How Transparent Are Digital Firms and Marketing Agencies?

By Mark van Leeuwen On Feb 7, 2020

Capacity Management, Resource Utilization, Billability – Digital Agency owners and Senior Leaders wring their hands over such terms. And rightly so, as there’s a growing need to operate more cost-effectively and prove value. Karl Sakas, the global agency consultant, reveals in his latest Agency trends report that CMOs need revenue attribution to help with pressure from their CEOs and CFOs. According to IDG Connect, 70 percent of marketers struggle with cost justification.

Adding to this is the stress of clients increasingly demanding transparency into work and visibility that shows their money is well spent. These client demands are understandable – you need to generate results. However, there are limits: If you’re dealing with scope creep, over-servicing clients or incorrectly pricing projects, you could go out of business. The problem is that getting a handle on it all alone is a challenge. As a survey from HubSpot pointed out, the second biggest pain point for Agency owners and Senior Leaders is the lack of time for administrative tasks.

The fact is client needs have become complex and budgets are spread thin. That, in many ways, can be attributed to the evolution of Marketing itself, regardless of if you’re in advertising, public relations, UE/UX, mobile development, social media or any other industry subset.

A look at old and new pricing models

Digital has taken over. There are new tools, channels, and strategies. Less discussed, however, are the ongoing changes to Agency pricing models.

Companies once worked on a project basis. This gave way to retainer relationships with buckets of hours. Each approach had flaws. Hours needed for completion of projects often differed from initial projections, so anticipating bandwidth or monthly revenue was difficult. Under a retainer, an Agency could overdeliver, or, a client could potentially receive a larger than expected bill for overages.

Visibility into an Agency’s Operations and Control was a constant issue. It still is today.

Lately, subscription-based Marketing has been on the rise. Under this approach, companies subscribe for a set number of hours on an ongoing basis – typically an agreed-upon period of months – and they use this time for whatever Marketing needs they have. Clients get what they want and the tops the cost. Agencies can scale employees and contractors accordingly because they know the workload and approximate cash flow.

The only issue? Clients like certainty and that mean results. So, this has led to a pay-for-performance model in which target goals are set against subscription services. Clients get the work and results they want. Agencies get stability and can sell themselves through performance guarantees.

Regardless, as much as changes to models continue, so does the need for Transparency and Visibility.

Expanded opportunities for specialized providers

There are now more sophisticated practices across the Marketing spectrum. As a result, agencies with specialized services will increasingly see success as they go up against large industry brethren. Those bigger organizations will be spread too thin as they try to continue being all things to all clients. They won’t be able to differentiate their services because they’ll lack the in-depth, precise skills clients are looking for to compete.

With this in mind, data has become critical, not just for reaching targets, but for streamlining Agency operations and more accurate planning and forecasting. Specialized agencies now have access to tools, like Professional Services Automation (PSA) platforms, that can enable them to fulfill their niches more powerfully. With the right insight, they can adapt, scale capacity and plan resources more precisely, move quicker on opportunities, and deliver more cost-effectively than larger, costlier agencies.

Seeing is believing

Today, Agency Leaders must have a grasp on what’s happening in their own organizations at all times. They need to prove value, but they’re also likely to over-service and undersell work as they err on the side of caution to keep clients happy. Leaders need to believe what they see about their Agency and processes are true before they can report with confidence in activities or make internal changes.

With more performance-based engagements, Agency finances will become more fluid and rise. Access to critical metrics is imperative and leaders must be able to interpret the insights. Thus, the technology that provides real-time visibility, such as PSA platforms, are gaining in popularity.

In an Agency, time is the product and employees the asset. A PSA with real-time insights provides the ability to manage revenue strategy, adopt new models, predict outcomes and handle complex demands. You can gage the accuracy of costs and sales and stay on top of cash flow as well. As an example, a PSA routinely delivers an 8.4 percent improvement in projects completed on budget.

The technology can also remove internal silos that hold back collaboration and information sharing. This, in turn, brings leaders the total visibility needed to justify work to clients. They can get time and expenses right with pre-populated timesheets, stopwatch tracking capabilities, notifications and approval on any device. Agency Leaders can also chart accounts and use real-time reporting to make sure financial targets are met. They can see up-to-the-moment Sales, Customer, Project and Utilization Metrics. Configurable KPI boards provide access to vital data from quote to cash.

As a result, scopes of work are on-target, Agency executives can increase margins, forecast the pipeline, know what’s working best for clients and make informed recommendations.

Think like a CMO

CMOs now want agencies to link work to financial metrics, demonstrating both top – and bottom-line dollar spend. For Agency Leaders who were once responsible for creative, design and delivery teams, a new set of business skills is now required. They need to think like CMOs – and technology can help.

Keep in mind, it’s a lot easier for CMOs to get approval for new initiatives if they can show need and success. The right platform increases transactional transparency so you can provide clients the justification they need based on real data. This makes you more valuable while providing business insight to help clients identify new opportunities and your team win that business.