In-housing, the evolving client-agency relationship and Brexit were some of the major themes that emerged when agency bosses descended on London this week to thrash out the opportunities and threats facing their businesses this year.
The Drum’s Agency Acceleration Day on Thursday (28 March) brought together independent agency founders and holding company heads for candid conversations about how both parties can gear up for growth. Brands including News UK, Spotify and Tui were also on hand to share their expectations of agencies today.
Here’s what you need to know:
Agencies must take in-housing seriously
Agencies need to realise that in-housing is a real trend that won’t be going away anytime soon. The more clients tout the cost savings they’re enjoying from bringing marcomms activity in-house, the more others will be willing to follow their lead.
Paul Hood, digital marketing director at News UK, said the media owner had seen cost savings of “40 to 50%” since taking its digital media, planning and buying in-house around nine months ago.
He added that the publisher of The Sun has not only been attracted to the efficiencies of in-housing, but also the speed at which it can deliver campaigns without the back-and-forward with agencies.
The Sun’s Dream Team fantasy football game which attracts a million sign-ups, for instance, needs to acquire players in just a two to three-week window. “We can understand audience data and start to react in real-time,” Hood said. “To deliver that through an agency? It’s just too slow.”
But don’t discount agencies just yet. As Lindsay Pattison, chief client officer at WPP, pointed out, News UK’s in-house operation is powered by a team transposed from The & Partnership agency.
“You could see in-housing as a threat or as an opportunity,” she said.
One agency group that has grasped this opportunity is Oliver, which effectively sets up and runs bespoke agencies onsite for clients. Its chief executive, Sharon Whale, said the approach can save clients “up to 30%” of their business as usual marketing budgets.
Much of those cost savings simply come from the greater proximity to brand decision-makers. "Being on site, there’s a huge amount of productive hours that you don’t have working externally,” Whale said.
The reality for now, however, is that most brands will continue to rely predominantly upon a client-agency roster while examining how to bring some functions of their marketing in-house.
As Hood admitted, there are some things most brands aren’t yet in a position to do themselves. “Programmatic, for example – we don’t have that full skillset. It requires a lot of heavy lifting. One of the opportunities for agencies is to help provide enablement for in-house teams around the areas that are more complex.”
And in-house and agency teams can complement one another without stepping on each other’s toes, according to Claire Dormer, who runs a 65-strong internal content team at travel firm Tui.
“We work with a lead agency who do the big creative thinking and TV campaigns," she explained. "But we collaborate. When they’re away shooting TVC, we have our own shoot plan. The agency can concentrate on what they need to deliver and we can add to that.”
The client-agency relationship will continue to evolve
The Drum Consulting’s Steve Antoniewicz and procurement expert Tina Fegent have identified 20 different agency models operating in the industry today. “The [proliferation] of these models has been phenomenal. It’s great from a procurement point but it’s a really complicated buyer’s market,” Fegent said, pointing to the some 10 different remuneration models agency partners rely upon. “But it gives us choice and options.”
It’s a complicated market for agencies selling services too, as Justin Billingsley, chief executive of Publicis Emil and chief operating officer of Publicis Communications, pointed out.
“There are two reasons driving change – attribution and austerity,” he said.
“Attribution because more than ever before you can see the influence of what you do has on conversion. Because of that, the ability of a client to brief you on the problem to solve is better than ever before because they can tell you what outcomes they want and you get compensated for delivering them.”
On austerity, Billingsley admitted that Publicis has been one of the groups impacted by P&G’s $500m reduction in spend on agency fees and production. “[P&G] keeps turning things off, and you know what? Its results don’t seem to be getting worse in many respects.”
To counteract the risk to agencies, Billingsley advocates moving to outcome-based remuneration. It’s a strategy that's paying off with motoring giant Daimler, for whom Publicis – drawing upon its Power of One group resource model – has replaced 56 of its 715 agencies around the world.
“It’s surprising even saying that we want to move to outcome models,” he noted. “It’s just part of the fundamental change we’re going through. If we’re brilliant at something then double down.”
Drawing upon his agency’s experience of working with the likes of Uber and Netflix, Gravity Road co-founder Mark Eaves said a new generation of ever-more sophisticated marketers was beginning to emerge.
“They are pretty good at communications themselves,” he said. “What we’re forgetting in this discussion of models and how we shape ourselves is that you have a new generation of marketers coming through who are really good at the things agencies previously would’ve said ‘we’ve got this for you’.
“Fundamentally [marketing's] still about people. Good marketers want good people around – just in different ways.”
With so much choice out there for knowledgeable clients, meaningful differentiation is becoming essential for today’s agencies. And those that do manage to stand out won’t just be in clients’ sights, but acquirers too, according to Keith Hunt, managing partner of mergers and acquisitions advisory Results International.
Hunt pointed out that marketing M&A deal-making hit a record high in 2018. But even then, of the 10,000 or so agencies in the world, only 900 were acquired. Only the strongest will rise to the top in such a cluttered landscape.
Brexit remains agencies' great unknown
One obstacle standing in everyone’s way, however, is a matter almost entirely out of their control – Brexit.
Katy Howell, chief executive of Immediate Future, acknowledged that the uncertainty Brexit poses was having an effect on planning. "It's driving me nuts," she admitted.
"We’re in a horrible cycle of short-term planning and while we’re getting on with it the realist is that it’s doing a lot of damage to the industry. We’re not looking more than eight weeks ahead. Procurement is saying it’s too risky to look further. And that’s a challenge. We can’t do the best we can do in tiny cycles."
Anil Stocker, chief executive of financial intermediary MarketInvoice, said his firm had already observed a slowdown in agencies being paid because of the upheaval. "People are having to wait longer to get cash in and to get finance," he acknowledged. "So in this time of uncertainty, it’s not good."
But though there was some pessimism about the present political circumstances, there was some cautious optimism that agencies – smaller independents, in particular – could emerge stronger from all this turbulence.
As Michael Scantlebury, founder and creative director at Impero, put it: "We’re an independent agency and the worst thing in the world for a holding company is a slowdown, or a recession, which we might be heading into. So I’m relatively optimistic. We can be more nimble, quicker and adapt and get things done at a quicker rate for clients."
And Nicky Unsworth, whose BJL agency was recently acquired by Dentsu, struck a similarly upbeat note. "I’m optimistic," she said. "We’re an industry that copes with change and challenge. The not knowing is difficult because people can’t plan. Our biggest thing is hand-holding clients through the transition. We’re problem solvers by nature and we’ll get through it."
Additional reporting by Jen Faull
The Drum will reconvene with agency leaders at our Pitch Perfect event in September. Find out more.