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It’s time for agencies to re-focus

Stuart Pocock - Observatory International Stuart Pocock Co-Founder & Network Operations November 23, 2023

It’s a tough time for agencies out there.

Tightened, delayed or even frozen client budgets, the continuing trend by clients to in-house services, the omni-presence of AI and associated implications – all combine to produce difficult conversations in agency boardrooms across the world.

Add to that, issues with hybrid working (much as agency leaders may try to mask it), demand for work/life balance, talent shortages and wage demands to keep up with costs of living – let alone real term increases, have further conspired to question where the industry is going – and according to the trade press, not a small amount of concern for people thinking of joining it.

But let’s not panic. In the work we’ve done with the World Federations of Advertisers on agency In-Housing it’s very apparent, perhaps in-spite of all the perceived headwinds, that agencies are still highly valued.

The report shows that it’s clear that all too often clients are frustrated by Agencies speed to market, by their costs and processes. That frustration has led many to bring significant amounts of volume into an in-house model – especially in relation so social and content. But it also shows that when it comes to pure creativity, agencies still have the upper hand.

Creativity has been the very essence of the industry since it was established well over 100 years ago. Creativity was the enabler to make your product stand out from those around you and drive consumer demand.

It’s still that today. But perhaps in a never-ending desire by agencies to expand services, to give clients what they need (or what believe their clients might need) the focus has perhaps shifted.

Many agencies tend to overclaim what and how they can deliver for their clients. And that’s why dissatisfaction from clients has grown and where the in-housing some services has solved the problem – often to the detriment of the agencies bottom lines.

So the shape and nature of agencies will inevitably have to move on from legacy models with ‘bolt on services’.

Many have shifted their focus to data and targeting. Fine if you’re a large Holding Company and have the resources to build bullet proof offerings which stretch far beyond the capabilities of in-house offerings. But for smaller, and often independent agencies, the route forward is less clear.

Agencies have always been heavily tiered – top management, a second layer of highly qualified talent (both of which often thinly spread) middle rank staffers with varying degrees of talent and juniors. That structure has operated across all departments – management, account management, strategy, creative, and production.

The future structure is likely to change. Both In-housing and the onslaught of AI is likely to make this layering redundant – in every sense of the word.

Agencies need to re-group, re-look at their offerings and make some tough decisions. There in no point in continuing to invest in resource that will shift either to the client or to automation.

Tighter, more senior (and talented) structures focussing on creative strategy and creativity itself could be the way forward for many. The agency won’t look like the familiar entity of the past. It will be smaller, but in reality far more powerful.

And play to the strengths that clients are looking for with creativity right back at the heart of the offering.

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