes to digital media, which is why they need strong relationships with their agencies to make this model a success.
- Pete Markey, the CMO at TSB Bank states that clients need agencies that are able to "get in the trenches… and roll up their sleeves and get involved and help drive a step change in performance."
Clients Pain Points — Insights
- It has been reported that data breaches are one of the reasons driving clients to choose in-house over external agencies.
- As regulations increase, one of the pain points is a concern about how agencies handle consumer data. If regulations are not followed, hefty fines could be imposed and reputation damages can be irreparable.
- The WFA survey identified that one of the aspects in which agencies do not meet the expectations of their clients is precisely the management of data.
- A lack of control and understanding of the data has been highlighted as an issue by clients, something they look to solve by different means.
- Clients want to be able to ensure compliance as well as have access to consumer insights, independently of the relationship with the agency.
- Fiona Spooner, a top executive at the Financial Times, explains that data management is "so fundamentally important to us, we try to do as much as we can ourselves, so it’s all linked to the data we have in house which we then share with our agencies."
- As it was mentioned before, clients want information about outputs and their overall return on investment (ROI). However, the majority of agencies identify showing proof of ROI as one of their biggest challenges.
- As channels continue to diversify, providing consistent ROI metrics becomes increasingly difficult, which is a concern for both clients and agencies.
- This shows the existence of an important gap between what the client wants and what the agency is capable of providing, constituting an important pain point.
- It has been proposed that a solution to this pain point could be the development of an ROI-centric service, in which the agency has a streamlined organization of the data, which can be easily provided to the client.
- One of the difficulties of providing ROI data is that metrics can vary according to each client and even each project. Therefore, good communication is necessary and goals need to be clearly established from the beginning of the project.
Trust in the Pricing Model
- Scandals about data misuse and other violations have led to an environment in which trust in brands is now in question. This has permeated the relationship between clients and agencies.
- The long-term use of retainers and fixed payments with unsatisfactorily measured results can also erode this trust, which is why performance-based agencies can develop a greater degree of trust with their clients.
- Accordingly, it has been reported that 71% of clients feel that changing the remuneration model they currently have in place with their agency would improve their relationship. However, only 28% of agencies have incorporated performance-based models.
- Performance or value-based models are not the only way to increase trust. It has been proposed that providing constant reports explaining what the agency is doing as well as its motivations and methods can also work in strengthening the trust of the client.
- Ideally, these reports would also aid in resolving the second pain point by providing information about ROI, which allows clients to measure success.