Seizing Opportunities Through a Pandemic-eMarketer Advertising Report 2021-Mark Sneider Quote

Navigating Pressures and Seizing Opportunities Through a Pandemic and Beyond

Executive Summary

The relationship between brands and agencies is ever-changing.

Throw in a pandemic, seismic disruptions in marketing strategy, plus urgent digital transformation plans, and that partnership becomes even more complex, adding both stress and opportunities for agencies as they prioritize their own success while still meeting and exceeding client demands.

How has the pandemic affected marketing and advertising agencies?

In 2020, agencies saw declines in revenues and struggled to close new business deals, while many in the US received Paycheck Protection Program (PPP) funding. Still, some agencies saw the tumultuous nature of pandemic as an opportunity to guide clients through a crisis. Furthermore, the pandemic has accelerated digital transformation for major brands, and agencies were and remain ready and waiting to assist in that journey.

KEY STAT: Agency executives worldwide are focused on improving multiple areas of their business for success in the future, including new business strategy (60%), productivity and efficiency (54%), profitability (54%), and attracting and retaining the right talent (47%).

Why do brands regularly audit their agency roster?

A big brand putting its agency business out for review is standard practice. It ensures the brand is getting the best work from its partners and keeps the ecosystem competitive. It also allows the brand to design a model that reflects the current state of marketing and advertising and its business priorities.

What is the state of in-housing?

The initial threat of brands in-housing isn’t as strong to agencies as it once was.

Still, there are brands that bring commoditized capabilities in-house, and some even build their own shops if it’s a core differentiator or value proposition.

Agencies are not threatened and see it as another way to guide and support clients as they build their team, skills, and operating model.

How can agencies best serve their clients in 2021 and beyond?

Agencies should focus on updating and evaluating their offerings to bring fresh and innovative ideas to the table, especially as clients change their needs. They should also understand their role when engaged in multi-agency brand ecosystem and be clear on how to deliver success. Lastly, agencies should be evaluating their operating model for a balance of depth and breadth with agility and scale.

WHAT’S IN THIS REPORT? This report covers the pandemic’s impact on the agency landscape, reviews other challenges agencies face like roster audits and in-housing, and highlights priority areas for future growth.

 

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From Ad Age: COVID accelerates belt-tightening as brands try in-housing, reviews, projects, digital experiments and more

COVID-19 and the related recession forced sharp cutbacks in marketing spending last year that still weigh on budgets now that marketers are going into second-quarter planning for 2021. But while spending started rebounding for most of the U.S. marketing industry in the back half of last year, it doesn’t feel that way for lots of people, especially in big agency holding companies where revenue continues to decline.

A survey by agency new business marketing firm RSW/US finds only 41% business marketing firm RSW/US finds only 41% of marketers expect to increase marketing spending this year, down from 50% last year, but a bit better than the all-time low of 38% in 2013.

Well before COVID, cost-cutting had become a way of life for marketers—and the pandemic has only served to sharpen their knives—accelerating everything from remote work and distributed workforces to more programmatic media buying, remote-controlled commercial production and greater flexibility in TV deals.

In some cases, marketers are just pushing harder on tried-and-true cost-cutting measures including agency consolidation, increasing project reviews or bringing more marketing in-house.

In others, they’re trying inventive new tactics including saving money on market research by putting products for sale in social media without actually having any products on hand.

But no matter how they are achieving it, one thing is for certain: As the industry continues to seek out ways to do more with less, there is potential for even bigger cuts in years ahead as marketers and agencies decide how many people to bring back into offices and whether to renew leases for expensive commercial real estate.

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61% of marketers said they expect in-housing to increase

Marketers and agencies are expecting in-housing to continue this year, a clear sign that what was once a growing trend might be the new reality.

The amount of work managed in-house is expected to increase over the next few years, according to 61% of senior-level marketers who responded to a survey by RSW/US, a firm that helps agencies find new business opportunities.

The report found that half of agency respondents said that 26% or more of their clients do “agency-like work” in-house. It also found that, compared to five years ago, more and more marketers are using two or fewer agencies to support their business needs.

