the state of creative agency land
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THE STATE OF CREATIVE AGENCY LAND
Sponsored by
2015
2
INTRODUCTION
3The last several years have been a rollercoaster ride for creative agencies across the globe as economies struggle to recover from the financial crisis and technology transforms the industry.
Is all well and good in Creative Agency Land, or are these dynamic organisations feeling the pressure?
ClickZ, together and sponsored by Deltek, decided to find out.
We asked almost 250 creative agency professionals from around the world to tell us about the challenges they’re facing and how their organisations are responding.
Our respondents came from agencies of all sizes – from boutique agencies with fewer than 10 employees to global giants – across five continents.
Almost 60 per cent were director level or above, perfectly placed to have a high-level understanding of the creative agency landscape as it is today.
SURVEY RESPONDENT SENIORITY
42%DIRECTOR
15%C-SUITE
14%MANAGER
12%SENIOR
11%MID-LEVEL
3%JUNIOR
3%FREELANCE
3
INTR
ODUC
TION
3
4
CHARGING AND PROFITABILITY
TOTA
L RES
PONS
ESTO
TAL R
ESPO
NSES
20% UNDERCHARGING CLIENTS FOR WORK DONE
MANAGING RISING CLIENT EXPECTATIONS FOR CHEAPER, BETTER, AND FASTER WORK
PROJECT SCOPE CREEP
STAFF COST INCREASES
OFFSHORING
15%
10%
5%
0%
RESOURCE MANAGEMENT AND PLANNING
20%
15%
10%
5%
0%
STAFFING FOR AN ‘ALWAYS ON’ ENVIRONMENT
EMPLOYEE BURNOUT
ADDING NEW DISCIPLINES OR SERVICES
INTEGRATION
TOP 3 CHALLENGES AGENCIES CURRENTLY FACE
It was our goal to identify and understand the major challenges faced by creative agencies, along with the strategies being deployed to stay creative and profitable in the face of enormous changes. To do this we asked each respondent to rank what they saw as their organisation’s three most pressing concerns.
While a range of issues were raised, the majority fell into two broad categories: resource management and planning; and charging and profitability. In this report we explore each of these in turn, along with how creative agencies are coping.
4
INTR
ODUC
TION
KEY
1ST CHOICE
2ND CHOICE
3RD CHOICE
FINDING AND RETAINING QUALIFIED STAFF
28%
MARGIN PRESSURE
5
RESOURCE MANAGEMENT& PLANNING
6
10% STAFFING FOR AN ALWAYS ON ENVIRONMENT
TOP RESOURCE MANAGEMENT AND PLANNING CHALLENGES
When asked to rank the top challenges their agencies face, our respondents captured a snapshot of an industry in which adequately staffing projects can be a struggle, creatives’ time is wasted and agencies are not making the best use of technologies to manage resources and planning.
6
RESO
URCE
MAN
AGEM
ENT
& PL
ANNI
NG
3% INTEGRATION
9% ADDING NEW DISCIPLINES OR SERVICES
13% FINDING AND RETAININGQUALIFIED STAFF
7% EMPLOYEE BURNOUT
2% WORKING ACROSS HORIZONTALS
7
FINDING AND RETAINING CREATIVE TALENT IS CORE TO AN AGENCY’S SUCCESS
COMPANIES WITH ENGAGED EMPLOYEES OUTPERFORM THOSE WITHOUT BY UP TO 22 PER CENT (BUSINESS REPORTER)
ANNUAL RECRUITMENT AND RETENTION COSTS IN THE ADVERTISING AND MARKETING INDUSTRY: £184M ($287M) (IPA)
AVERAGE TIME IT TAKES A NEW EMPLOYEE TO GET UP TO SPEED: FIVE TO SEVEN MONTHS (IPA)
WHY IS EMPLOYEE RETENTION IMPORTANT?
7
RESO
URCE
MAN
AGEM
ENT
& PL
ANNI
NG
8 SEVEN REASONS AGENCIES RELY ON FREELANCERS
34%ACCESS TO SPECIALIST SKILLS
20%NEED FOR FLEXIBLE AVAILIBILITY
18%FULFILMENT OF SHORT-TERM PROJECTS
12%NEED TO COMPLETE PROJECTS FASTER
11%REDUCTION OF OVERHEADS ASSOCIATED WITH PERMANENT STAFF
4%LACK OF PROPER HIRING STRATEGY
1%FREELANCER RATES ARE CHEAPER
Our survey found that these staffing pressures are being resolved at least in part by freelancers.
