Last year, Unilver, one of the world’s largest advertisers and a bellweather for the ever-important CPG market, spent $8.6bn on ads, an 8% jump over the prior year.
And it invested heavily in digital, upping its digital ad spend a whopping 40%.
That would normally be reason for agency execs to cheer, but you like won’t hear any champagne bottles popping.
The reason? According to Unilever CFO Jean-Marc Huet, the company is working to reduce “the part of the advertising spend which is used to make films, pay agencies and the like.” And it isn’t where it wants to be yet.
Huet’s comments during an investor presentation highlight a harsh truth for agencies: although many companies are increasing how much they spend on advertising, particularly digital advertising, they’re not looking to pad agency bank accounts.
That makes sense, but how can agencies already worried about margins and increased client demands fight the downward pressure on their fees? Here are five suggestions.
The digital landscape grows in complexity by the day, and it’s all but impossible for full-service agencies to claim with any credibility that they’re masters of the universe. Trying to be all things to all clients is therefore a recipe for disaster.
The better approach: focus on digital channels that you’re best equipped to handle so that you can deliver more value, more efficiently.
2. Watch the clock.
When it comes to focusing on channels, it’s important to remember that time is money. Pushing clients into channels that drive up billable hours is a risky proposition, particularly when it’s hard for clients to quantify the ROI in those channels. In other words, overemphasizing social media is a risky proposition.
3. Remember that expensive technology isn’t a panacea.
Digital advertising is a lucrative market. But agencies themselves are a lucrative target for technology firm which claim to have tools and platforms that will work miracles. While it wouldn’t be fair to state that most ad tech firms are hawking vaporware, the reality is that expensive technology is usually not a panacea for agencies.
Spending a significant amount of time exploring every new product or service that hits the market, or worse, buying lots of shiny new toys, is far more likely to drive costs up than it is to convince clients that you’re offering more value.
4. Pretend you’re the client.
Agencies exist for a reason: they can offer their clients strategic insight and know-how that they lack internally. But that doesn’t mean that agencies should assume that they know everything.
Clients reveal a lot, and industry trends shouldn’t be ignored. Put simply, it’s important for agencies to stop, look and listen so that they can identify what areas clients see high value in. That will reduce the likelihood that an agency finds itself out of touch with the needs of the market, and with out-of-whack fees as a result.
5. Rethink client acquisition.
Business development is tough, and it can be particularly costly for agencies. While it’s tough to avoid pitching practices and tradition, agencies should remember that they often provide some of their most valuable work up front and without compensation. Unfortunately, the prize, if won, often barely makes up for the cost, particularly with clients that seek new agency relationships every few years.
With this in mind, a thoughtful approach to client selection is perhaps the most effective tool by which agencies can ensure they’re not being run out of business by their own clients.