“Marketers are struggling to do more with less,” the report said. “While many marketers are making the move to bring some services in-house, this alone isn’t their answer. Agencies need to show marketers why they are unique in the value they provide, as marketers will continue to look to agencies to bring them things they can’t get from an in-house shop.”

In-housing

According to the report, 48% of agencies expect the amount of work clients manage in-house to increase, while 46% said they expect no change. Only 7% said they expect in-house work to decrease.

“Agencies have to learn to work with in-house firms,” Sneider said. “If I were an agency, I wouldn’t want to ignore what’s happening.”

Nancy Hill, former 4A’s CEO and founder of consultancy Media Sherpas, said it’s “too soon” to tell how the in-housing trend will shake out—but said agencies, particularly independent ones, are beginning to find ways to prove their value within this framework.

“Clients are certainly experimenting with what works internally versus what works externally. I think agencies are figuring out how to work with that system,” she said.

Greg Paull, principal and co-founder at marketing consultancy R3, said marketers will continue to “find more and more things to try and do in-house,” particularly those who are armed with first-party data they may not want to share with agencies.

Consolidation

The report found a slight uptick in the percentage of marketers who plan to consolidate the number of agencies in their roster this year.

In 2018, 26% of marketers said they plan to use fewer agencies, while in 2019 that number rose to 35%. Additionally, 70% of marketers reported using two or fewer agencies to support their business needs, compared to 54% in in 2017.

However, Paull is skeptical that marketers are actually making moves to seriously consolidate their rosters.

“I think they’re talking about consolidation, but I don’t believe they’re actually doing it,” he said. “I would be surprised if rosters continue to decrease, because I think marketers are looking for the best ideas. They are willing to go anywhere for that.”

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58% of Marketers Believe They Could ‘Know More’ When It Comes to Martech Although most marketers have adopted some form of martech at this point, new research shows that many are still just beginning to test the waters in terms of familiarizing themselves with martech platforms.

58% of Marketers Believe They Could ‘Know More’

Although most marketers have adopted some form of martech at this point, new research shows that many are still just beginning to test the waters in terms of familiarizing themselves with platforms.

RSW/US recently conducted the “2019 Marketing Technology Survey Report,” and the majority of marketers (58%) said that while they are reasonably well-versed in terms of platforms, they believe that they could know more.

Twenty-four percent said that they’re still trying to figure them out, while only nine percent claimed that they are on top of them.

 

About 46% of marketers say that there are simply too many offerings in the martech space, making it challenging.

Nearly 55% claim that they don’t have the time to read up on martech platforms, and 45% find many of them to be too expensive.

Many Marketers Still Working on Integrating Martech

As it turns out, many marketers are still working on implementing martech into their strategies, according to previous research.

Ascend2 recently conducted the “Marketing Technology Trends Survey,” and statistics showed that the majority of marketers (63%) are still “working on it” when it comes to implementing.

Furthermore, most respondents (58%) have only been “somewhat successful” at achieving their top priorities with their strategy.

About 52% of marketers say that integrating disparate systems is their biggest challenge. This is followed by attributing revenue to marketing (47%) and increasing marketing ROI (36%).

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Agencies and marketers find common ground—and challenges—in MarTech

As in many industries, Martech seems to be moving faster than marketers’ ability to stay on top of the advancements. In fact, many comms pros are just starting to figure it all out—or feel they’re being altogether left behind.

In its first-ever Marketing Technology Survey Report, marketing-focused lead generation and biz-dev firm RSW/US confirms these challenges—but also reveals Martech’s great opportunities.

RSW/US President Mark Sneider attended this year’s MarTech West conference in San Jose and was impressed with the energy, new ideas, and new platforms that permeated the conference.

He and his team saw the explosion in the space, and also heard agency clients and marketing prospects grappling with it as they tried to stay ahead.

Case in point: Chiefmartech’s famous Technology Landscape Supergraphic, which in 2011 had 150 Marketing Technology firms, and in 2019 now numbers 7,040.

In previous years, RSW released its Agency New Business Tools report, surveying agencies, PR firms and marketing services firms on the tools and platforms they found most useful to their new business efforts.

While well-received, the team at RSW continued to see a lack of meaningful innovation and progress in the tools available—i.e., more of the same.

