How The Agency Model Can Adapt to the New Era of Digital Marketing
The agency model isn't dead; it's just evolving. Here's how technology and the rise of the gig economy is changing how brands procure marketing services.
"The Death of the Agency Model" is a concept that has bounced around the agency and marketing procurement world for a number of years now. Spurred by an evolving marketing environment, the rapidly changing nature of how people work, and disruptive new technologies, marketing agencies are being forced to adapt in real time or die trying — and procurement departments are not far behind.
So, is the traditional agency model truly dead? According to most reports: no, but it is evolving.
In a recent article, the Association of National Advertisers gives us a clear view of the current landscape:
"Early on there were 'above the line' full-service agencies and 'below the line' shops such as sales promotion, direct marketing and PR. Over time, specialists in diversity advertising, shopper marketing and digital media have come into vogue," says author and Principal at AARM, Cliff Campeau. "Specialization led to fragmentation and full-service agencies fell by the wayside. Marketers, in turn, saw their agency networks expand in size creating a range of agency stewardship and coordination challenges."
Agencies may be fracturing, creating new challenges for procurement. But there are also opportunities. Here are just a few ways the agency model is changing and how procurement can adapt.
These days, agencies don't just provide services; they also tend to play the role of "technology broker." It's rare to find a marketing or advertising agency that isn't fully invested in one technology stack or another, providing discounts and frictionless onboarding to the companies that hire them.
This enables agencies to provide their clients with more capabilities and hands-on education in using new marketing technologies.
Ebiquity, a leading marketing and media consultancy, recognizes the importance of onboarding new technology solutions to help their clients, which is why they partnered with "1-to-1 Platform" producer Evergage to deliver more personalization capabilities to their clients.
"This partnership with Evergage will enhance our clients' experience and provide them with the right modeling to deliver a maximally relevant, individualized experience," said Maigari Jinkiri, chief revenue officer of Ebiquity in a press release. "Evergage empowers us to utilize our full stack of data collection, reporting and analysis, optimization and personalization services so that our clients can drive intelligent, relevant messaging no matter which channel their customers choose to engage."
More and more agencies aren't just providing their clients with creative assets and ideas, but with new, technology-backed capabilities as well. Procurement will be tasked with identifying which highly specialized providers will best suit their organizations' needs.
Historically, the agency model was structured around different segments or teams, each of which had an assigned role. For example, account managers acted as the face of the agency, interacting with clients and fostering strong relationships. Meanwhile, the creative side of the agency operated in the backend, rarely revealing the "secrets" to their processes.
This model worked for decades. It allowed companies to outsource their entire marketing department and save on costs, worrying only about their relationship with their agency.
But from a procurement perspective, this arrangement is no longer ideal. The organization is often left waiting for tasks and assets to be completed with little to no transparency into the agency's process. Furthermore, it's much to difficult to identify wasted spend and track ROI. As a result, more organizations are bringing the creative side of their marketing apparatus in-house.
Take the international consumer goods company Unilever as an example. A recent news report revealed that their digital content creative arm, U-Studio, was "creating content for brand teams faster and around 30 percent cheaper than external agencies" according to the company's 2017 annual report.
U-studio now operates in 18 countries. It has essentially replaced the need for Unilever to outsource the creative side of their marketing engine. Although Unilever still approaches external companies for strategic ideas, they blend them with their internal teams for faster turn-around.
Additionally, the role of freelancers in the workforce is expanding. There were an estimated 56.7 million freelancers in the U.S. alone in 2018, up 3.7 million from 2014. If this trend continues, the majority of the U.S. workforce could be made up of freelancers by 2027, according to a survey by the Freelancers Union.
In addition to partnering with technology agencies and using in-house teams, many procurement departments may also soon need to manage an army of freelancers. This could be for one-off assignments or as long-term retainers. To do so, procurement professionals will require new solutions and processes to find, vet, and monitor contractors.
The "full-service" agency is no longer sustainable, which has good implications for companies looking to procure marketing services, but also some new challenges. For one, they have more choices than ever before and can trust that the agencies they hire are more specialized.
But specialization also makes the job of procurement more complex. There are more suppliers to manage, so it can be more difficult to manage spend and ROI.
In order to adapt, procurement professionals will need a single source of truth for managing their marketing suppliers and spend. They'll also need to cut waste wherever possible, relying on smaller, more specialized teams or freelancers to provide services where large agency packages are no longer necessary, and investing on in-house talent whenever possible.