Putting aside the perennial complaints about pitches being too costly and time-consuming, the rise of the consultancies and a trend towards in-housing are now taking their toll.
What’s more, agencies’ less-than-transparent billing model looks close to breaking point, while there’s an apparent dissatisfaction from clients about the lack of expertise for new communications channels that often inexperienced staff at large agencies possess.
According to research by the World Federation of Advertisers, clients give their current agency roster set-up a score of just 5.7 out of 10, where 10 is fit for purpose. Agencies themselves believe the situation is even worse, with current arrangements given a score of 5.2.
The current dominant model is “multiple agencies managed individually by marketing”, used by 81% of major brands, followed by “integrated lead agency” on 44% and “network agency with specialism from same holding company” on 39%. Yet the numbers show advertisers are using a variety of models across different areas of their business; that just goes to show how complex the situation has become.
Factors such as pressure on margins, the rise of digital advertising and concerns over media transparency have led many major brands to in-house at least some areas of advertising. Brands like Lego and Spotify are building out internal creative teams, others such as Honda are taking content creation in-house. And of course there are the brands trying to make in-house programmatic a success.
Even where brands are not in-housing, they are building dedicated agency teams that are far more integrated than before. At O2, the media, PR, advertising and CRM agencies are now co-located three days a week. The likes of Unilever and Procter & Gamble are also asking cross-agency groups to work together.
This shift has not gone unnoticed by agencies. The move by Engine to drop its WCRS and Partners Andrew Aldridge brands, for example, is a move towards a more integrated model that spans disciplines and better brings together its capabilities (as well as being a means to cut costs). WPP has similarly attempted to simplify its offering, by merging VML and Y&R, and Wunderman and J. Walter Thompson, although more needs to be done. The agency holding group is now embarking on a three-year strategy of “radical evolution” as it looks to streamline the business and capitalise on the “opportunities of a changing market”, according to CEO Mark Read.
What the agency model of the future looks like of course depends on the brand, its strategy, its internal capabilities and its KPIs. There will never be a one-size-fits-all solution. But such a complex landscape cannot continue; it works neither for the brands nor the agencies. And agencies will need to get on board with this new way of thinking and prove their value to brands, or watch as their business goes to the consultancies on strategy, and direct to media owners like Facebook and Google on execution.