The Future of the Digital Client / Agency Relationship
The digital marketing landscape is ever evolving.
Over the years we have seen a trend for clients to move from having all their digital marketing with one agency, to separating the channels out to “keep agencies on their toes”, to it all coming back to one agency again. Throw in the mix, a trend to also in house, and bring basic digital marketing into businesses themselves, and you get a variety of clients, at different stages of digital adoption.
Then, a little known thing called Covid-19 came over the hill. Businesses closed all over the world, and were forced online to engage with their customers. Those who were ahead of the digital adoption curve, or at least on it, began to flourish and see a change in consumer behavior, albeit a forced one.
So how does the digital agency market respond to this? No longer do we have clients just looking for an agency to handle their digital marketing for them. We have a mix of buyers, with different needs and wants. How can agencies now be nimble, and amend their propositions to make them more appealing?
Did predictions come true?
In 2017, Econsultancy wrote a powerful piece on the key opportunities for agencies in a “shifting landscape”, obviously totally oblivious to the Covid situation some 2 years down the line. The piece was centred on how clients were focused on improving their “customer experience (CX)” and how this meant that agencies could “deepen their engagement with clients”.
In essence this was true. We began to see the emergence of CRO and UX as real specialisms that agencies offered more. And it was heightened in its offering because clients were demanding it. Two years earlier in 2015, Google’s Eileen Naughton had spoken about “winning the moments that matter” which was centralised around brands ensuring that mobile experiences were as good as they could be so as not to lose the customers interest.
This then paved the way for the launch of Accelerated Mobile Pages (AMP’s) which Google pushed hard with agencies and advertisers alike. But the core behind all of this was ensuring that the experience you served the outside world as a brand was usable, speedy and centred around the key goal of your content. This made brands think hard about their customers' experiences of their digital content, and we began to see improvements in the way brands invested in improving their digital content. No longer was it just a gold rush to get more traffic.
However, taking this back to the agency viewpoint, putting a different spin on this is to think about what the client's customer experience of working with agencies is and what it needed to be to evolve. If agencies wanted to “deepen their engagement with clients”, they needed to think less about business models that served them the best, and start to think about how they could work much more effectively and collaboratively with clients. In essence, be seen as a partner, and not just a supplier whose contract would go out to tender after 1 2 months.
Fail to setup; setup to fail
We then moved into a time where the agencies that won clients over, showed a demonstrable flexibility in the way they operate. Take for example an SEO retainer, where month after month, technical changes and amends were investigated to help improve a clients website organic ranking. All it takes is a code or a development freeze to halt the value that the client sees in this activity, in its tracks. So rather than charge the client for something they got little or no value from, agencies began to adjust their mentality, and offer complimentary services such as content production, CRO and UX.
This was the first sign of agencies taking stock of their customers' experience, and adapting how they worked to suit the situation. This was a market driven change, with smaller, boutique agencies setting up to capitalise on the difficulty of the larger networked agencies inabilities to turn around the big ship in choppy waters.
“We’re bringing it all in house”
Clients then began to start to venture into in-housing; a trend everyone in the digital market knew was coming. The trigger was a lot of the .coms starting to build out their in house digital teams, your AO’s and BooHoo’s. By building their own in house teams, the traditional agency model of retainers and monthly work schedules began to be called into question. For in house teams who had the ability to manage digital challenges themselves, where would the agency now fit in?
There soon became a trade off between “having the job title and having the experience”. These became two very different things. Agencies continued to have the most skilled people in their businesses, but clients felt as though their teams had the potential to be as talented. What we then saw was a trend to “consult and train”, where agencies could continue to work with clients who had in house teams, but the engagement was much different. No longer was the agency under the cosh to get results, but they needed to offer out the one commodity they had in their arsenal. Experience.
The Covid Effect
Agencies were making the move to a consultative model way before Covid happened. The fact that the pandemic has occurred has accelerated that transition by a good 3 or 4 years. Coronavirus has forced through a monumental shift in digital adoption, with many facts and figures showing how brands have seen exponential growth in ecommerce and digital engagement. High street brands and banks are closing stores left, right and centre, as customers shift to online methods. The times aren’t for changing; they’ve already changed.
In an article centred around agencies responses to the pandemic, The Drum and Wix claim that “more and more businesses on the client side are opting for a DIY approach, taking aspects of marketing in-house to save on expense and dev time”. This supports the theory that the inhousing trend is set to continue, meaning the traditional agency retainer model is to come under even more pressure.
In addition, The Drum and Wix argue that client marketers have begun to become more cautious about their choice of agency. From the study they conducted they…
“...predict a shift in outlook, with more businesses preferring to work with agencies closer to home…”
This potentially plays into the hands of agencies located in the same city or town as the client, but given Covid has opened up the possibilities of remote working, and video conferencing for regular meetings, this may not quite play out the way The Drum and Wix infer.
