Many industry analysts predicted 2020 to be the year of change in agency-client relationships. Media and marketing consultancy ID Comms forecasted (pre-pandemic) at least a half dozen multibillion-dollar media pitches in the first quarter alone.
In actuality, new business revenue was down about 30% for Q1 compared to the same 2019 period as marketers delayed activities as a result of the health crisis, according to an analysis by R3 Worldwide.
Now, agency leaders are cautiously looking forward to see if the coming six months will unleash the floodgates of competitive pitches or whether the entire year will be written off as a disappointment.
MediaPost queried agency leaders on their expectations and found most of them expect pitches to accelerate during the next six months.
The top reason clients will review is a lack of support from incumbents, states one CEO. Most clients in the current climate need more support right now, not less. Agencies, paradoxically, have cut down on their customer relations and staff positions seen as less essential to the bottom line. Holding companies were especially hit hard by ad spend cutbacks that have led to staff cuts and furloughs.
At the same time clients still expect the same levels of performance and attention, yet agencies have fewer bodies, lower employee morale, and leaders likely to be distracted with these internal struggles.
And clients are aware of these struggles. “It's always clear and intuitive when any partner is struggling so I don’t think smoke and mirrors would matter if in fact that was happening, you can’t hide a fire,” says one executive.
Clients are value-conscious, but it is not just “I had to lay off X% of my team and want to just save money off my agencies,” explains another executive. Instead, these brands want to find a newer, better model of working as well as align their internal operating models with external agencies to make the best fit. That said, procurement still matters, probably even more so now than ever and is still commonly mentioned as a motivation for new RFPs.
Another leader adds that coming out of the pandemic, many brands will look at augmenting their agency rosters purely based on the way agencies partnered and performed or didn’t for these brands during the crisis. “One thing I know for certain is that some agencies will have excelled during this time and some will have been distracted and failed,” says the head of one agency.
Independent agency leaders, in particular, feel they are well-positioned to pick up business. This has been a “chickens will come home to roost” moment for the major networks,” quips one agency head.
The high numbers of layoffs at the holding companies will unquestionably impact service levels and clients are likely to be less satisfied with the output. Those firms are also at a disadvantage through their usage of “musical chairs” where they spread the work among more and less senior people. “This strategy does not work even in good times,” believes one agency head. “You need teams that own the work not just a fancy scope spreadsheet that adds up to 100.”
Ultimately, the remaining half of the year is likely to see “more clients changing agency partners, but with fewer traditional agency-of-record relationships,” adds another agency source. “Clients want different. They want more content in more forms, more data and more decision support. They want outcome-based which requires more testing and more types of interconnected work probably for less money. Those that thrive in these reviews will be the real agencies of the future.”