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16 Agency Business Development Tools You Need to Thrive in 2019

16 Business Development Tools You Need to Thrive in 2019

And as Mark Kelly points out on Smart Insights, the ultra-competitive nature of the modern agency landscape means that you can’t ignore agency new business development tools.

When you’re competing against not just your local agencies but shops sitting halfway across the world (who can undercut you on price), you have to be proactive in your search for new business.

Which is why all but 14% of agencies say that new business is a “vital” area of focus for them.

Like all businesses, agencies need a steady stream of clients to keep growing.

Yet, “business development” is often considered a dirty word, especially among the more creatively-inclined shops.

There is a perception that if you keep doing excellent work, the work will come your way.

Then there is the issue of sales cycles. Agencies rarely have the organizational setup for a traditional B2B sales process. They’re too happy to chase down easy-to-get leads instead of waiting for those fat contracts that take 6-12 months to close. The former takes a query on your site; the latter requires extensive, consistent business development.

It doesn’t help that “creativity” is tough to sell, especially if your business development team doesn’t share a creative background.

To make new business easier, you need agency business development tools.

There has been a steady rise in the number of agencies using such tools.

For instance, an RSW/US survey found that the percentage of agency execs using list building software increased from 45% in 2015 to 69% in 2018.

 

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Agencies’ New Business Worries Spike

Agencies’ New Business Worries Spike

More than half (52%) of both marketers and marketing agencies are expecting to see marketing spend increase somewhat or significantly in 2019.

But for marketers, this percentage is lower than last year’s 60%, according to recent survey data [download page] from RSW/US.

It may be due to this slight decrease in marketers’ confidence regarding spending – among other factors – that agencies increasingly believe that winning new business will become more difficult.

More than half (56%) of the 115 US and Canadian agencies executive surveyed said they believe that generating new business will be either somewhat or a lot harder in 2019 than it was in 2018.

This is the lowest confidence in winning new business agencies this decade (looking at bi-annual reports).

With the ANA reporting that the number of brands with in-house agencies has doubled in the past decade, it’s not difficult to see why winning new business is more challenging than it used to be.

Marketers Are Consolidating Agencies

One reason winning new business is even more difficult for agencies is a trend among those marketers who rely on agencies to increasingly consolidate their work with few partners, or at least not hire more agencies.

In this latest survey conducted in 2018, half (51%) of marketers surveyed who use agencies on a regular basis said they only use one or two agencies to support their business needs.

Compared to years past (2015 and 2016: 43% and 2017 45%) this indicates growing use of fewer agencies.

Moreover, more than one-quarter (26%) of marketers report using fewer agencies in the past year, a considerable jump from the 2017 survey, in which that was the case for just 15%.

Consolidation is also happening at pace on the agency side, causing concern that business is moving to a smaller number of players, many of whom have recently started to muscle in on traditional ad agency territory.

In recent years, large professional service firms including Accenture and Deloitte have made a large number of acquisitions – a fact that caused WPP to answer the question “Are consultancies eating our lunch?” in an investor presentation [PDF] last year.

Increased Importance Placed On Data and Analytics

Despite apparent inclinations towards consolidation and in-housing, data from the Society of Digital Agencies (SoDA) and Forrester reported growth in both profits and revenue for agencies in 2018 and forecasted further growth in 2019.

Customer insights and analytics is predicted to be one of the top areas for growth this year.

The importance of agency data and analytics capabilities is echoed by the marketers surveyed by RSW.

Nearly 9 in 10 marketers consider these capabilities important or highly important for their agencies.

Most encouraging is that agencies are in agreement about data and analytics capabilities.

Seven in 10 (70%) of participating agencies said it was highly important that they provide data and analytics capabilities to their clients in 2019.

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Nearly 70% of marketers to use Instagram in 2018

Nearly 70% of marketers to use Instagram in 2018

Dive Brief:

  • Just under 70% of U.S. marketers will use Instagram for marketing purposes in 2018, and just over 28% will use Snapchat, according to a new eMarketer report.
  • The projected Snapchat figure is up from 25% in 2017, and is expected to help the platform reap more than $660 million in U.S. ad revenues, an 18.7%  revenue increase from 2017. Meanwhile, Instagram has grown by over 6% and is expected to nearly double its U.S. ad revenues this year, to $6.12 billion.
  • Meanwhile, LinkedIn ranks as the top social media platform used by U.S. ad agencies for marketing purposes, as it’s used by 89% of 300 marketing and advertising agency executives surveyed earlier this year for the RSW/US-Mirren New Business Tools Report 2018. Facebook and Twitter will be used by 78% and 75%, respectively.

