After reading Avi Dan’s piece What’s Behind The Trouble On Madison Avenue, I felt compelled to do more than just leave an epic comment. Avi’s post is well worth the read and makes some vital points about significant challenges in the agency world. Every agency should be paying attention to transparency, coordination, fee structures and engagement models.
Despite the genuine issues, things are certainly not all doom and gloom for agencies, especially those that are willing to take a fresh look at how and where they provide value.
Let’s consider at the most basic level at why marketers typically hire agencies:
Skill/capability/expertise – Marketers can’t have every skill they need present within their team. Even at the very largest companies, there are always requirements that are beyond the skills of existing marketing staff. Agencies are the go-to resource to provide essential, often specialized, skills.
Capacity – Even if the right skills are present, the ebb and flow of business may require more of a particular skill than the team can support. Agencies solve for both #1 and #2 in many situations, providing additional expertise and capacity.
Perspective – Marketers often look to agencies for strategic guidance in a wide number of areas seeking insights and experience from agencies who aggregate knowledge by working across a variety of clients and industries.
Geography – Marketers operating across the globe often need geo-specific feet on the ground as well as unique regional expertise and execution capabilities.
Almost anything a client may need from an agency aligns with one of these areas. No matter how much buzz surrounds the discipline (data, customer experience, digital transformation, etc.) for a client, it’s about filling a need for expertise, capacity, perspective or geography. We’ve all heard the expression about railroads failing because they forgot they weren’t in the railroad business, they were in the transportation business. There is no agency business. There is an expertise, capacity, perspective, geography business. These are the core agency services.
Agencies should get VERY clear on where they provide actual value to marketers and then consider a couple of very positive signs.
Marketers really, really need the help! The scope and span of responsibility for marketing organizations continue to swell; this includes increased ownership of technology strategy and spending, responsibility for customer experience and a swirling array of emerging channels and measurement requirements. Marketing organizations are growing, but certainly not at the pace to support the increased scope.
Marketers want the help. In our annual marketing organization survey (Gartner Marketing Organizational Design and Strategy Survey 2016: Marketing Leaders’ Ambitions Outstrip Capabilities – subscription required) 43% of marketing leaders indicate they plan to increase spending on agencies. 47% of marketing leaders, who already characterized their current organization as agency-centric, reported that they would continue at that same level of spending.
Things are far from dire on the demand side, the big issue for agencies is the delivery side.
The digital media mess is bigger than I will attempt to tackle here and involves agencies, publishers, tech vendors and a host of others. It will continue to be a problem until everyone reaches a mutually acceptable level of transparency and accountability. Marketers are increasingly unwilling to pay for agency-side inefficiencies, the promise of clean coordination across agencies within holding companies has delivered mixed results at best, and there are plenty of horror stories about counterproductive behaviors where multiple agencies are involved. The classic agency of record style engagement is going the way of the dinosaur and marketers expect speed, quality, and flexibility like never before. Agencies have a lot to work through to align with the new shape of the world.
What should agencies be doing?
Don’t be delusional about where you provide value. Marketers want complementary expertise, capacity, perspective or geography. You must have clear stories about how you support those areas better or differently than other options.
Make playing nice with others a priority and differentiator. Many clients have shared that in multi-agency scenarios the agencies that demonstrate true selflessness and contribution to do what’s best for the client ironically end up getting a larger role in the business.
Get real about the competitive landscape. Business and IT consultants, small and mid-sized agencies, technology vendors and a host of players are all in your house now. You will be bumping into new competitors and need to be prepared.
Embrace the opportunity. Despite all the challenges, new competitors and general dynamics of the marketplace, agencies are still in demand. Marketers need and want the help and are looking for trusted, capable partners.
Avi’s piece does an excellent job of painting the picture of some of the challenges agencies are facing. A little soul searching is probably in order for agencies to get in step with new realities, but for those that can adapt marketers are looking forward to working with you.