RSW/US study of agencies and marketers shows an anticipated uptick in spend and use of AI

Last September, a study by RSW/US, an outsourced business development firm that works solely with ad agencies and PR firms, found that small agencies were finding it difficult to land new business.

Just a few months later, the outlook is a bit sunnier, as RSW has released its 2024 RSW/US New Year Outlook Report with a view that over half of marketers are anticipating improved business performance in 2024 compared with 2023.

RSW surveyed advertising agencies and marketers in November 2023 on what marketers are planning and expecting, and what agencies are considering and preparing for in 2024. The agency sample came from the RSW/US database of more than 7,000 marketing services, advertising and PR firms in the U.S. and Canada, and the marketer sample came from the RSW/AgencySearch database of 30,000 marketing decision maker contacts.

Now in its 12th year, this year’s study found that there was hope for a better year, with 79% of agencies, and more than half of marketers, anticipating significantly improved business performance in 2024. While 2023 found nearly half of agencies and 40% of marketers reporting a decline in 2023 over 2022, the outlook was more upbeat for this year.

“2023 was a roller coaster for a lot of firms. They were seeing sales cycles go longer, they were seeing budgets shrink, and it was just harder to break through overall,” Lee McKnight Jr., vice president of sales at RSW/US, told Adweek.

McKnight pointed to notes of optimism for 2024, including 59% of marketers anticipating a moderate to major rise in marketing spend and 45% of agencies predicting a similar increase in client marketing spend.

But why such optimism when just months earlier the outlook was decidedly bleak? McKnight looked at the end of the year, when budgets were being locked into place, that spending and hiring were starting to rise and both agencies and marketers looked to a slight improvement in the economy and a forecast for a more economically stable year.

Agencies under more scrutiny

While the outlook may be slightly rosier than last year, agencies are having to prove themselves to clients more than ever. When marketers were asked why they decided to review new agencies to work with, 45% cited lack of proactivity by their current agencies, up from 30% the previous year. Over a third (40%) said it was due to them not being happy with their agency’s strategy or thinking, while 35% said they were not happy with the creative.

 

McKnight sees strategy and creative as subjective, but the proactivity aspect means marketers are looking to their agencies to come to them with ideas and solutions before they ask for it. Marketers are looking to their agencies to be experts and leaders of their strategies, not just order takers.

As such, the study showed a rise in project work and a drop in RFPs from both the client side and agencies participating in pitches and RFPs. Half of marketers reported releasing fewer RFPs in 2023 compared to the previous year, while 37% of agencies reported answering fewer RFPs.

AI and tech are on the rise

Unsurprisingly, AI is on the minds of everyone in the industry, with 77% of agencies planning to incorporate AI into their business strategy in 2024, and 60% of marketers feeling their agencies are ahead of the trends in tech.

But it’s still the Wild West when it comes to AI, and many firms have not worked out how they will use the technology.

“There’s still so much we don’t know about how it’s going to apply to our businesses. However, making sure that you are staying on top of what’s happening now and informing your clients, that’s going to be key,” said McKnight, adding that those afraid of adopting any form of AI are ultimately going to lose out on new business.

Proactive outreach is needed

Agencies need to have an active outreach arm to get themselves in front of new potential clients. Sitting back and waiting for work doesn’t move the needle for most agencies. New business depends on outreach. Marketers are reporting that they found new agencies not by past agency relationships nor networking through friends and coworkers, which have all dropped. The notable increase was in direct agency outreach, which increased by six points, up to 50%.

Agencies need some form of direct outreach, said McKnight, and it can’t just be through email.

“People are still picking up the phone. You have to alternate your touches over phone, over social, over email. We still use physical mail. It’s a little old school, but it’s interesting how consistently our salespeople will hear from these prospects,” said McKnight.

He added that agencies have to show prospective clients at the top of the funnel what the agency does, who they do it for, and what results they get. The positioning should be plain spoken and focused to help win new business.

While there are still plenty of challenges facing agencies and marketers in the new year, a greater understanding of the outlook on both sides could lead to greater prosperity in 2024 compared to last year.

To obtain a copy of the full study, visit the RSW/US site here.

Published on January 18

Source: Adweek

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Many American marketing agencies are finding it harder to obtain new business this year compared with last year, according to recent research from RSW/US.

 

The report was based on data from a survey conducted in 2023 among 250 executives who work for advertising and marketing agencies in the United States.

 

Some 37% of respondents say obtaining new business in 2023 has been harder and 21% say it has been a lot harder.

 

The 58% of agency executives who say they’ve found it harder to obtain new business in 2023 is a significantly higher share compared with the 43% who said the same in 2022.

 

Agency executives say obtaining new business has been difficult for a range of reasons, including fewer opportunities, struggling with breaking through, and challenges reaching the right people at target organizations.

 

Some 41% of agency executives say the dollar amount of new opportunities has decreased this year, 31% say it has remained the same as last year, and 27% say it has increased.

 

About the research: The report was based on data from a survey conducted in 2023 among 250 executives who work for advertising and marketing agencies in the United States.

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A RSW/US survey revealed a bleak new business outlook and few plans to fix it

 

New business is drying up for agencies ill-equipped to find clients in a squeezed market.

 

This is according to RSW/US, the 18-year-old business development firm that works with ad agencies, marketing services firms and PR firms.

Since 2010, the firm has surveyed agencies to diagnose new business trends. This year, it fielded the survey over a four-week period and collected responses from 250 agencies, and small and midsize shops were the predominant respondents to the survey.

