What brands need to know about the future of agencies

What does the future hold for marketing agencies? It’s an increasingly urgent question as a variety of factors – such as technological change, pressures on margins and tighter time-scales – prompt agencies to reconfigure the way they work. Everything is on the table and up for renegotiation, from operating models to remuneration and approaches to talent.

These issues are explored in a new report entitled ‘The Future of Agencies’ by the IPA and Marketing Week sister title Econsultancy, which is based on a series of in-depth interviews with a range of senior agency and marketing professionals. The findings will be discussed on a panel at Advertising Week Europe today (23 March) hosted by Marketing Week editor Russell Parsons and featuring a mix of agency marketers.

One of the report’s core considerations is the potential conflict between “systems and empathy” within agencies and how this dynamic could shape the future. It notes that there is a great deal of value that agencies can offer clients through the application of ‘systems’ such as data, technology and “technical delivery at scale”, but also value in the empathetic qualities that they can bring, such as “human-centred insight” and creativity.

“Systems-empathy is not a binary choice for agencies,” the report says. Those interviewed for it “echoed again and again the need for agencies to have awareness and degrees of understanding right across this spectrum, and to consider carefully how they bring these two very different dynamics together to create propositions and positioning”.

The convergence of systems and empathy

The report suggests there is already evidence of convergence between the two qualities, with various large consultancies that specialise in systems and professional services looking to acquire creative agencies. This includes Accenture buying Fjord and Karmarama, and Deloitte’s acquisition of Heat. “At the same time agency holding companies are beefing up their data and technology expertise to combine it with their creative capability,” the report states.

“WPP goes on an ad tech company acquisition spree and sets up new technology units across Group M focused on addressability across all media. Publicis acquires SapientNitro and brings it together with Razorfish. Left brain is meeting right brain in the industry. This is the dynamic that will shape the future of agency capability.”

Too many agencies have reneged on their obligation to train. I don’t think that’s good enough any more.

Amelia Torode, TBWA\London (formerly)

Amelia Torode, former chief strategy officer at TBWA\London and a speaker on the AWE panel, says most traditional agencies “veer towards empathy” and that getting the balance right with systems-led capabilities requires training and professional development. In this regard, she believes many agencies have failed.

“For the last decade, too many agencies have reneged on their obligation to train and have basically said, this is a brave new world, let people learn on the job. I don’t think that’s good enough any more,” she says.

“Agencies have to recommit to putting money into really professional training. If they don’t, I think we will lose considerably to consultancies that do invest in training.”

Torode also predicts that the agency world will see “an outflux of talent” over the next five to 10 years as the most talented people extricate themselves from “big, clunky, networked” agency structures in favour of picking their own projects as freelancers. Agencies must trial new operating models to avoid this and to make themselves “easier [for clients] to buy”, she says.

“The smart people are getting fed up of big agency politics and I think their eyes have been opened,” adds Torode. “It’s very possible to create what you might call a portfolio career where you pick projects or partner with different strategists and app developers and makers, and create a way of working that feels much more 21st century. Many of the agencies were born in the last century and some are starting to creak.”

New operating models

Self-storage company Safestore has radically redrawn its relationship with agencies as it was dissatisfied with existing models. Last year the business created several new in-house roles – including digital outreach executive and content manager – as it looks to end its reliance on agencies.

One of Safestore’s primary targets for 2017 is to bring anything it can in-house. All content campaigns, outreach and PR is now carried out in-house and the business has also started producing video content, sometimes outsourcing the work to freelancers.

Tiffiny Franklin, who joined as digital outreach executive, claims the company is seeing “far greater results for a fraction of the spend”. One of Safestore’s biggest gripes with agencies was their failure to understand its business model and communicate it to consumers.

“Safestore is quite a tricky product [to convey],” says Franklin. “We were finding that a lot of the creative agencies were trying to shoehorn in creative content campaigns and use creative ideas that had worked for other clients they had worked with. They were trying to put a square peg in a round hole because we don’t quite fit into the same B2C customer relationship that other brands do.”

Agencies are going to have to offer more bespoke packages to people and offer better value for money.

Chrissie Saunders, Safestore

In addition to cutting down on the number of agencies it uses, Safestore has renegotiated the retainer for SEO services that it still hires from a digital agency. Chrissie Saunders, who joined as in-house content manager last year, argues that all agencies should show greater flexibility in their contracts with clients.

“I think agencies realise now that more clients are in a similar position to us and they need to be more flexible with their retainers and say ‘OK, you don’t need the full package, we can just do the SEO for you, or we can just do other bits and pieces depending on what you need’,” she says.

“Agencies are going to have to offer more bespoke packages to people and offer better value for money.”

This view is reflected in the IPA and Econsultancy report, which identifies “a notable shift towards more agile working practices” in many agencies. “While two years ago these approaches were restricted to the most progressive agencies, it is now apparent that this way of working is emerging as an underlying trend shaping the future of agency-client engagement,” it says.

The role of technology

The increasingly important role of technology in agency propositions is a common theme throughout the report. It states there are clear opportunities for agencies to deliver benefits to clients by not only making sense of new technologies, but also by helping to “operationalise” and then optimise them.

“The customer experience revolution requires marketing and communications to be integrated seamlessly into wider brand experience and a broad set of touchpoints facilitated by technology and increasingly automation,” the report notes.

More and more agency partnerships are built around technology. Last month, online investment service Wealthify appointed creative agency Isobel to produce its first advertising campaign. The fintech business claims to have “a mission to democratise investing” by offering a simple online process through which anyone can sign up and create personal investment plans that they can manage on their phones.

READ MORE: What marketers can learn from the ‘fintech’ disruptors

Sally Allan, chief marketing officer at Wealthify, says Isobel’s understanding of technology and its business model was an important factor in choosing the agency from the pitching process. “Assuming that creative and planning excellence are a given, as a tech startup and digital business we want to work with agencies that understand the digital landscape and proactively search out new channels and opportunities for growth for our business,” she adds.

On the agency side, meanwhile, Isobel’s managing partner Paul Houlding agrees that “tech has become critical” to the way creative agencies think and work with clients. He adds, though, that there remains “no such thing as a catch-all client”.

“It’s not been easy for anyone but agencies will only thrive in a rapidly changing market if they can clearly understand what value they offer clients,” he says.