Remember the tsunami of agency reviews a few years back, when the world’s biggest advertisers put tens of billions of media dollars up for grabs? Now they’re thinking of doing it again: Ad Age reports that nearly one-third of advertisers may be contemplating switching agencies in the next six months!
My firm, Avidan Strategies, manages agency pitches, and in doing so, we noticed an uptick in pitch activity since last Fall. Some are new and some had resumed, after being paused in early 2020 due to Covid-19.
This new trend should have agencies worrying. CMOs are under incredible pressure. And, given their short tenure, they’re concerned about their future. Either way, they will be scrutinizing their own agency. If they, the CMOs, are not being supported at the pace that they have to work, they will definitely replace the agency.
Demand for digital services at the consumer level, the media level and at the enterprise level is accelerating. Traditional platforms such as linear TV or magazines are losing ground. In the $1.7 trillion global advertising industry, more than 50% is spent on digital platforms. Digital advertising had been already growing at a rate of about 20% annually even before the pandemic. It is now estimated that digital will be 70% of the advertising pie by 2024.
That means two things: Firstly, advertisers need different insights from the agency into the shifting consumer trends. Secondly, they need agencies with enough flexibility to adapt quickly in response to those trends.
The digital transformation puts newfound pressure on the perennial list of advertiser concerns around strategy, operating model, efficient use of technology, compliance of data use, in-housing and brand safety with the shift from reach and branding to direct-to-consumer strategies and performance marketing, so as to generate leads.
During the last year I had been traveling all over the country, meeting with advertisers and CEOs, except, for the fact that I’m not actually traveling physically. I’m still stuck at home, in New York, relying – like many of us – on virtual meetings.
Almost all advertisers that I spoke with are considering an agency change. Surprisingly, only a few are motivated by bad advertising. For most, the issue has more to do with the future than the past. As one CMO put it, “Our agency is doing an OK job, but times are changing and I’m not sure they are ready for what’s next. We need a different type of agency, with different skills than the one we have.”
To adapt to post-Covid, agencies need a strategy that develops employees’ critical digital and cognitive capabilities, their social and emotional skills and their adaptability and resilience. They need to double down on their learning budgets and commit to re-skilling.
The briefs for pitches that we’re seeing come through to us now, are more transformational, and different from pre-pandemic briefs. And the context for selecting an agency in a pitch is different. We now probe agencies in the pitches we run for areas like:
Adopting digital transformation: Post-Covid, all the software, assets, systems and processes in place (and I mean every last one of them) should be cloud-based and accessible from anywhere. Agencies must avoid inefficient software to connect with the office. The office should follow each person 24/7, regardless og location.
Streamlined workflow: Marketers now operate in a hyper-complex ecosystem and do not have time to wait for agency workflow, or for outdated processes and tools. Market sentiment can change from week to week (and sometimes daily). Agencies need to keep pace with it.
Commit to agile marketing. Agile is as much a culture as an operational system.Its pillars are improvisation, iterations, testing and data, and collaboration not silos and hierarchy. It means faster decision cycles, and having more flexibility across key areas like creative, budgeting, and media.
Values-based communication. Today’s consumers are purpose driven. This means that, unlike traditional consumers, who may have prioritized price or convenience, they want to see brands that improve the world, not just making a profit. That dynamic, coupled with growing consumer social awareness and activism, influence brand selection and loyalty.
People enablement. While tech and data at scale pose the most pressing need for agencies, they are not the only factors that drive results and improves agency output. Agencies need to have a strategy for recruitment, development and retention. The chief HR officer has a seat at the boardroom now and deserves to scrutinized as much as the chief creative officer during the pitch.
V-UX. The first stage of the transformation was all about applying digital to traditional marketing. The next stage was about building digital experiences. Now, agencies need to be adept to the latest evolution: Virtualization, which involves incorporating virtual reality into marketing strategy.
As much as pitches represent a chance for agencies to win some much-needed revenue, they’re also an additional cost. Already short-staffed, in light of cost cuts during the pandemic, agency bosses will need to weigh their chances of winning new business, along with the impact it will have, on work for current clients. It can be a slippery slope for those CEOs struggling to balance short-term gains and the longer-term stability of their business.