For advertisers to thrive in the increasingly-complex and resource-intensive media and marketing ecosystem, they need healthy media agency networks. And despite the chill headwinds of first the pandemic and then the growing global economic crisis, the world’s agencies are holding up remarkably well. (all things considering…)
The biggest challenges facing the industry today are: the consumer recession and associated advertiser budget cuts; recruiting and retaining talent – particularly specialist talent; understanding and responding to often-volatile and unpredictable shifts in consumer behaviour; the growing importance and ownership of data, forcing advertisers to review operating models; and, the emerging importance of setting and attaining sustainability targets and quotas.
Reviews slowing down
Pitch activity has slowed markedly in the first half of 2023, a trend continuing from last year. 2021 represented a bumper year for reviews as many advertisers delayed agency reviews in the first pandemic year, 2020. In 2021, more than US$40bn of media agency billings were reviewed, falling to just over US$32bn in 2022. The leading categories reviewed in 2022 were FMCG and retail, followed by telecoms and financial services/insurance. Two-thirds of all reviews for global brands were actually conducted at the local, country level.
This year so far, just over US$5bn in media agency billings have been reviewed, and this slow start to the year looks set to continue. 2023 has also seen slightly lower retention rates by the Big Six media agency holding companies, with currently around 8% of total billings being awarded to specialist, independent agencies.
Increasingly fit-for-purpose
Activity over the past couple of years shows that media agency groups are working hard to retain the majority of their biggest, most important, and most strategic accounts. But it’s not just hard work that’s driving account retention. Behind the scenes, agencies have taken action in four distinct areas to ensure they are fit-for-purpose.
1. By taking a more integrated approach to staffing and servicing their clients.
2. By accelerating investing in both data and technology – from e-commerce to personalisation, from data analytics to CRM. All the leading agencies have acquired at least one digital and/or data agency in the past year, and there’s a dynamic mergers and acquisitions market focused on both artificial intelligence and machine learning.
3. By paying much more than lip service to social responsibility. Agency words – no longer greenwashing – are being made flesh with a sustained commitment to both people and planet. In the wake of consumer and campaigning organisation activity – such as the direct action taken by organisations including Just Stop Oil – agencies are making tough choices on who (and who not) they are prepared to represent.
4. By re-engineering themselves. New architecture and cross-silo structures mean that agencies expect to sustain the momentum that this has delivered for them. By cutting costs during and post-pandemic, they have reinvested these savings into data, technology, productivity tools, and effective strategies designed to recruit and retain staff in the teeth of a super-competitive war on talent.
Summing up
Despite undeniable challenges in the market, agencies big and small are doing well. This, in turn, sets advertisers up well for the choppy months and years ahead. Our Priya T Patel shares 4 key actions that advertisers can take for a healthy media agency relationship.
To watch Priya T Patel (Associate Director, Media, Ebiquity) talking about these issues in more detail, click here.
Feel free to get in touch with the Ebiquity team to further discuss these important updates and take proactive steps to reduce wasteful practices. Reach out now.