While freelancers allow for agility during busy times, often they are brought in as the first point of call, and instead of reviewing existing availability across the business. Overuse of freelancers can happen easily if a project is not properly scoped, which will erode margins.
Despite these risks, almost 80 per cent of our survey respondents work in organisations staffed at least partially by freelancers. For 15 per cent, freelancers make up half the workforce or more.
These freelancers are being brought in primarily to provide specialist skills (34 per cent), create a more flexible workforce (20 per cent) and fulfil short-term projects (18 per cent).
8
RESO
URCE
MAN
AGEM
ENT
& PL
ANNI
NG
FIND OUT MORE ABOUT FINDING THE FREELANCE BALANCE HERE
9
53%YES, VERY MUCH SO
But the widespread use of freelancers isn’t reducing the pressure on permanent staff.
The vast majority of survey respondents — more than 80 per cent — have seen the scope of their role increase significantly in the past 12 months, indicating that individual workloads are being stretched as projects pile up.
THE SCOPE OF MARKETING ROLES HAS EXPANDED IN THE LAST 12 MONTHS
29%YES, SLIGHTY
14%NO, IT HAS REMAINED THE SAME
9
RESO
URCE
MAN
AGEM
ENT
& PL
ANNI
NG
4%NO, THE SCOPE OF MY ROLE HAS SHRUNK
10
28%DISAGREE
And freelancers aren’t reducing the administrative burden within creative agencies, either.
In fact, a full third of respondents report spending more time on internal admin or control requirements than doing the creative, client-facing work at the core of their roles. The cumulative impact of this can be significant, not only leading to diminished time and space for creativity, but also staff dissatisfaction, missed deadlines and budget over-runs.
MARKETERS ARE SPENDING MORE TIME MEETING INTERNAL ADMIN AND CONTROL REQUIREMENTS THAN DOING CLIENT-FACING WORK
RESO
URCE
MAN
AGEM
ENT
& PL
ANNI
NG
29% AGREE
8%STRONGLY AGREE
29%NEUTRAL
6%STRONGLY DISAGREE
10
RESO
URCE
MAN
AGEM
ENT
& PL
ANNI
NG
11 AGENCIES ARE DOING WELL AT BRINGING IN NEW TECHNOLOGIES TO MANAGE RESOURCES AND PLAN, ALLOWING STAFF TO FOCUS ON CLIENTS
The good news is that technology exists to manage resources and plan projects, allowing staff to focus more on client work.
Unfortunately, more than 50 per cent of our survey respondents do not agree that their agency is making full use of these technologies, thus missing a major opportunity to better resource and plan projects.
So how are agencies grappling with challenges in resource management and planning? While some are coping well and putting existing tools to good use, others are struggling.
11
RESO
URCE
MAN
AGEM
ENT
& PL
ANNI
NG
26%
7%
21%
38% AGREE
NEUTRAL
DISAGREE
8% STRONGLY AGREE
STRONGLY DISAGREE
12
WE SPEND A LOT OF TIME FIGHTING, SADLY
MAKING SURE THAT EVERYONE WE EMPLOY ADDS A NEW, VALUABLE SKILL
BURYING ITS HEAD IN THE SAND
MAKING SURE OUR SYSTEMS MATCHES OUR PROCESSES AND HAVE USEFUL LITTLE TRICKS, LIKE RECORDING TIME STRAIGHT FROM OUR CALENDARS.
HOW AGENCIES ARE OVERCOMING RESOURCE MANAGEMENT AND PLANNING CHALLENGES
WE’RE NOT — INSTEAD WE’RE REDUCING FIXED STAFF COUNT AND HIRING FREELANCERS TO MEET PROJECT NEEDS
USING PROGRAMMES TO KEEP TRACK OF AVAILABILITY SO THAT WE CAN GET THE RIGHT PEOPLE ON THE RIGHT PROJECTS.
REFINING FREELANCER RECRUITMENT AND SUPPORT PROCESSES.
SCOPING BASED ON WHAT WE LEARNED FROM PREVIOUS JOBS — IT MIGHT SEEM OBVIOUS, BUT IT’S SO EFFECTIVE.
OUTSOURCING
RESO
URCE
MAN
AGEM
ENT
& PL
ANNI
NG
13
CHARGING& PROFITABILITY
14 TOP CHARGING AND PROFITABILITY CHALLENGES
Our survey also revealed huge tensions surrounding how projects are priced and delivered. “Managing rising client expectations for faster, better cheaper work” was chosen more frequently than any other response. Undercharging was another major issue identified by our respondents.
