The Dangers of Agency Commoditization

As marketers, we need to stop playing the RFP game.

As we witness some seismic shifts in the current marketing and agency landscape, I’m concerned about how CMOs are fostering commoditization. 

The Wall Street Journal recently published a special insert which analyzed digital advertising trends. They also shared key findings from the Cannes Lions International Festival of Creativity. The articles punctuated the tenuous relationship between CMOs and outside services firms. Here are four observations worth considering: 

  1. The field is crowded. Big consulting firms now occupy traditional agency turf. Accenture Interactive, for example, is growing 35% annually. They are on track to become a $6.5B business. Much of their growth comes from digital advertising. Accenture CEO Brian Whipple claims that there is only a 20-30% overlap of their services with the services of traditional agencies. 

Is Whipple low-balling that number? I’m not sure, but it’s compelling. I can imagine that other consulting firms can boast 35+% growth in this area, too. Clearly, marketing leaders are questioning the value they are getting from agencies and have opened the budget floodgates to challengers.

  1. Freelance marketing talent erodes agency market share. Upwork claims that 36% of the U.S. workforce is freelancing. They also report that by 2027, the majority of our workforce will be freelancers. 

Since 2004, I have hired dozens of freelancers for marketing research, CRM and MarTech expertise, and other projects. Based on the quality of talent I have found on Upwork, I believe that agencies who market to small and mid-sized businesses should be nervous. Some may be forced to focus their energy exclusively on large accounts and invest in their own re-branding. Those who suffer from “shoemaker’s children” syndrome will feel the heat.

How might you harness the quality of the talent on platforms like Thumbtack and Upwork? Consider hiring them for smaller assignments. Give them a try. You may think twice before investing in a sterling agency that is paying tens or hundreds of thousands of dollars for premium Manhattan office space, free employee massages and craft beer Fridays.

  1. As the exterior group of players expands, some companies are bringing advertising and creative back in house. At the 2018 Cannes Lions Awards, 65% of the entries were submitted by brands, not by agencies. 

How do we interpret that statistic?   Some believe that the brands and their teams wanted to attend Cannes Lions, and left their agency peers at home. These same people argue that the agencies are intimately involved in those advertising and digital initiatives; they are just kept in the shadows and are not getting the credit they deserve. 

I think that’s a very cynical view, and I’m not convinced that that is truly the root cause.

Realizing the dangers of agency commoditization, what are the practical steps you can take? Look for Part Two next week, where I will provide my recommendations.

Copyright 2018, Lisa Nirell. All Rights Reserved.

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