The agency of record is heading for extinction: SoDA Report

Half of all marketers, and more than half of all agencies, believe that agency of record relationships are disappearing.

That finding comes from ‘The SoDA Report‘, which includes an annual ‘Digital Marketing Outlook’ survey of the changes taking places across the industry.

It found that agencies are more pessimistic about the future of agency of record relationships than clients. While 57% of agencies believe AOR relationships are disappearing, half (49%) of clients believe that is the case.

More generally, the survey’s findings reveal key shifts in marketer-agency relationships, weaknesses in advertiser expertise, and mismatches between what advertisers and agencies believe are most valuable to clients. There are also startling perception differences over clients’ attempts to transform their business, and disconnects over why clients walk away from agencies.

The research also highlights steep learning curves inside agencies when it comes to acting on data insights, as well as using digital information to propel deeper personalization. As clients increase investment, agencies need to stay ahead in data, mobile and product innovation.

Conducted in partnership with Econsultancy, the ‘Digital Marketing Outlook’ is based on a global sample, evenly split between advertisers and agencies, which represent a total annual marketing spend of $25.4 billion. In total there were 736 respondents, the large majority being senior company decision-makers.

 

Disparities – what clients want

While it was largely agreed that marketing creativity was most important, clients rated product and service innovation second, while agencies rated it fourth in importance. Agencies rated customer-centered marketing for clients third, while clients scored it fifth in terms of priority.

Over 60% of clients felt their digital agency was excellent or good at evaluating digital trends for practical use. However, nearly one in three agency respondents (29%) do not offer any training on current or emerging trends and technologies, a missed opportunity to increase revenue and for clients to capitalise on the changes.

 

Why clients leave

The number one reason for clients walking away was outgrowing their agency’s ability to deliver against their needs (27%). Agencies pointed to new client management as the main reason (39%) for this. Agency respondents ranked failure to deliver for clients’ growing needs a distant fourth, a major discrepancy. The specific service areas clients cited the most for termination was dissatisfaction with strategy (11%). Few agencies (6%) viewed this as the root problem.

 

Positive outlook

The outlook is bright for agencies that offer the services clients need. Successful agencies saw more buy-in from clients, with growth in retainer-based work (up 21%) and a significant rise in agency investments (up 28%). Agencies that have invested in incubators – 50% of respondents – reported great success with talent retention and new business wins both up.