14
CHAR
GING
& PR
OFITA
ABILI
TY
PROJECT SCOPE CREEP
OFFSHORING
MARGIN PRESSURE
MANAGING RISING CLIENT EXPECTATIONS
UNDERCHARGING CLIENTS FOR WORK DONE
10%
8%1%
2%
12%
19%
STAFF COST INCREASES
15
HOW AGENCIES ARE PRICING PROJECTS
Our survey respondents identified no fewer than seven methods of pricing projects, indicating that undercharging is a concern for creative agencies regardless of how they charge for their work.
Time and materials, used by 34 per cent of our respondents, is the most common pricing method. Fixed price (27 per cent) and retainers (23 per cent) are also common.
While profit margins remain healthy — 75 per cent of our respondents reported margins of over 10 per cent — research from KingstonSmithW1 has shown consistently that these margins are under pressure, falling as much as seven per cent in some sectors since 2012.
34%TIME AND MATERIALS
27%FIXED PRICE (RATE CARD)
23%RETAINER /FIXED FEE
14%VALUE BASEDPRICING
2%OTHER
15
CHAR
GING
& PR
OFITA
ABILI
TY
16
FOUR WAYS TO OPTIMISE YOUR MARGINSFOUR WAYS TO OPTIMISE YOUR MARGINS
16
CHAR
GING
& PR
OFITA
ABILI
TY
ENSURE THAT YOUR ENTIRE STAFF UNDERSTANDS THE IMPORTANCE OF PROFIT MARGINS – GET EVERYONE SPEAKING THE SAME LANGUAGE.
FORECAST EARLY AND USING DATA ONLY FROM THE MOST RELIABLE SOURCES, LIKE SPECIALIST PROGRAMMES.
AIM FOR A THOROUGH UNDERSTANDING OF THE MARGIN ON EACH BILLABLE EMPLOYEE AND PROJECT.
BRING ALL OF YOUR DATA TOGETHER INTO A SINGLE PLACE FOR A MORE ACCURATE, COMPLETE VIEW OF CURRENT AND FUTURE COSTS.
17
This negative trend in profit margins could be due, in part, to over-servicing.
The vast majority of our survey respondents — 75 per cent — told us that their clients change the scope of their projects frequently and throughout the development process.
However, less than 10 per cent of our survey’s respondents said that they always charge their clients more for additional work. A full 16 per cent never or hardly ever adjust prices as project scopes creep up.
CLIENTS CHANGE THE SCOPE OF PROJECTS FREQUENTLY
54%AGREE
22%STRONGLY AGREE
19%NEUTRAL
3%DISAGREE
1%STRONGLYDISAGREE
1%OTHER
17
CHAR
GING
& PR
OFITA
ABILI
TY
18
Despite the fact that scope creep is having a serious impact on the profitability of creative agencies, almost half of respondents did not agree that their agency has systems in place capable of accurately tracking and comparing cost estimates versus actual costs.
Clearly agencies are missing out on a valuable opportunity to confront the issue with technology — but what strategies are they using?
Not surprisingly, some agencies have struggled. But others have put systems and processes in place to safeguard their profitability and protect the time of their most creative minds.
5.51%
DO AGENCIES HAVE SYSTEMS IN PLACE TO ACCURATELY TRACK ACTUAL VERSUS ESTIMATED COSTS?
38%AGREE
20%DISAGREE
18%NEUTRAL
18%STRONGLY AGREE
6%STRONGLY DISAGREE
18
CHAR
GING
& PR
OFITA
ABILI
TY
19
LOTS OF MEETINGS ARE OCCURRINGREVISITING THE WAY WE QUOTE AND
INTRODUCING STRICTER TERMS AND CAVEATS
INTRODUCING NEW WORKING PRACTICES TO MANAGE SCOPE CREEP.
HOW CREATIVE AGENCIES ARE GRAPPLING WITH THE CHALLENGE OF CHARGING AND SAFEGUARDING PROFITABILITY
TRYING TO BE MORE STRATEGIC IN DECIDING WHICH ARE THE PROJECTS THAT WE CAN ADD MOST VALUE TO, AND WHICH WILL ADD VALUE TO OUR AGENCY.
AVOIDING PRICE WARS WHEREVER POSSIBLE
NOT WELL. WE’RE PUTTING PRESSURE ON CREATIVES TO BE MORE ‘EFFICIENT’, WHICH IS KILLING CREATIVITY AND CAUSING BURNOUT
IMPLEMENTING PROJECT MANAGEMENT AND FINANCE SOFTWARE.
