Opinion piece from Chris Morris, MD and Founder of Clarity
Client needs are changing. It’s no surprise, given the current climate. Competition is rife, and clients are being forced to deliver more in order to stay relevant in their target sectors. But we need to address the impact this has on agency offerings. Agencies need to future-proof business models and reassess how to best update, evolve and sell their services.
With in-housing headlines hitting trade press daily – take PepsiCo which is building an in-house media and data team to shape its adtech agenda – clients and agencies are constantly developing new ways to work together. And there’s no sign of this stopping. For some, this means exploring how traditional agency-led services can now be taken in-house. For others, it means refining their rosters or minimising the number of agencies they’re working with.
Understanding why and how brands are changing
Recently we’ve seen an increase in agency consolidation. Consider Shell, which last year split the company’s creative business as it completed a significant overhaul of its agency roster. Shell handpicked the agencies it wanted and parted ways with those it didn’t, even cutting ties with its lead agency. This decision shows that taking data, analytics and tech in-house is no longer a dark art of the agency world.
Ditching retainers is becoming more common, with an acceleration in project-based relationships and smaller contracts, as flexible and nimble ways of working take over. Projects are steadily becoming performance based, as clients want to see as quickly as possible the value an agency creates.
Relationships like these mean greater flexibility for clients, enabling them to choose the right expertise for the right challenge. Scrapping the lead agency role and looking for collaborative agencies that work together for the right outcome is the way forward. That can be a tricky balance, with clients expecting agencies to collaborate closely while at the same time staying in their lane. It can feel like achieving targets is all that matters. Agencies can have a certain influence over this, but brands also need to step up at their end.
Reinventing the agency model
Who is driving these changes? Client or agency? In truth, sector-disruption is affecting the way clients access agency services, which in turn drives the evolution of these relationships. The FMCG and retail sectors are leading the way, showing that new solutions need to be created. This year we’ve already seen P&G in-house more of its media buying and planning, and it’s clear other brands will be following suit as agencies stretch themselves too thin.
Of course, it’s no easy feat to change the model you are offering. Time and time again we see businesses attempt to change their models at such speed that it’s obvious they’re headed for disaster. When it comes to reinvention it’s best to aim for an evolution rather than a revolution, the pace of change should never be the priority. Effective change relies on two parties, and it can only work if the new approach remains totally relevant to the client in question. There is no one-size-fits-all approach to this – but an agreed process is always key.
It’s harder to introduce change to legacy clients as they are understandably more resistant to new things, but it can be done. Explain the cultural shift, introduce them to your new thinking and showcase the benefits you can provide. That being said, the optimum time to reinvent your model is in the courtship stage of working with a new client. At this point you have the best chance to influence the way that they think and monitor how receptive they might be to what you are suggesting.
Make your new model an integral part of the conversation, normalise it, both client side and within the agency. It’s not about the agency dictating how to work together, it’s about advocating the value, creativity and flexibility on offer. This way you can gain real insight into what clients are actually looking for. Talking is key, you need to be clear about what they want from the relationship. Larger clients might work differently to smaller ones, and be less agile by nature, so it’s key to be adaptive, nimble and accommodating to various client needs.
Where do remuneration and pricing models come in?
Clients want flexible ways of working, and evidence of ROI. Changing the conversation to address the importance of value, rather than focusing on price alone, can be difficult but it’s crucial. How agencies are paid is paramount to establishing a productive relationship whilst also offering agencies the chance to be rewarded for their successes.
Conversations around the evolution of client-agency relationships are everywhere, but there’s so much more to this topic than the points being focused on currently. It’s multi-layered and complex and there’s so many considerations to be factored in. Clients are under increased pressure to squeeze as much value out of their budget as possible while delivering results at top speed, it’s up to agencies to adapt accordingly. But brands need to meet us half-way.
This disruption is impacting on all areas of the creative and marketing industry, putting increased pressure on agencies to evolve the services they offer, the way they price and the way they work. Today’s agency model is all about collaboration. Agencies build on their knowledge of data, analytics and performance, in addition to their creative flair, using targeting and personalisation to reinforce their relevance by driving greater value in their offering.
The future agency model will be all about constant innovation, interconnected business and creative outcomes. The key is to be brave, be bold and stay focused – it’s a long process and won’t be done overnight, but there is a light at the end of the tunnel.
Originally published on Digital Doughnut: https://www.digitaldoughnut.com/articles/2019/september/the-evolution-of-agency-models