The Agency Work’s first Agency Food Report of 2016 reveals that 68 per cent of agencies are over-servicing. The statistics prove that the relationship between over-servicing and increasing profitability is steadily increasing for both B2B and B2C agencies, following in last years footsteps.
The research aims to calculate whether the majority of revenue is obtained from B2B or consumer clients, following up with their biggest general and financial challenges. The B2B survey involved interviewing companies dispersed all over the United Kingdom. The consumer survey concentrated on reporting in the South; a vast majority of the survey reporting on London (39 per cent) and the South West (28 per cent). However, the results of the survey revealed a similar outcome.
The most difficult challenges facing B2B and consumer agencies include increasing new business leads and recruiting talent; the number of agencies that consider recruiting talent as the most difficult challenge has increased by 10 per cent since 2015, while increasing new business leads remains the same.
With regards to the financial challenges faced by businesses, a whopping 68 per cent have reported over-servicing, a slight increase since 2015, closely followed by 55 per cent struggling to increase profitability.
The relationship between over-servicing and the difficulty in increasing profitability has made itself obvious many times in the past few years, popping up in surveys and articles from different agencies.
Many agencies are pitching or offering services for free, in an attempt to compete with rival companies and ensure customer interest. However, the margin prediction for this technique is often over calculated and can leave businesses not only under target but can unintentionally create a service that their customers begin to treat as an expectation rather than a privilege, causing workers to be overworked and under-performing in the eyes of the consumer.
Jay Neale, co-founder of The Agency Works explains “In terms of financial challenges, it will undoubtedly resonate with everyone regardless of the maturity of your agency, that over-servicing continues to dominate as the top financial consideration for agency leaders”. He goes on to say “With the year-on-year rise in the number of agencies seeing increasing profitability as a financial challenge, agencies cannot ignore the barriers to growth that constantly plague them.”
The difference in financial challenge between B2B and consumer agencies demonstrate that these challenges are dramatically higher for the former. However, it is evident that over-servicing has been an ever increasing problem for both businesses over the last couple of years and will continue grow if agencies do not tighten up on costs and begin charging for work.
These staggering results are forcing companies to recognise the damage that over-servicing can cause. Agencies are slowly beginning to implement charges for amenities and cut back on ‘free service’, in an attempt to save costs and raise their profits.
The Agency Works are an agency software provider. You can access the Agency Food Report here.