When consumer packaged goods giant Procter & Gamble sneezes the marketing world catches a cold. That’s because, as the world’s biggest media spender, this P&G is the bellwether for client-agency relationships, and other marketers tend to follow suit.
It was nothing short of a bombshell that P&G announced during an analysts call last week that it cut the number of agencies by 40% globally, trimming agency and production spending by around 15%, or $300 million. In one global beauty category P&G cut spending on digital marketing services by 75% by consolidating with one shop.
What happens with P&G reflects a shake up in client relationships with their advertising and media agency partners.CMO Council’s Strategic Brief reveals only 5% of marketers report more confidence in their creative and media agencies; 72% say that they will seek new partners to better exploit data & digital.
Marketing is at a crossroads, and now is the time for agency partners to work even harder to meet the expectation for performance and creativity. This has created an interesting phenomenon of marketers placing their old agency accounts up for review – calling everything from performance to structure into question. Marketers recognize that the world has changed, and they’re looking for partners who can unlock the new communications landscape in all its manifestations.
In the last two decades we saw changes that transformed marketing and the business models that defined advertising become obsolete. Most notably among the casualties was the “traditional” advertising agency. Once the vanguards of marketing, these institutions struggle to retain their relevance in the information age.
Marketers are looking well beyond their traditional advertising agency base for expertise to drive marketing performance and handle exploding technology, data, digital migration, channel fragmentation, and a more diverse, multi-cultural consumer base.
As budgets shift to fund digital marketing campaigns and more personalized customer engagement, marketers now need different competencies in data analytics, content creation and channel proliferation to improve ROI.
There’s a new focus on finding high performance marketing partners with specialized knowledge and business acumen. An overwhelming 83% of clients surveyed by CMO Council are looking for unique skill sets and specialized capabilities not found in most ad agencies or media buying firms.
When asked to identify who marketers consider to be important marketing partners, few traditional holding companies, advertising firms or media agencies made the list. Marketers are instead looking more to solution providers as their go-to sources for performance improvements and solution partners to tackle the biggest challenges facing marketing today
When it comes to ad and media agencies’ expertise, CMOs gave negative reviews in three essential areas:
- The ability to manage the data explosion (only 30%said well or very well)
- Analyzing data to create personalized experiences (just 29%)
- Overcoming financial restraint and demonstrating ROI (less than 40%)
Only 5% of CMOs say they are confident in their media or agency partner’s performance. In fact, marketers are looking to apply far more stringent and taxing ROI thresholds on their media and agency partners to maximize return. As digital evolves, CMOs will ensure that return on investment and return on advertising investment are held to higher standards.
Many marketers have tripled their digital budgets in the last two years, and are working hard to protect their investment. They do so by building digital infrastructure and acquiring relevant talent, so the agencies must be different too.
For brands to successfully adapt to changing needs in the market the agencies that support them will need to adapt in kind. But, over the last decade traditional agencies have floundered in this role, leading many to conclude that they may not be the most qualified to define their own path.
To regain their footing agencies should become highly flexible and constantly adapt: Instead of having a large staff, a small core staff with all non-core functions outsourced to experts, allowing the company to offer more flexible solutions that are highly customizable to client needs. Instead of offering “full service”, agencies should ideally specialize and focus on what they actually do best. Instead of making the client’s problem fit the agency’s staffing and capabilities, adapt those to the client’s problem. Instead of trying to own the client and compete with all other marketing service firms, own an area of competence and cooperate.
Avi Dan is the CEO of Avidan Strategies, an agency search and compensation consultants.
