This year has been better than last year for marketing agencies, with most finding more new business opportunities in 2021 compared with 2020, according to recent research from RSW/US.

The annual report was based on data from a survey conducted in September and October 2021 among 120 executives who work for marketing, advertising, and PR agencies.

Some 51% of marketing agency executives say the number of new business opportunities has increased relative to last year and 37% say it has stayed the same.

Only 12% of marketing agency executives say the number of new business opportunities has decreased relative to last year.

Some 38% of marketing agency executives say obtaining new business in 2021 has been easier compared with last year and 35% say it has stayed the same.

In 2020, more than two-thirds (67%) of marketing agency executives said obtaining new business had become more difficult compared with the previous year.

Marketing agency executives say the most effective tools/approaches for generating new business over the past year have been gaining business from existing clients and referrals.

Published on November 10, 2021

Thanks to Marketing Profs!

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.

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.”

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.

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.