Agencies have been having a tough time lately. With brands increasingly moving functions in-house, Brexit causing uncertainty with marketing budgets, and fears of a recession and a general tightening of belts all around. Plus, the almost weekly prediction that the agency model is dying.
But the future isn’t as dire as it seems. Agencies that respond to the future of work aren’t likely to vanish. Of course, nobody has a crystal ball and can accurately predict exactly what the agency of the future will look like, but it could be significantly different to today's model.
As MediaLink chairman and CEO Michael Kassan explains: “There has to be a true willingness for the agency of the future to be more adaptive and reflective of clients' needs. Only the ones who can adapt will survive."
Focus on tangible results
Agencies are going to have prioritise tangible results that positively impact a client’s bottom-line. Not just on growth numbers, but conversions and direct leads. The things you can measure.
This will become especially urgent if the UK economy does enter a recession or if Brexit really starts to bite businesses.
In addition, brand-side marketers will have to prove greater ROI for their budgets to be approved - a need that will be passed on their agencies.
Specialise in one niche
Specialising in a niche is one way to achieve this. It can be tempting to diversify your offering to attract more revenue from many different services - however, this is unlikely to pay off in the future.
The current client-agency model is far too complex to remain sustainable. There are some 20 different types of client-agency engagement, from full-service to in-house and everything inbetween.
Clients will increasingly want highly specialised and expert advice. They will turn to agencies for one or two tasks - not for everything.
Indeed, some argue that the agency model itself will split into just two broad areas: consultancy and production management.
Innovate for your clients
At the same time, agencies can add value to their services by keeping up with the developments that their clients don’t have time to monitor. It ties in with agencies becoming more consultative.
There are many new ways to engage more effectively with target audiences. Private networks offer an effective way to have targeted conversations within a group of engaged consumers. Dark social is on the rise as people share information off of public channels.
Autonomous vehicles will change the way that consumers consume media on-the-move. Windscreens may soon be replaced with TV screens, for example. Voice technology is becoming more ubiquitous and people will begin relying on voice search more and more. Then there’s the blockchain and cryptocurrency, which could change the ways businesses and customers transact and reduce the amount of ad fraud currently afflicting the industry.
Finally, data and artificial intelligence is gaining momentum and will drastically change marketing and advertising. Making communications far more intelligent and targeted.
Agencies that can remain at the forefront of these changes, or even collaborate with its developers, will be relatively futureproofed.
Data will soon drive every single decision made in business - including marketing. It will be key to improving results and competing for a declining share of consumer attention.
For instance, Tumi has been using AI and customer data from emails, social media and its website, to provide more targeted marketing communications and improve its digital advertising strategy.
Many agencies overlook data because they are purely focused on creative. But that won’t work in the future. Agencies will have to become more comfortable with analysing data and acting on its insights.
Data literacy goes beyond just knowing what data to use and how to use it but also about wider legislation governing its use, such as GDPR. It’s a whole new level of knowledge that agencies will have to develop and recruit.
Use more freelancers
With client budgets under strain, many agencies struggle to make ends meet. Especially when budgets are suddenly cut or a client moves a large part of agency business in-house.
As agencies seek to become more agile and outcome-focused, more may turn to contingent talent to respond to ups and downs in business. Having a network of on-demand freelancers and contractors means that agencies can bid for new business without the worry of increasing fixed overheads.
Traditional agencies are built on an inflexible legacy model that’s designed for long-term client relationships and marketing plans that span years. But times have changed and these types of clients are far-and-few between. Therefore, the agencies that will survive in the future will be the agile ones. The ones with workforces that can respond to market pressures.
Agencies with flatter structures will also have an edge. They have less infrastructure and fewer silos, meaning they will be more efficient in developing great campaigns at a faster speed. Again, remaining at the forefront of changes will be key. That can’t be done if workforces are rigid and hierarchical.
Pay structure changing
With budgets under more scrutiny, clients will move to an outcome-based model to drive results. But that causes potential issues for agencies if their pay is only linked to results. A better approach may be to adopt a flat fee structure with bonuses.
In any case, the billable hours model is fast on its way out. It misaligns the interests of the client and the agency because it doesn’t focus on results. As a consequence, innovation suffers and the best people aren’t necessarily put on a project. It also provides little-to-no useful information on the quality of work or how effective an agency is.
This shift in pay will also be reflected in employee remuneration. They may be paid in relation to what they produce, as opposed to a yearly salary. This ties back to the increased reliance on freelancers and contractors.
Naturally, there are still likely to be many different agencies of the future. Depending on client needs, market opportunities, capabilities and technology, there will still be a varied agency landscape. But, it will be much simpler to the current one.
A reckoning is coming for agencies. Today’s model doesn’t work for agencies or brands, so evolution is needed. Those that embrace the change will survive the coming days. The ones that don’t will soon become a footnote in the history books.
Photo by Venveo on Unsplash.