Marketing right now is anything but normal, and it’s likely that pre-COVID normal will never be normal again. This may also be true for how brands engage with their agencies.
In some ways, marketing departments can feel the pain of their agency partners, and vice versa. When it came to initial COVID-19 related budget cuts, both marketing and agencies wore metaphoric targets on their backs. A Gartner poll of over 300 financial leaders published in early April asked which SG&A functions would likely have their budget cut by more than 10%, and Marketing was the top function identified. By a lot. Similarly, one of the top ways that marketing, sales and communications leaders are defending core operations is by cutting back on their use of external marketing agencies (see “COVID-19 Bulletin: Executive Pulse, 3 April 2020”).
The pandemic has not affected all agencies the same way, however. A late March pole by the Agency Management Institute found that while media planning and buying agencies were most likely to report that they were very negatively impacted by coronavirus or “near total disaster”, web design and development agencies were not nearly as impacted (see https://www.orbitmedia.com/blog/coronavirus-agency-impact/). This is not surprising, as the current state of uncertainty has driven many marketing leaders to reallocate budgets from shorter-term campaign spend to longer-term “digital infrastructure” spend.
In the initial shock of COVID-19 budget cuts and belt-tightening, some marketers turned to their agency contracts and force majeure clauses to end agency ties. But rather than jumping to contract negotiation, a stronger strategy is to negotiate your current agency relationships. (One thing that COVID-19 has taught us is that the loose wording of most force majeure clauses probably wouldn’t hold up in a court of law anyway.) Work with your agencies to identify where short-term strategies could be replaced with spend allocated to longer-term foundational goals. As good partners, strong agencies will be flexible here and will jump at the chance to make strategic recommendations — things like strengthening your in-house capabilities, helping you adopt more agile processes or optimizing your ecommerce capabilities.
Optimizing your agency relationships has never been more important. The current situation has reinforced the need for leadership, transparency, clarity and trust with your agency partners. Some agencies will be able to deliver; some will not. Use this time to assess and optimize relationships. Assess agency costs against Gartner’s Cost Optimization Matrix. Audit the capabilities of each agency, and identify any overlaps or gaps. Identify and remedy inefficiencies.
But leadership, transparency, clarity and trust cuts both ways in a true partnership. Have you provided the same to your agencies? Have you identified priority business objective and goals? Have you clearly articulated to each agency the role they play within the larger portfolio of agencies? Have you been transparent in your expectations of each agency and how you will be evaluating them? The more leadership you provide here, the better your agencies will be able to deliver to your goals on an ongoing basis.
For more on optimizing agency costs, see “Agency Cost Optimization the Right Way” .
For more on managing agency portfolios, see “Manage Agency Portfolios with Capabilities-Focused Scorecards” .
Gartner is here to help. Schedule an inquiry with us to discuss your specific situation.
While Gartner research may touch on legal issues, we do not provide legal advice, and our research or guidance should not be construed or used as a specific guide to action. We encourage you to consult with your legal counsel before applying the guidance and recommendations contained in our research.