Agencies Predict Revenue Growth in the Year Ahead –But Indicate Significant Challenges in Capturing It

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In our most recent study, The Trends Defining New Business, we found that the major opportunity for agencies is to make long overdue changes they’ve been aware of for several years now. 
Just under 600 agency leaders participated from a range of agencies in digital, social media, advertising, PR, and more. The answers reveal the current trends, future predictions and most significant opportunities for agencies – and there were a number of surprises along the way.

Here is a summary of the key findings.

1. Agency Growth Will Be Up in the Year Ahead, Driven Largely by Strategic Work & Social Content Creation.

The majority of agencies reported that spending will increase by 6% or more, with the top areas of growth being marketing communications strategy, social content creation and social media. These findings are supported by the industry, as many brands have taken steps in recent years to build out robust content creation resources, as content marketing continues to be a top priority.

However, almost half of agencies expect clients to “demand more work for a smaller fee.” Combine this with an equal number expecting clients to “shift from retainers to project-based work,” and clients “demanding more business impact,” and it all points to agencies needing to prove their worth and demonstrate tangible value (versus softer brand metrics alone) in moving their clients’ business in a positive direction.

This ability is expected to override growth within a particular medium or channel.

2. Agencies Report a Failing Grade on Supporting Clients With Their Need for Business Outcomes – With No Effort to Try and Improve.

Demanding more “tangible business outcomes” will continue to be a major client trend in the year ahead as reported by a majority of agencies. When clients don’t perform, they’re out, so it’s no surprise to see this pressure passed along to agencies. However, in stark contrast to this client need, few agencies report this as an area of strength.

  • Interestingly, agencies are most nervous about “clients wanting more work for a smaller fee” and seeing “more work shifting to project-based.”
  • However, agencies are not nervous about clients “demanding more tangible business outcomes.” Only a handful of agencies are worried about this particular trend with their clients – while all others appear to be focused on what they personally want (fee increases).
  • This critical oversight may continue to drive client distrust and lead to more changes in the client/agency relationship.

 

3. Is Your Agency’s Work Too Expensive or Just Not Valuable Enough?

Agencies report the top reason clients award business is based on category knowledge/expertise – but then report “being too expensive” as the reason for losing.

Clients generally correlate category knowledge/expertise with the ability to generate tangible business outcomes. This trend has been building for several years, with management consulting firms best capitalizing on it as they enter the marketing space.

Given this, it is possible the challenge actually lies within the finding that only one quarter of respondents believe their agencies understand how to “correlate work to category-specific business improvements.” The reason for losing may in fact differ from the industry perception.

  • Like the advice agencies provide clients, pricing strength directly correlates to ability to provide a meaningful benefit.
  • Based on the findings in this report, agencies may actually be losing business due to an inability to sell benefit – or at least enough benefit to be worthy of the requested fee.

 

4. Agencies Need to Elevate Their Approach to Client Servicing or Get Used to Vendor Status. As clients and agencies continue to work on their relationship, an overwhelming number of agencies report that a key obstacle towards achieving their best work will be “clients who treat them like a vendor”. Related to this finding, more than half the agencies indicate that clients “don’t provide enough information about their business goals” with an almost equal number of agencies saying clients “don’t provide enough access to senior decision makers”.

  • The combination of these findings, along with additional data in the report, suggests that clients will not provide additional business intelligence and decision-maker access if they don’t see any end benefit in doing so.
  • Agencies risk becoming a willing participant in their demotion to vendor status and the move towards more project-based work. In fact, agencies report the biggest mistake they make in servicing clients is being “too reactive” and “not leading the client”.
  • In a time that continues to be a battle over fees tied to measured value, it may be misguided for agencies to express frustrations about not getting paid enough – when they also report not living up to client expectations.

 

5. Agencies Are Still Taking a Beating from Procurement, but Report Doing Little to Proactively Address It.

Nearly half of the respondents indicate that procurement will have a “negative impact” on their revenue in the year ahead. Adding fuel to the fire, over half also indicated “no attempt to improve” their ability to effectively manage or improve procurement negotiation strategy.

  • Another factor agencies anticipate in the coming year is a change in compensation structure. Nearly three-fourths believe their compensation models will be shifting from what is in place today. Understanding how to negotiate new fees will be important in maintaining overall revenue as well as profitable margin. No small feat when procurement is involved as well.

 

This All Means a Significant Growth Opportunity for Agencies

Client marketing chiefs are being held accountable for tangible business impact like never before. As marketing now has the potential to be more effective, the pressure to do so has increased accordingly. Simply put, marketing chiefs grow the business or they’re out. And it’s becoming black and white for agencies: you play a role in this pursuit or you don’t. 

The findings in this report point to the fact agencies need to make a shift in their thinking. It’s time to elevate the focus from lower level measurements such as awareness and impressions – towards improving the category-specific business key performance indicators (KPIs). These are also the same metrics by which senior clients are personally evaluated and often compensated. There seems to be a growing sentiment with clients: with more and more agencies focused on category-specific business impact, why stay with those who are not. If you were in the client’s shoes, what would you do?

And it’s not as difficult as most agencies believe. Can you perfectly attribute every dollar spent on marketing to several back in revenue? No. And clients understand this. However, they’re looking for the agencies at least willing to try. Those who at least make the effort are the ones seeing the most significant growth.

Get the full report to find out more details on what other trends and challenges agencies will be facing in the coming year as they pursue new business. Learn more about new business win rates, why clients fire agencies and where agencies see opportunities to improve their new business performance.

Download the Full Report >

You can also join us in Chicago on November 7 – 8 for The Mirren CEO Summit.

Limited to an exclusive group of only 135 participants, this event focuses on the most important issues that agency CEOs and their top lieutenants face in building an infrastructure for agency growth. With that goal, the conference is broken into Four Pillars of Agency Growth: Model, Operations, Marketing, and Leadership. Expect to be challenged, inspired and leave with specific plans to drive your agency forward.

Register by October 6th and receive a special discount of $350 from Winmo (expires October 13th). When registering, use the code Win350Mo.

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Written by: Brent Hodgins

Brent Hodgins is the Managing Director at Mirren, a firm that specializes in organic growth and new business training for agencies in digital, PR, advertising, promotions, experiential and design. Brent has trained CEOs and their senior management teams in every major region around the world. He is highly competitive as he pushes himself, his Mirren team, and his clients to accept nothing less than a commitment to growth.

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