The State of the Agency - Client Relationship
Agency and production company respondents in this year’s survey are decidedly bullish on their relationships with clients. A whopping 69.5% of agency and prodco leaders who chimed in with their opinion indicated that the dynamic of how brands and agencies are working together is improving overall.
This is arguably due to the fact that an increasing number of agencies are “walking the walk” of real transparency in their client relationships. SoDA members – and other top companies in our industry – are creating highly innovative and collaborative workflows with clients that are paying quantitative and qualitative dividends. We encourage the readers of The SoDA Report to explore some of those best practices that are highlighted within our Industry Insider and Modern Marketer section in this edition.
The Client/Agency Dynamic
Click graph below to enlarge
Agency respondents at independent shops were even more optimistic about the state of agency-client dynamics.
- 72.3% of independent agency respondents who chimed in with their opinion on this question thought the brand-agency dynamic was improving
- Meanwhile, only 62.5% of holding company agency respondents believed that to be the case.
What Clients Want
In contrast to the 2014 DMO Study, this year’s research reveals significant congruity in client and agency perceptions of what’s important to clients.
To gauge YOY trends, we once again asked both clients and agencies to rank the areas of expertise they believe to be most valuable for client organizations. Here’s what they said:
Q. (Agencies) What do your clients value most in their relationship with your organization?
Q. (Clients) Generally speaking, what do you value most in agency relationships?
Click image to enlarge
Our 2015 DMO study indicates that agencies are clearly more in tune with the needs of clients. While there was only one match between clients and agencies in 2014, the 2015 results revealed matches in five of seven areas as shown in the graphic above.
The 2015 results, however, do reveal a missed opportunity by agencies in the area of data and analytics. Clients are clearly looking for more expertise and support from their agency partners in the mission critical area of data science than agencies believe to be the case.
Why Clients Leave
In last year’s study, we revealed significant discrepancies between clients and agencies in terms of their thoughts on why clients terminate agency partnerships. Like last year, the No. 1 reason cited by clients in our 2015 study was that their needs had outgrown the agency’s ability to deliver. Meanwhile, agencies continued to assert that changes in management were the number one reason they got the axe.
In this year’s study, however, there was direct alignment between clients and agencies when it came to the 2nd most cited reason that clients terminate – Cost Overruns. In last year’s study, cost overruns ranked a distant 4th in the eyes of clients as the primary reason for terminating an agency partnership.
This underscores just how critical it is for agencies and production companies to improve their scoping and estimation practices in order to boost client retention. Agency/prodco respondents in this year’s study are keenly aware of the need to step up their scoping game as evidenced by their self-assessment of their estimation skills.
Q. (Client) Thinking about your most recent experience with terminating an agency, why did that relationship end?
Q. (Agencies) Thinking about your most recent experience with being terminated by a client, why did that relationship end?
We also allowed respondents to add color commentary around the issue of why clients terminate. Consolidation and insourcing also emerged as major themes among the respondents.
“Consolidation of brands under one agency.”
“Agency personnel turnover too high.”
“Cost structure too high”
“Decided to create our own team [in-house].”
“Desire to control services internally”
“Shift to in-house”
“Taking work in-house”
“Thought they could accomplish cheaper/faster in-house”
“Establishing in-house team.”
Our personal favorite. “No accounting for crazy.”
Clients on Their Agency Partners: A Lukewarm Assessment
SoDA’s 2015 study points to the acute need for agencies of all stripes to focus on client satisfaction in order to drive improvements in customer loyalty and to enable profitable growth.
While almost 7 in 10 agency respondents reported that the dynamic of how brands and agencies are working together is improving, clients are not yet strong advocates for their agencies to the extent that they would recommend them to other client-side colleagues. In this year’s study, we asked clients how likely they were (on a scale of 0-10) to recommend their agency partners to a friend or colleague. We inquired about those agencies primarily responsible for digital marketing efforts as well as agencies responsible for other marketing efforts at their companies. Here’s what they had to say.
