Report: Agencies To Become More 'Product Oriented' Post COVID-19

by Larissa Faw , July 29, 2020

One in four respondents to a new survey of mostly smaller agencies from Ad World Masters believes the agency market will be much more “product-oriented” post-pandemic, which means shifting away from creative partnerships to selling agency services as products.

Slightly more executives believe broad competencies will prove to be a competitive advantage in a post-pandemic world versus narrow specialization (35% vs. 24%).

However, one in three (34%) feel brands will continue to build in-house competencies for marketing in 2020-2021. Moreover, 28% of them think that brands will use more freelancers in 2020-2021 than they did before.

Over one third (36%) of creative companies’ leaders feel that in-house marketing of brands leads to reduced marketing budgets. “This is a problem for agencies,” according to the report.

“Agencies will have to adapt to an environment in which they collaborate with client’s different marketing divisions, freelancers and other agencies. Agencies do not have to assume a leadership role. Instead, an agency’s role is more often secondary and functions like a module, easy to replace when it does not meet the client’s desired criteria.”

The tech giants will continue to grow even more powerful. One in three (35%) think the biggest market players — Google, Facebook, Amazon, Microsoft and their ad systems — will gain in 2020-2021, versus only 10% who hold an opposite opinion.

Nearly twice as many executives agree with the statement “As a result of the pandemic many small agencies will gain, and a lot of larger agencies will suffer or even go bankrupt” than those who think the opposite.

Agencies considering reduction in workforce point primarily to the following areas: administration 25%, client service 17%, management 15% and art direction 14%. At the same time, 12% of agencies say they are planning to employ new staff and 17% say new hires are “very likely.”

Those jobs are primarily concentrated in social media employees (36%), web / app coders (30%), new business (28%), and client service (27%).

“We can’t say that all agencies can adapt to the new normal, some agencies specialized in event or experiential may have already gone bankrupt,” says Thomas Lavernhe, CEO, AdworldMasters. “But not every niche is doomed, and even the less promising niche will find some survivors during these times. History will tell the facts, but I am guessing this situation already acted as a catalyzer for the digital transformation of many industries.”

The survey was conducted in March.

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2 comments about "Report: Agencies To Become More 'Product Oriented' Post COVID-19".

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Ed Papazian from Media Dynamics Inc, July 30, 2020 at 9:20 a.m.
Larissa, as you point out at the outset, as the respondents were mostly from small agencies it goes without saying that the survey finds that large shops are in trouble while small agencies will be on the upswing. Same goes for the services required. A small agency usually does only part of the job and a client must farm out various duties--like TV time buying/media planning, commercial production, research, etc. to free lancers or specialized shops as needed. But the larger agencies offer a lot more than specialists to perform various functions for a client's organization. The larger agencies help the client's marketing team in developing positioning and advertising execution strategies, they often get in volved in suggesting new products, they conduct or have access to all sorts of research not available to smaller shops, etc. What's more, as small agency clients grow, they invariably switch to larger shops which provide a more comprehensive range of guidance and services---when the client is orgaized to utilize them.
Reply

Thomas Lavernhe from Ad World Masters replied, July 31, 2020 at 9:31 a.m.

Ed, you are right there is definitely a correlation between the size of one agency and its array of capabilities that matches with the client's size. I think you can find interesting the finding from a report from the WFA named: "The Future of Agency Rosters"; it underlines that even for larger clients (in terms of ad spend), the most common roster model remains to collaborate directly with multiple agencies that are managed by marketing. The model that you cite with a main lead agency and specialists, while being broadly used with different structures and hierarchies appears to be only a secondary model even for large clients. I do not think this model is worst or better, I think each client needs to find what works for itself, but I also believe in our times, specialists have an edge as long as the internal marketing is capable of managing them.
Sincerely
Thomas Lavernhe, CEO at https://AdWorldMasters.com