The rapid pace of mobile marketing innovation is changing the relationship between advertising agencies and their clients, according to new research.
The study, from SoDA (Global Society for Digital Marketing Innovators), found that that agencies that can innovate digitally and help create digital products, will continue to be needed.
Key points include:
– One in three advertising companies/brands are investing in data, mobile and product innovation
– Nearly 70% of brands/advertising companies place great importance of being seen as early adopters of technology
– But 77% of agencies cited user experience as the biggest weakness among clients
The findings reveal key shifts in marketer/agency relationships, weaknesses in advertiser expertise, and mismatches between what advertisers and agencies believe are most valuable to clients. There are also startling perception differences over clients’ attempts to transform their business, and disconnects over why clients walk away from agencies.
View the full report here:
The research also highlights steep learning curves inside agencies when it comes to acting on data insights, as well as using digital information to propel deeper personalization. As clients increase investment, agencies need to stay ahead in data, mobile and product innovation.
The Digital Marketing Outlook is based on a global sample, evenly split between advertisers and agencies, which represent a total annual marketing spend of $25.4 billion. In total there were 736 respondents, the large majority being senior company decision-makers.
• After years of dramatic growth, half the marketers surveyed are keeping digital marketing budgets level in 2014 (up from a third in 2013).
• However, there was a notable rise in spend on non-marketing related initiatives, including data, mobile and product innovation, with one in three clients increasing budgets in these areas.
• Nearly 70% of clients believe being seen as an early adopter is key or important to their brand position.
• Clients are increasingly seeking specialized digital services from agencies rather than looking for a traditional agency of record (AOR). This is in part recognition of the amount of digital work now carried out in-house.
• Agencies believe advertisers still lack digital talent, with 50% or more highlighting gaps in paid-, earned- and owned-media strategy and execution as well as user experience and product innovation.
• User experience was identified as the biggest gap on the client side with 77% of agency respondents citing it as a weakness.
• The number of advertisers working with zero agencies has risen for the second successive year, with 13% managing the process in-house (slightly up on 2013).
• The number of agency leaders concerned about off-shoring jumped almost 10%, up from 22% in 2013 to 31% in 2014.
• The number of agency leaders identifying commoditization of digital product work as a serious problem rose 9% on last year.
• 86% of respondents said the best route to future growth was product and platform creation – up 3% on 2013.
Disparities – what clients want
While all agreed marketing creativity was most important, clients rated product and service innovation second, while agencies rated it fourth in importance. Agencies rated customer-centered marketing for clients third, while clients scored it fifth in terms of priority.
Over 60% of clients felt their digital agency was excellent or good at evaluating digital trends for practical use. However, nearly one in three agency respondents (29%) do not offer any training on current or emerging trends and technologies, a missed opportunity to increase revenue and for clients to capitalize on the changes.
Why clients leave
The number one reason for clients walking away was outgrowing their agency’s ability to deliver against their needs (27%). Agencies overwhelmingly pointed to new client management as the number one reason (39%). Agency respondents ranked failure to deliver for clients’ growing needs a distant fourth, a major discrepancy. The specific service areas clients cited the most for termination was dissatisfaction with strategy (11%). Few agencies (6%) viewed this as the root problem.
The outlook is bright for agencies that offer the services clients need. Successful agencies saw more buy-in from clients, with growth in retainer-based work (up 21%) and a significant rise in agency investments (up 28%). Agencies that have invested in incubators – 50% of respondents – reported great success with talent retention and new business wins both up.
Other areas of difference
Agencies are more pessimistic about the future of AOR relationships than clients. While 57% of agencies believe AOR relationships are disappearing, half (49%) of clients believe that is the case.
Chris Buettner, SoDA executive director and managing editor of The SoDA Report, said: “Clients are doing more digital in-house than ever. But increasing levels of sophistication and elaborate in-house digital teams do not have to translate into diminished revenue for digital agencies. The opportunity is in data, mobile and product innovation – areas of high demand.
“Digital agencies that provide the core value trinity: creative marketing, innovation, and expertise in emerging trends and opportunities, can more deeply embed themselves in internal client teams, build stronger digital expertise across marketing and customer experience, and continue to prosper in 2014 and 2015.”