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.