 

The findings concerned Lee McKnight Jr., the firm’s vice president of sales, who co-authored the research. Only two years ago, 28% of agencies found getting new business more challenging than it was during the previous year. In 2023, the number hit 58%.

 

Those agencies find their bottom line bearing down on them. The work’s dried up, whether because of economic conditions or competition from large shops. The data shows many agencies are out of plans to address these challenges, since few employ new business experts for long, if at all. This year, ad industry layoffs are abound, and if agencies can’t find some way to generate more work, it will become harder to stay in business.

 

“Agencies are particularly struggling, and have been in 2023, from a business development and new business standpoint,” McKnight Jr. told Adweek.

 

‘There is no plan here.’

 

Agencies found opportunities plentiful after the pandemic—so much so that there was more work than most agencies had the bandwidth to take on. Marketers restarted campaigns and redistributed budgets pent up during quarantine.

 

It didn’t last forever, though. The survey results reveal a bleak outlook for small and midsize shops. They report dwindling new business opportunities, with 61% experiencing those difficulties this year, up from the 39% that struggled last year and just 23% that struggled in 2021.

 

Economic conditions are behind the relative squeeze, but systemic issues are also at play. Smaller agencies overwhelmingly admit they’ve run out of new business strategies, or that those strategies never existed in the first place.

“There is no plan here,” an anonymous survey respondent wrote in.

 

The so-called new business ‘plan?’ That’s asking other clients for referrals. Of agencies that responded to the survey, 60% said their new business strategy hinged on them. That’s a large number of businesses entrusting their survival on word of mouth.

 

What happened to all the projects?

 

Overall, marketers are embracing fewer AOR relationships, opting to distribute smaller projects to a wider variety of agencies.

 

It should be a good thing for smaller shops, but McKnight Jr. fears large shops are still monopolizing opportunities. Rather than accept disruption, small agencies believe that more large shops should be unwilling to accept the smaller projects. Simply put, the big agencies are “playing down,” a survey respondent wrote in.

 

Meanwhile, it’s taking agencies longer to close deals with the prospective clients they do find.

 

Respondents said sales cycles (defined as the first client meeting to when a deal closes) are, on average, between one and six months long. That’s actually better than last year, but fewer agencies are landing deals fast. Last year, 11% reported sales cycles less than a month long, and this year, just 7% said the same thing.

 

The hiring problem

 

New business strategies are absent, agencies report, because of how hard it is for them to find and hire the right employees for the job.

 

In 2021 and 2022, “hiring for the new business director position at an agency [was] at its second-lowest level since we started this survey report in 2010,” McKnight Jr. said. Just 36% of responding agencies hired a new business director sometime in the last three years, painting a bleak picture of hiring trends. While 32% reported the same thing last year, the pandemic and the subsequent new business surge in 2021 might’ve contributed to hiring being exceptionally low then.

 

This year, agencies that found new business directors also found that those employees didn’t stick around long: 29% said they lasted less than a year in the role.

 

With no new business strategy to fall back on, McKnight Jr. said small agencies often rely too heavily on new business leaders’ industry connections. Eventually, those dry up, and any opportunities along with them.

Hiring new business leaders is also a challenge because they aren’t scoped to work on clients. The agency must cover their salaries, and that risks pulling down a small shop’s margins.

 

According to McKnight Jr.’s own estimate, smaller agencies are competing for accounts worth between $200,000 and $500,000, when leaving out media billings. It theoretically prevents them from hiring large new business teams comprised of senior, and expensive, employees with deep industry connections.

 

“It is very difficult—especially at midsize or small firms—for one individual to be in charge of new business. I wouldn’t say it’s impossible, but I’m getting close to saying that,” McKnight Jr. said.

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Marketers and agencies are miles apart: A potential shift in the sphere of influence and advertising agency/marketer relationships?

The symbiotic advertising agency/marketer relationships have always been fraught with a certain level of division, but a new report from marketing agency business firm RSW/US shows marketers and agencies are miles apart when it comes to planned 2022 investments in their business on things like personnel, technology, R&D, and product development.

Last year COVID dampened enthusiasm for marketers’ spending, from 77 percent in 2020, down to 49 percent that planned to invest “somewhat” or “heavily “in their business in 2021. Agencies similarly saw a drop from 86 percent in 2020 to 64 percent in 2021.

However, this year shows a stark contrast in the respective temperaments of marketers and agencies as it relates to 2022.

Just when we thought marketer enthusiasm couldn’t drop any lower, this year we hit an even lower point, with only 21 percent of marketers saying they would “somewhat” or “significantly” increase spending on non-marketing activities in the new year.

The story is different for agencies. In contrast to marketers this year, 79 percent of agencies actually report they plan to invest in non-marketing activities “somewhat” or “heavily”. Last year only 64 percent of agencies felt this way.

So, what does this mean for marketers and agencies in 2022?

Could this chasm in investment mean the beginning of a wholesale shift in the sphere of influence between marketers and agencies?

Agencies that invest more in their business could find themselves in a more dominant position relative to their marketing partners, with marketers relying on them even more than they do today.

It’s possible that because of marketers’ lower levels of investment in technology, personnel, and development, they will need their agency partners to help keep them ahead of the technology curve and fill in gaps where their own personnel are lacking.

2022 could prove a banner year for marketing service firms!

Download the full report here.

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