First look: 4A’s issues agency business guidance for surviving Covid-19

The 4A's says agencies that invest in new capabilities are more likely to thrive in the future.

What does it take to be a ‘resilient agency?’ The 4A’s new report says be more prone to invest in growth areas and less promiscuous when it comes to client business. But will agencies act quickly enough?

The advertising industry was experiencing myriad challenges before the global pandemic struck. Now as the impact of coronavirus has created recessionary headwinds, agencies large and small are taking a good hard look at what it will take to survive and, hopefully, to thrive.

In a new report launching today, The American Association of Advertising Agencies (4A's) paints a picture of what a resilient agency looks like within this climate. Aside from proffering practical advice for financial and operational focus, it offers recommendations as to where agencies should actually invest or at least not cut too deeply.

The capabilities and skills that are in current demand, ideally support strong margins and likely will remain in demand due to societal changes taking place, per the report. This includes strategic planning, data and analytics, digital development, creative technology and innovation, customer experience, voice and social.

“This is the time to invest and make sure you’re doubling down on what’s next, what’s new and to take whatever money you’ve saved and not just put it into the bottom line. Invest for the future,” says 4A’s president and chief executive Marla Kaplowitz. “That’s what the agencies that grew after the recession did. They took the hit in other areas but said we’ve got to invest in new capabilities.”

As the “distance economy” continues, the digital habits being formed in terms of personal interactions and purchase behaviors will continue, per the report. This makes customer experience and customer-journey analyses and strategic skills vitally important to marketing success. In fact, the report says, fluency in effective social media strategies, user experience design, and creative digital-content marketing are table stakes.

It also asks: can you develop any digital products or services to help solve a client need in an area in which you may not be operating? What new agency IP could you develop?

The issue is “too many agencies were set up to produce commercials,” says Avi Dan of the marketing consultancy firm Avidan Strategies. Dan agrees with many of the findings, but says, “in theory agencies should go and invest in all of those things. In practice it’s going to be difficult.” He cites the sins of siloed cultures, the dependency on the development of TV campaigns and a lack of willingness to form strategic alliances as being core issues. “Everyone wants to be a general. You have to reach out and collaborate to survive.”

When it comes to clients, love the one you’re with

How agencies attack new business also now needs new and careful consideration. Agency land was built on the chassis of new business machines ready and willing to speed toward a new account at a moment’s notice.

Today, organic growth should be the focus. “Always be pitching…your current clients” and “love the one you’re with” are two mantras the report espouses. “People are promiscuous,” says Kaplowitz. “You need to be focusing on your current clients, and not just always be focusing new business, especially during a time like this.”

That’s not to say ignore new clients. However, new business efforts need to be more strategic. The report reads: “Think of your client roster as an investment portfolio to safeguard against declines in certain sectors…While every client being a creative showpiece helps you clean up at awards shows, they don’t always translate to stable income, strong cash flow and margin." That's why developing a screening model to determine where best to invest scarce resources is essential.

When it comes to marketing, agencies should stick with the same advice they are preaching to their clients. Strive to maintain share of voice and share of mind with clients and prospects, says the report.

However, two aspects where agencies often have “the cobbler's children have no shoes syndrome” are now coming into play: agency brand positioning and air-tight case studies. The report stresses that now is the time for agencies to be sure they have strong positioning relevant to the marketers that they want to attract as well as case histories that demonstrates an ability to build client businesses.

Still, there is always one place where agencies typically prevail: creativity. Specifically, the report notes that creativity that drives commerce always wins. “It’s not just brilliant ideas, but understanding the client’s business,” says Kaplowitz. “It’s about clients, allowing agencies to get in and partner with them because that’s the only way you’re going to get those great ideas.”

Another positive: the in-housing trend that was so prevalent pre-pandemic “is slowly shifting the other way because Covid has a lot of companies realizing that they needed agencies to manage production to get things done,” says Kaplowitz. “They realized that agencies have an almost 24/7 mentality, especially if you have a global agency, in terms of the dynamic and the way you can work. It opened people’s eyes. They said 'wow, we really do need that external perspective.' This has been an excellent reminder of the value agencies bring.’”

Overall, there is plenty of work agencies need to do to position themselves for future success. The difference now is they can’t just aspire to evolve, they must evolve quickly, says Dan. “It’s going to be tough on agencies unless they realize they have to change their model on the dime. The consumer is changing. The client is changing and the agencies that are not going to change, they will be left behind.”

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