CHAR
GING
& PR
OFITA
ABILI
TY
20
CONCLUSION:WHAT’S NEXT?
21
“IDENTIFYING AND RETAINING THE RIGHT TALENT — DIGITAL SPECIFICALLY — WILL REMAIN
A CHALLENGE FOR SMALLER, INTEGRATED AGENCIES.”
To be successful in the fast-paced environment of the ever-evolving agency land, creative agencies around the world need to have one eye on the future.
We asked which trends will come to the fore over the next three years. Our respondents identified four key challenges which they believe will shape the future of creative agencies across the globe: the skills gap; data; technology; and the rise of in-house teams.
The rise of digital has revolutionised the way the world works, consumes media, communicates and shops. Entire industries have met their end in the last two decades as others have blossomed out of nowhere.
The marketing industry has not been immune, and the rise of social media, mobile and web has changed what it means to be a marketer. Even as agencies struggle to attract young people with the digital skills
necessary for survival, the skillsets of their most senior colleagues have been rendered obsolete.
The skills gap was of major concern to our respondents, who identified issues including:
THE SKILLS GAP
“JUNIOR STAFF HAVE MORE KNOWLEDGE ON DIGITAL THAN SENIOR DIRECTORS.”
“THERE IS A GENERAL LACK OF SKILLS IN THE INDUSTRY. I THINK WE NEED TO SEE GREATER SUPPORT AND ORGANISATION AROUND THE INTERFACE BETWEEN FREELANCERS
AND AGENCIES IN THE LONG-TERM.”
21
CONC
LUSIO
N; W
HAT’S
NEX
T?
MIND THE GAP
22
The world is awash with data, but all of that information is costly to buy and time-consuming to verify, clean and put to good use. Those who aren’t able to meet the data challenge could be in serious peril as it becomes more and more important to the way all businesses operate.
Our survey respondents see data — from how to use it to how it will change the industry — as a major concern for the coming years.
DATA
“THE USE OF DATA WILL REVOLUTIONISE THE WAY WE DO
THINGS. UNFORTUNATELY, IT WILL BRING HUGE CHANGES WHICH WILL
NOT ALWAYS BE WELCOME.”
“THE AMOUNT OF DATA AND INFORMATION AVAILABLE IS INSANE. MOST AGENCIES’
RESOURCES ARE TOO LIMITED TO PUT IT TO GOOD USE.”
22
CONC
LUSIO
N; W
HAT’S
NEX
T?
23
“CONSUMERS ARE ALREADY HAVING THEIR FIRST ENCOUNTER WITH ROBOTS IN THE RETAIL
ENVIRONMENT.”
The pace of technological change is picking up and everyone needs to get on board or be left behind. Marketers are no exception to this and, as robots start popping up on shop floors and software sorts our mail, staying ahead of the curve will be a major priority.
TECHNOLOGY “TECHNOLOGY IS THE BIGGEST CHALLENGE — ALL AGENCIES NEED TO KEEP UP OR WE
WILL BE LEFT BEHIND.”
23
CONC
LUSIO
N; W
HAT’S
NEX
T?
24
As the global economy recovers from a deep and protracted recession, agencies are facing competition from a new quarter: the in-house marketing team.
Suddenly the job market is awash with graduates fully versed in digital. And, with budgets under pressure and costs soaring, bringing marketing in-house is an attractive proposition to financially squeezed
organisations. This trend was highlighted by several of our respondents as one to watch in the coming years.
THE RISE OF IN-HOUSE TEAMS
“AGENCIES ARE BEING SQUEEZED OUT AS BRANDS TAKE SKILL IN-HOUSE.”
“CLIENTS ARE RECRUITING IN-HOUSE SO THAT THEY CAN ENSURE 24/7 AVAILABILITY OF THE SKILL SETS THEY
NEED, RATHER THAN RECEIVING SET TIME FROM
AN AGENCY.”“FURTHER SPECIALISATION IS BEING DRIVEN AS CLIENTS TAKE SKILLS IN-HOUSE, PARTICULARLY
DATA MANAGEMENT AND ANALYSIS.”
24
CONC
LUSIO
N; W
HAT’S
NEX
T?
25
For more information on the challenges facing the creative industry, and expert advice on how to overcome them, visit www.clickz.com and www.deltek.com/whatif
WANT TO KNOW MORE?
@ClickZ
@Deltek
@Deltek_UK
THE STATE OF CREATIVE AGENCY LAND
Sponsored by
2015
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