Irrespective of all of this, it seems the pandemic has not stopped the drive to continue improving customer experiences. MarketingCharts produced a study in February 2021 that showed that “60% of CEOS said delivering a better customer experience was their top priority”. Maybe this is driven by the seismic shift to online, meaning brands have literally seconds to make an impact before consumers decide to hit back, and re-peruse Google for another website that might suit their needs better.
MarketingWeek, it would seem, would agree with this theory. Their research shows that “digital roles in marketing are among the fastest growing in the industry”, with a rise towards in-house roles particularly interesting. The below graphic shows that the highest rise in demand for digital centred marketing roles, is for in house positions.
“Agencies of the future are completely unrecognizable”
The above was a quote from a piece written by AdAge / ForwardPMX in 2020. In the same piece, it’s stated that:
“...agencies’ main activity is no longer to just buy media, then their focus must be on strategic guidance based on their wealth of collective experience and broad perspective spanning industries, markets and platforms—part of what has always made agencies more valuable than any in-house or consultative alternative…”
Powerful stuff. There are others that wholeheartedly agree with the above. In a piece produced by MarTech Today and Call Rail, it was stated that “being seen as a strategic partner is one of the primary ways agencies can increase their value to clients”.
So what we will start to see emerge is a definite increase in the trend of inhousing. As brands need to continue to embrace digital due to consumer demands, spend on digital marketing, data analysis and analytics, and creative will only increase. There becomes a point where it no longer becomes economically viable for brands to continue to pay agencies for managed retainers across the digital landscape.
Brands will turn to in-housing, in the knowledge that they are better able to control the resource if it's on their payroll. Agencies can continue to add value by diversifying their propositions to be more consultative and training led, which can easily be as financially as lucrative as the retainer model. Continuing to have the best people in the industry in your agency will be the key battle for agencies in the next few years, as the demand for digital skills and experience increases. Expect to see more “strategy” and “consultant” job roles come onto the market, as brands demand deeper insight into their challenges, and assistance on how to address these challenges, allowing their in house teams to execute the strategy laid out by the agency.
Joel Barnett, managing director of recruitment firm Fortune Hill would agree with this. Commenting in Marketing Week, he states that:
“When companies are allocating more budget to digital media, they are going to be looking for experts in that space. And increasingly because companies are under financial pressure they are looking at in-housing some of the stuff they would previously have outsourced to agency partners,”
What we must be wary of is allowing brands to pedal the idea of digital unicorns. Over the last twelve months, we have all seen roles advertised for digital marketing people who can carry out SEO, PPC, Programmatic, Analytics, Data Science, Web Development, and can use Photoshop. This isn’t one person, it's an entire department.
Of course there will still be brands who require an agency to continue to carry out the traditional agency retainer model. These brands may have under adopted digital in the past, or it doesn't make economic sense for them to hire an in house team. Equally, brands may not have the right sort of leaders in their business to guide and nurture these digital marketing enthusiasts, leading to “the blind leading the blind”.
However, irrespective of either of these scenarios, it is the responsibility of agencies to help to drive improvement of digital marketing skills across the market. Historically, some of the best skills have come from, or existed in agencies, so to ensure the market continues to advance in skill development, agencies have a huge part to play in upskilling their teams, and their clients. The entire market will benefit from better digital marketing skills, and agencies should not shy away from imparting their knowledge and abilities to clients, to help develop this, and strengthen their bond with their clients.
The important move for agencies here is to be adaptable and not adopt a one size fits all approach. It may lead to agencies needing to spend more time initially with a client in a pitch situation, to really understand their needs, so a compelling solution can be proposed. This should invariably lead to agencies winning more business that is a better “fit” for them, and will shift the focus from a constant strive to win new business, to ensuring that the client is catered for within the agency in the best way possible. If you like, creating a better, more enriching, customer experience.
Irrespective of your thoughts or outlook on the relationship between digital agencies and clients, there is one thing that holds true, and no matter how hard you try, you won’t be able to find a better statement than the below;
“Whatever you call yourself, the intent is to always solve the client’s problem.” (Econsultancy, 2019)
Agencies will do well to remember that without focusing on solving the client’s problem, the value they provide is very low. By focusing on this, you are more likely to land on a solution that benefits the client, rather than something that traditionally would support your agency model.
Some of the biggest “digital native” brands in the market will, in 5 years time, have bigger digital marketing, data, tech, creative and development teams than most agencies in the UK, as the upward shift to digital continues. This shouldn’t be seen as a threat to agencies existence, rather an exciting and interesting opportunity and challenge.