Q. How likely are you to recommend the following agency partners to a friend or colleague?
On the whole, clients surveyed in this study can be classified as agency “detractors” based on Net Promoter Score (NPS) methodology. Any NPS score under “6” indicates that these clients are generally unsatisfied and can damage your brand and impede your growth through negative word of mouth. Agencies (and other companies in the digital industry) must reinforce efforts on client satisfaction in order to retain relationships and fuel future growth.
When we segment the results based on the ownership structure of the agencies, independent agencies (5.4) performed better than the overall average.
A company’s actual NPS score is a percentage, calculated by taking the percentage of your “promoters” (i.e., those who rank you 9 or 10) and subtracting the percentage of your “detractors” (i.e., those who rank you 0 to 6). Based on that definition, agencies in our 2015 study had a significant negative double-digit NPS score.
In order to secure a positive, double digit NPS score, more companies in the digital service industry need to open up and have a candid dialogue with their clients. One way service is no longer acceptable, as customers want to be heard and involved in the discussion to find solutions. Emily Wengert of Huge and Jordan Eshpeter of Invoke both underscore this necessity in their articles within the Industry Insider section of this edition.
Those agencies who have the leadership commitment and businesses processes in place to monitor customer satisfaction and to act on that client feedback are likely to win in the medium-to-long term.
Are Clients Organized For Innovation?
Clients and Agencies Opine. For the first time in this year’s DMO Study, SoDA asked both clients and agencies their opinion on clients’ organizational structures and whether those structures facilitate or hinder their ability to innovate and spur positive change. Here’s what they said:
Q.(Clients) “My company’s current organizational structure (facilities, hinders, neither facilitates or hinders) our ability to innovate”
Q.(Agencies) “Our clients’ current organizational structures generally (facilities, hinders, neither facilitates or hinders) our ability to innovate”
My company's current organizational structure...
Click graph below to enlarge
Our clients' current organizational structure...
Click graph below to enlarge
The perceptions of clients and agencies on this question are diametrically opposed. More than two in five agencies see client organizational structures as a major impediment to innovation. More than 40% of clients, on the other hand, believed their company’s structure actually helped enable innovation.
From the agency’s perspective, organizational complexity in large client organizations is clearly seen as a roadblock that can suffocate innovation. The intricacies of developing a new product or service on the client side can also lead to missed market windows.
Many client organizations, however, are becoming much more agile and responsive to their customers’ needs – albeit perhaps not to the extent that agencies would like to see.
Clients and Agencies Assess Their Digital Savvy
Q. How do you rate your organization on the following? 0-10 (Clients, Agencies and Production Companies were evaluating themselves on the three attributes listed below)
Sophistication with User-Center Design
Taking Advantage of Emerging Technology and Trends
Driving Digital Innovation within our Competitive Set and Incubating New Products and Services that are Transforming Categories
The capabilities analyzed above (user-centric design, emerging tech & trends and product incubation) constitute our Top Three Picks for growth areas in agency-client collaboration in 2015. While one could argue that agencies and prodcos simply have an inflated sense of their capabilities in these three areas, it is undeniable that a large and growing number of agencies in the digital services industry have developed a wealth of expertise in UX, technology trends and product incubation – both in their work with clients as well as through their efforts to bring their own IP to market.
In contract, the client-side talent gap in User Experience has been well documented in each of the last three SoDA Digital Marketing Outlook studies. This year’s study also revealed that expertise in emerging technology and trends is the area that clients value most in their agency partnerships – a finding that makes perfect sense based on their mediocre self-assessment in this area.
The potential to spur positive change across a wide array of industries has never been stronger if resources and agency ecosystems are aligned to stimulate innovation. Agency-client partnerships forged via a sober analysis of strengths in these three areas are likely to yield strong benefits for agencies, brands and consumers.