 

Dive Insight:

While the results indicate that there’s not much love for Snapchat among marketers, there’s more to why so many fewer marketers are embracing the platform compared to Instagram. As eMarketer points out in its report, Instagram provides a lot of support for marketers to use its platform organically by sharing promotional posts and videos with their followers, without necessarily having to buy advertising.

Snapchat, though a similar platform to Instagram in many ways, is more of a paid advertising platform that doesn’t provide as much organic support to businesses wanting to use the platform for marketing purposes. Despite the difference, neither platform appears to be hurting for advertising revenue.

Of course, it also helps Instagram that it’s owned by Facebook, which no doubt makes the most of the affiliation to help both platforms achieve better positioning and leverage with marketers and advertisers. In fact, eMarketer said that when marketers buy ads on Facebook, they “can simply check a box to add Instagram feed ads or Stories ads as additional placements.”

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How Many Marketers Use Snapchat and Instagram in the US?

Are Marketers Using Snapchat and Instagram in Different Ways?

While both may appear similar to users, marketers take very different approaches when they use these platforms.

One reason for the large difference in the percentage of marketers using both is that Snapchat is primarily a paid advertising platform, while Instagram encourages marketers to use its platform organically, without necessarily having to buy advertising.

“Many marketers create accounts on Instagram to share posts and videos with followers. Instagram Stories are also very popular,” said eMarketer principal analyst Debra Aho Williamson.

Snapchat doesn’t offer much support for marketers to use the platform organically, so their usage typically includes paid advertising.

Another factor driving strong marketer usage of Instagram is its close ties with Facebook, particularly when it comes to advertising.

When making an ad buy on Facebook, marketers can simply check a box to add Instagram feed ads or Stories ads as additional placements.

In a March 2018 survey of 300 US senior agency executives by RSW/US and Mirren, 66% of those polled said they use Instagram, and 36% said they use Snapchat.

 

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The Battle For The Best Ideas Starts With Rethinking The Creative Process

Degumming the creative process

It shouldn’t matter whether creative talent works at an agency or in-house.

Brands today need creative partners that can let go of old processes and values and frankly, many agencies haven’t changed quickly enough to meet that need. (Indeed, when prompted to identify troubling industry trends, a 2017 survey by RSW/US found that brand marketers believe legacy agencies are still stuck on “old media.”) Many high-level creatives only feel free to exercise their full potential in-house because those positions empower them to abandon the stodgy agency life of peer reviews.

To that end, we must rethink how we structure our creative teams. Often, a concept that begins as brilliant ends up diluted by too many inputs and approval barriers. Yes, eliminating approval processes means some ideas will flop harder than usual, but it also frees the greatest ideas to soar unhindered.

When ideas get lost in drawn-out processes, so does the incentive for creativity.

A new creative structure

In my experience, nonlinear teams composed of members from multiple disciplines are better able to meet the needs of today’s brands. In diverse teams, low-level marketers don’t see their ideas twisted as they rise upward: Anyone can propose a brilliant idea and see it through to completion.

In-house teams and agencies alike struggle to operate outside traditional organizational structures, yet break down those structures we must. It’s not about eliminating processes altogether; it’s about prioritizing processes that yield the best results, even when they fly in the face of traditional marketing wisdom.

So form multidisciplinary teams—of creatives and non-creatives—and give them more freedom than ever. Outside the regimented structure that agencies and in-house teams traditionally impose, these teams can blend brutal simplicity and radical creativity to discover, not force, the brand truths people care about.

The Battle For The Best Ideas Starts With Rethinking The Creative Process

With Procter & Gamble, Unilever and United Airlines joining the growing list of companies leaving agencies to fold marketing functions in-house, voices all across the agency world have wondered aloud: What gives?

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