Cutting Rosters: Clients Unhappy With Agency ROI, Performance

by Steve McClellan , October 9, 2012

Avi-Dan For years now, the ad industry has talked of the need to be nimble in the digital era’s shifting media landscape, while showing clients the ROI agencies provide.

But a new study from marketing and agency search consultant Avidan Strategies shows that clients aren’t impressed with recent agency output -- and are cutting back on their agency rosters.

According to the study, just over half (51%) of the business leaders responding to an online survey stated that they have been reducing their roster in the past three years.

Some 44% said their rosters are still too big and they plan to consolidate further. Asked what type of agencies they plan to cut back on next year, most -- 69% -- cite digital agencies and 48% cite creative agencies.

Detailing the survey results on a Forbes blog on Monday, Avidan Strategies founder Avi Dan said the study “reveals a fundamental tension between clients operating in the current tough environment, with the sense that agencies are not pulling their weight.”

Asked what their main area of frustration is with agencies, 71% responded that it is accountability -- a frustration that looms larger, given growing demands inside their own organizations, particularly from the CEO and board levels, for greater demonstrations of marketing ROI effectiveness.

“Corporate America is questioning the return on their advertising investment, and agencies continue to struggle to prove their value,” Dan wrote. “Agencies need to become more proactive in experimenting with different business models. Today’s agency models are constructed to suit the agencies, not the clients.

"They need to embrace measurement and integration as an intrinsic part of their offering, if they want to be perceived as having a higher value by marketers. It is high time to acknowledge that the economic model of agencies is broken," Dan added.

According to the survey, big agencies in particular need to sharply improve their performances with 73% of respondents, indicating that small- and medium-size agencies are more creative. The major ad holding companies also have big perception problems, per the survey, with 85% saying they have not improved service to clients, and are viewed as “inefficient and unable to overcome internal territorial disputes.”

Agencies are also falling short when it comes to delivering integrated communications programs with 72% of marketers saying agencies are “inconsistent and need to improve,” in that space.

Despite much agency chatter about the importance of digital capabilities, nearly half the marketers in the survey (46%) said that agencies “are struggling in transitioning their business model to incorporate a more digital platform.”

“The alternatives are clear: maintain the status quo and sustain a slow descent to irrelevancy with cuts in quality as margins erode; or improve margins, and attract and retain top talent by making their offering more relevant to their customers’ needs," he concluded.

advertising, agency, brand marketing, marketing

4 comments about "Cutting Rosters: Clients Unhappy With Agency ROI, Performance".

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Mike Einstein from the Brothers Einstein, October 10, 2012 at 10:21 a.m.
I had an experience recently that brings this article's point home in spades...A couple of months ago, I made a call on a big media agency that had just won a huge beer account. The meeting was held in the very office that had previously housed the former agency and the kid in front of me was sitting at the same desk previously occupied by a peer of his from the former agency. In fact, the agency's name on the door hadn't even been changed (I had to ask the receptionist if I was in the right place). Worse yet, and more to the point of this comment, the new kid on the block had the same vapid look on his face that the former occupant had. Now I know where the Legos folks got their inspiration.
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Jenny Faker from na, October 10, 2012 at 1:16 p.m.

Great article. I know that most agencies in the industry have yet to integrate mobile apps into their marketing mix. I'm not talking about in-app ads, but actual, interactive brand and promotional apps. This is astonishing, considering this is arguably the best channel ever created for engaging target audiences everywhere. And it's not like agencies need to invest in hiring developers to author custom native code. There are a handful of mobile app developers who have created CMS platforms (like updating your facebook account). These are easy to use, and give marketing associates the ability to modify and update an app in real-time, no tech savvy required. For example, I know for a fact that AVAI Mobile Solutions (avaimobile.com) has a platform that supports this model. And what's nice about these platforms is they can have you up and running quickly. So for marketing agencies that have resisted this channel, within weeks, they have the opportunity to catch up with agencies who have been developing apps for years.

Heather Dougherty from Self-employed, October 11, 2012 at 3:07 p.m.

This isn't the first time I've seen this reported and it likely won't be the last. What I find interesting — and mind you my agency experience is with small to medium sized agencies — is that, at least where I've worked, we WANT to partner with clients in exactly the ways they've identified in the survey results. However, more often than not, they are not willing (or able) to pay for the performance management (tracking, testing, reporting/analysis), have disparate systems that make evaluating true ROI impossible or are structured such that the marketing department can't affect the business changes we recommend to drive the ROI they're being held accountable for. Regarding performance-based compensation, it is a topic of discussion at our agency, actually. It's a matter of working out the details, though — after all, we're a business too and need to protect our own profitability.

Please send us these dissatisfied clients who want nothing more than to empower their agency partner to truly help them impact their bottom line!

Lyndon Williams from alittlebitwrong, October 11, 2012 at 4:44 p.m.

I'm going to agree with Heather here. There are large gaping holes in this article, which should be filled with references and links to other articles that support the arguments of this particular piece of opinion. There is also some blatant common sense that is omitted. There are somethings which are unknowable. Period. Let us not pretend that we know everything, all the time. There is a great deal of hit and miss in most things in life, and that does not exclude advertising or brands. Some agencies strike a chord and they generate ROI through shifting boxes. Some brands have below par products and services, which no amount of advertising can save. I am not surprised in the slightest that agencies are expected to improve. Shareholders and owners of companies expect the same. I would daresay that a degree of agencies are "unhappy" with the blind ignorance and obstinance that some marketing teams approach their agencies with. Perhaps agencies should now factor in to all of their projects metrics, to cover themselves, however this will drive the price up in the short term. It is the same as buying a basic model of a car. If you want all the bells and whistles to upgrade, you're going to pay. So maybe the bar needs to be set higher with the bells and whistles included from the get go. We're going to need to test things out and adapt. Everybody always needs to improve to stay relevant and competitive. Not just agencies. Everybody.