What will successful marketing services agencies look like in 2020?
Read time: 5 Minutes
Obsolescence and recession are once again gathering like storm clouds over the advertising sector. But we could also be seeing the dawning of a strategic and long term pivot for an industry that has so often been twitchy and reactive.
Agencies are being forced to observe the first rule of marketing; fulfilling their clients’ needs.
Yes, the irony won’t be lost on you but think about this: advertising agencies came about in the 1860s to help newspapers sell more advertising. Back then, they were fulfilling an actual need with demonstrable economic impact. Lots changed over the next 160 years. However, as we hurtle towards 2020, perhaps a year for perfect vision, most agencies remain stuck at a crossroads.
It’s not about digital vs. traditional, nor is it about one-stop-shops. The client base for agencies is transforming rapidly. And the agencies are having to rethink how they are meeting the transformed needs of those clients. I believe agencies are in a strong position to address this challenge.
Over the last three years, BDO have sought to understand more about this challenge for agencies and the other side of the same coin, how brands are investing. We have worked with our research partners at WARC and the University of Bristol to speak directly to those who are making the key decision on direction of travel and investment. Here’s what we have learnt:
The money is moving towards martech, data science and customer experience. Why? Because these are the tools that brands and advertisers believe will consistently get them where they want to be in a fast moving, digital world.
Masterchef or Nutritionist?
I am a keen cook. I spend time planning meals for guests and family and thoroughly enjoy cooking those feasts. It was while cooking and reading a draft of the Martech Report that I realised what agencies can learn from the world of food.
Agencies need to work out how they are going to help their clients create value? I think they have to choose to be either nutritionists or chefs.
As ‘nutritionists’, their role will be to understand how and why their clients are facing commercial issues or challenges. They will need to be experts in collating and analyzing the huge amounts of data about both their clients and their clients’ clients. Data science will be their stock in trade.
Finally, they will recommend a ‘diet’ of marketing activity to solve the issue and help their clients find the right martech tools, among the more than 7,000 available to achieve success.
This approach will answer two needs that brands clearly have. It will allow brands to step away from the contentious and risky business of handling personal data and it solves the problem of working out what martech to invest in. For agencies, the benefits are a focus on high value activities rather than commoditized productions.
The alternative is for agencies to become like kitchens. They will bring together all the best (martech) tools and some of the best cooks to deliver a full menu of dishes for their clients. The menu will have been designed by someone else, possibly a nutritionist, but every aspect of production will be handled by the kitchen, including compliance and reporting. This full service could potentially extend as far as lead generation and even actual sales.
Brands will outsource whole campaigns to an agency on a project basis. They will have the flexibility that comes from separating the data analysis from production. They will also completely sidestep the issue of how or whether to invest in martech.
How this impacts M&A
We believe there will be ongoing consolidation in the martech and marcoms sectors. Right now, there are simply too many vendors offering similar solutions. We expect agencies to realign with the needs of their client base as explained above and to occupy either the consultancy space or the production space.
Whether or not it will be tenable to offer both remains to be seen. For media owners, it is a time for reinvention and creativity. The market requires data friendly channels to market and it’s encouraging to read in the Martech report that most brands do not expect media budgets to decrease despite continuing global uncertainty.
Our Martech report has been an invaluable guide for advising our advertising agency and marketing services clients on M&A strategy. For those clients at a crossroads, it's a signpost towards their future success.
To discuss any of the issues raised in this article or to schedule a meeting to discuss the future of your business, please contact Damian Ryan.
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