Professional Service Organizations (PSOs) revolve around people. They’re always on the lookout for new tools to help employees perform at their best, more efficient processes to simplify work, and ways to enhance profitability so a business is viable and all can prosper.
Service-based companies live amid flux and flow, and quick adaptation is table stakes.
Marketing agencies have always required particular agility, and with digital ushering in dramatic changes, new technologies and strategies seem to arise daily, and long-held business approaches are giving way to fresh engagement models.
Marketing Technology is demanding, fun, but it’s never business as usual. That said, here’s what I think you can expect to see in 2019 for digital agencies, along with a few tips that might keep you a step ahead of the competition.
Agencies Adopt Subscription-Based Pay Models
Companies used to engage agencies on a project basis, typically with time and materials. Next came retainer relationships with buckets of hours, which if exceeded, resulted in further costs. There were downsides to each. On a project basis, the hours needed for completion often differed from initial projections, so agencies couldn’t reliably project bandwidth or recurring monthly revenue. With a retainer, an agency could take a hit by over-delivering against a set fee. On the other side, a could receive a larger than expected bill and become upset.
Recently, we’ve seen another pay option gain interest and create a little buzz — subscription-based marketing services. We’re talking about digital agencies offering services based on pre-set months, complete with deliverables and incentive discounts. Companies subscribe for a predetermined number of hours on an ongoing (three-, six-, nine- or 12-month subscriptions) basis, with marketing tasks changing to fit their needs. Customers have flexible access to services and know the cost, while agencies gain reliable cash flow. This, in turn, enables marketers to hire the right number of people versus having lulls in which staff have downtime.
What’s less clear with this approach is what results the agency needs to deliver. This has led to an update to the pay-for-performance model — a mix of subscription services and target goals to be reached. Clients get both the services and results they need. Agencies get the stability that’ll enable them to do invest in new employees or business directions, and they can sell themselves through performance.
A Move Toward Agency Specialization
On the flip side of engagement, you’re going to see a continued move away from general, full-service agencies to those offering specialized services. The all-purpose behemoths are spread too thin to match the value others can provide in more sophisticated, newer marketing practices. They’ll fail to differentiate their services because of a lack of laser-focus skills clients need in order to compete.
Data has become critical, not just for reaching targets, but for insight into agency operations, planning and forecasting. Specialized agencies now have access to tools, like Professional Services Automation (PSA) platforms, that can enable them to fulfill their niches cost-effectively and powerfully. They can compete against larger, costlier agencies. They are nimbler and cannot just meet change, but move quickly on opportunities, so they’ll stay out front.
Proving Bottom-Line ROI for CMOs
Chief marketing officers (CMOs) are now tasking agencies to attribute their work to financial metrics, with an emphasis on demonstrating both top- and bottom-line dollar contributions. Ultimately, it’s the CMO’s job to find the most revenue potential at the lowest possible costs.
For agency leaders, once consumed by such things as overseeing teams involved in the creative, design and delivery of campaigns, a different business-focused skill set is being required. It’s becoming critical for an agency pro to think like a CMO to avoid being marginalized.
Further, as the industry moves into more performance-based engagements, agency finances become more fluid. If done right, you’ll make money, but leaders need reporting and tracking capabilities to make it work, specifically when it comes to capacity planning and revenue forecasting.
As the year ahead approaches, leaders must have access to critical metrics and should expect to be called upon to interpret the insights. Technology platforms that provide this type of real-time visibility will become standard, as it supports better decision-making across the business.
Marketing Moves Businesses Forward
Agency life keeps you on your toes. Marketing is always morphing and you must move with it to stay ahead. I believe specialized agencies are going to be in a better position to do so in the foreseeable future. They’ll have the distinct skills full-service agencies can’t match. Pricing won’t be dictated by the market. Their services won’t be commoditized, which typically leads to industry consolidation.
Still, it requires understanding, not only of newer and emerging marketing methods, but of the technology, practices and metrics that can streamline and simplify business process and maximize profitability.
And perhaps that’s the one consistency to marketing agency success; maintaining the agility necessary to remain relevant and ensure you’re always in demand.