SoDA Unveils the Changing Face of Client-Agency Relationships

By | May 6, 2014
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Chris BuettnerBelow is a guest post from Chris Buettner (@sodaspeaks), SoDA executive director and managing editor of The SoDA Report.

In a wearable tech, internet of things-obsessed world, it’s easy to overlook that human beings are at the heart of marketing. That’s why the first edition of The SoDA Report 2014 explores themes around human value systems, creation and delivery from a wide variety of perspectives.
The report features curated editorial, contributed by leaders of some of the world’s top digital agencies and production companies. Essays complement case studies from brands, such as American Express, Adobe, EA Sports, Walmart, Nike, Google, IBM, Samsung, BMW, MINI and more.
Included in the report are also the results of the annual Digital Marketing Outlook (DMO) survey, which identifies the changes taking places across the industry. Conducted in partnership with Econsultancy, DMO is based on a global sample, evenly split between advertisers and agencies, and representing a total annual marketing spend of $25.4 billion. There were 736 respondents; the majority were senior company decision-makers.

Key Report Findings

The findings reveal key shifts in marketer/agency relationships, weaknesses in advertiser expertise, and mismatches between what advertisers and agencies believe are most valuable to clients. There are also startling perception differences over clients' attempts to transform their businesses, and disconnect over why clients walk away from agencies.

In addition, the research highlights steep learning curves inside agencies when it comes to acting on data insights and using digital information to propel deeper personalization. As clients increase investment, agencies need to stay ahead in data, mobile and product innovation.

  • After years of dramatic growth, half the marketers surveyed are keeping digital marketing budgets level in 2014 (up from a third in 2013).
  • However, there was a notable rise in spend on non-marketing related initiatives, including data, mobile and product innovation, with one in three clients increasing budgets in these areas.
  • Nearly 70% of clients believe being seen as an early adopter is key or important to their brand position.
  • Clients are increasingly seeking specialized digital services from agencies rather than looking for a traditional agency of record (AOR). This is, in part, recognition of the amount of digital work now completed in-house.
  • Agencies believe advertisers still lack digital talent, with 50% or more highlighting gaps in paid-, earned- and owned-media strategy and execution, user experience and product innovation.
  • User experience was identified as the biggest gap on the client side with 77% of agency respondents citing it as a weakness.
  • The number of advertisers not working with an agency has risen for the second successive year, with 13% managing the process in-house (slightly up compared to 2013).
  • The number of agency leaders concerned about off-shoring jumped almost 10%, up from 22% in 2013 to 31% in 2014.
  • The number of agency leaders identifying commoditization of digital product work as a serious problem rose 9% on last year.
  • 86% of respondents said the best route to future growth was product and platform creation—up 3% on 2013.

Why Clients Leave

The number one reason clients cited for walking away was outgrowing their agency’s ability to deliver against their needs (27%). Agencies, overwhelmingly, pointed to new client management as the number one reason (39%). Agency respondents ranked failure to deliver for clients’ growing needs a distant fourth, a major discrepancy.

The specific service area clients cited the most for termination was dissatisfaction with strategy (11%). Few agencies (6%) viewed this as the root problem.

Agency Opportunities

Clients are doing more digital in-house than ever before. However, increasing sophistication levels and elaborate in-house digital teams do not have to translate into diminished revenue for digital agencies. The opportunity lies in data, mobile and product innovation—areas of high demand.
Digital agencies that provide the core value trinity: creative marketing, innovation and expertise in emerging trends and opportunities, can more deeply embed themselves in internal client teams, build stronger digital expertise across marketing and customer experience, and continue to prosper in 2014 and 2015.

What industry trends are you seeing? Share them below.