The development of new agency propositions, capabilities and talent, are the only defence against the ongoing pressures of the commoditisation of agencies and the pressures of short-termism. This is according to the findings of a new IPA report, launched in association with Econsultancy at Advertising Week Europe.
The research for the IPA Future of Agencies – Systems and Empathy report comprises interviews with senior agency heads and clients, innovation specialists, consultancy leaders and futurists, who reveal the impact of the changing landscape, and subsequent requirements, on agency capabilities, operating and client engagement models, remuneration structures and their approach to talent.
Says report author Neil Perkin, Founder, Only Dead Fish: “Participants in the research conducted for this report spoke of ‘waves of commoditisation’ impacting from many sides as traditional areas of agency margin get squeezed between the compounding forces of client procurement, technology and automation, and increased staff costs reflecting the need for agencies to employ a wider range of expert - and scarce -skills. Agency heads are now acutely aware of the need to transform their offering and accompanying requirements, and to transform quickly.”
Some of the key report trends:
‘Systems’ (understanding and application of technology and data capability) have traditionally been the strength of consultancy-based offers, while ‘empathy’ (human-centred insight, affinity and creativity) is a known strength of agency-like businesses. Between the two sits the world of customer experience, where the market is now coalescing and where agencies are finding their own blend of creativity, technology and data.
From agency network to the networked agency, agencies will now use networks to drive their reach in skills and capabilities, not just geographical reach. In a move towards the ways of the digital world, agencies are starting to look to more flexible, scalable networks to create an ecosystem of talent, technologies and tools. This presents a commercial opportunity as strategic alliances and partnerships offer new ways to create and capture value.
There are now 3,500 martech vendors, however, none of the client or agency respondents felt they offered sufficient understanding to lead and navigate companies and brands through the choices and decisions. This represents a high value opportunity for agencies (and others) where expertise acquired can allow them to play the role of sense-maker, diagnoser, connecter and navigator.
Key roles within agencies will evolve: strategists and planners to reflect the heightened value of strategic thinking but also the far broader client context in which they operate; with account management and client services potentially becoming key to orchestrating agency capability and ensuring mutually commercial client/agency benefit.
The mix of agency remuneration models will continue to shift, reflecting the widening forms of client engagement. More traditional forms of remuneration, such as agency retainer, will increasingly be replaced by or allied to more projectbased fees, and a mix that may include more ongoing operational or subscription-based fees, performance-related remuneration, or revenues from IP and talent.
Says Liz Wilson, Chair of the IPA’s Commercial Leadership Group and COO Karmarama: "Agencies are shifting towards scenarios where they are increasingly originating and crafting platforms for customer experience for and with clients, and eventually to a position where they are guiding real transformation in the relationship that the client has with its customers, and within the client organisation itself. With this comes a myriad of ramifications for the agency business. I therefore strongly urge all agencies to take notice of these report findings."
The report findings were discussed at the IPA’s ‘Future of Agencies: From Agency Network to Networked Agency’ session at Advertising Week Europe. Panellists included Joydeep Bhattacharya, UK Lead, Accenture Interactive; Amelia Torode, Former Chief Strategy Officer, TBWALondon; Neil Perkin, Founder Only Dead Fish; Russell Parsons, Editor Marketing Week; Leigh Thomas, Director of Global Client Partnerships Facebook; George Prest, Founder, Blood. If you missed the session, you can watch the replay of it here.
The report, IPA Future of Agencies – Systems and Empathy - is available to purchase (£50 for non-IPA members, £25 for members) PDF or hard copy.