The global SoDA Report 2016 features the annual Global Digital Outlook Survey of agency leaders and senior clients who represent more than $6 billion in global annual spend. It was conducted for SoDA by Forrester Research.
Despite a disconnect between clients and agencies on expectations and satisfaction, the agency model will thrive in the next 12 months as the number of clients who plan to take digital in-house has more than halved year on year (13% for 2016, 27% in 2015). Contrary to reports of client-agency consolidation, the number of clients with three or more digital shops on their roster also grew 42% year on year.
These are key findings highlighted in the Global Digital Outlook Survey, published in The SoDA Report 2016, which includes an array of insights from senior clients and agency heads.
Further revelations include discrepancies on why agencies are fired, the satisfaction of their work, and whether clients’ organizational structures hinder or facilitate innovation.
The study was conducted in association with Forrester Research, which polled 629 marketers who are collectively responsible for more than $6 billion in global annual spend.
What do clients want?
Market or marketing research was the number one most valued skill in clients’ relationship with their agencies — an option that was at the very bottom of the list last year. The least valued this year is strategic leadership and marketing creativity, which adds fuel to the idea that clients are prioritizing execution over big ideas when it comes to agency relationships.
New era of confidence as digital spend increases
More than half (55%) of clients expect to increase their digital spend, while only 11% forecast a fall, in the next 12 months. The destination of the new budget has also changed, with digital experiences (eg websites, mobile web) (82%) top of the priority list followed by content development (76%) and digital projects (eg non-marketing related platforms, applications, tools and services) (71%).
The new era of confidence continues with an incredible 12-point jump year on year to more than a quarter (27%) of clients saying they are “very innovative” when it comes to digital marketing. This is expected to have a ripple effect throughout the marketing ecosystem as clients look for new partners for support (50% agency partners, 33% consultancies, 19% innovation consultancies).
Chris Buettner, editor of The SoDA Report, said:
There’s a positive outlook for agencies and clients and alike. With an eight-point increase in the number of marketers predicting spend increases, a trend toward digital agency specialization (despite recent media reports suggesting large-scale agency consolidation), and an acute need for innovation on the client side that is leading to more marketer-agency collaboration, the future is bright for forward-thinking digital shops.
However, agencies still have a long way to go to align with clients around issues such as client priorities, causal factors involved in client-agency ‘break-ups’, and what needs to be done to improve lackluster client satisfaction levels.
The respondents, with 86% at marketing director level or above and 30% in command of budgets in excess of $50 million, also commented on their agency relationships.
Why digital agencies get fired
After a positive turn in 2015, the client/agency dynamic has hit a roadblock with the number of agencies reporting relationship improvements falling from 70% to 53%.
Sarah Sikowitz, principal analyst serving B2C marketing professionals at Forrester, comments:
Miscommunication is usually a root cause of any bad relationship; even at the end. It’s no different with clients and agencies. Clients continue to leave for a myriad of reasons, but agencies continue to blame it on management changes.
Although the majority of agencies said changes in management were the number one reason to get fired (56%, up from 33% in 2015), clients reported pricing or value as the primary reason they terminated a contract (37%).
Cost over-runs, which were second in last year’s study, have fallen to eighth (13%), behind:
- Unhappy with creative (24%)
- Mismatched agency size/ability (24%)
- Unhappy with project management/account management (22%)
- Unhappy with strategy (21%)
- Understaffed/under-experienced (21%)
We expect inexperience to be an increasingly prevalent causal factor in agency-client relationships going south, as the percentage of agencies who indicated they are not providing any training to their staff almost tripled in 2016, growing from 5% to 14%.
Structures for digital innovation
Respondents were asked whether clients’ organizational structures hinder or facilitate innovation. The results revealed very different perceptions of how clients are positioned to drive innovation.
The percentage of clients that feel their organization facilitates innovation saw a slight increase from 42% to 48%. Meanwhile, agencies are less optimistic – with the percentage that report their clients’ current organizational structures facilitate innovation dropping from 15% to 12% and those that think client organisational structures hinder up from 44% to 51%.
A more startling disconnect is perceived strengths: agencies believe that clients are very weak in the areas of executive management (40%), user experience (42%), and technology (33%). Meanwhile, clients say their companies have little to no gap in these areas.
Benefits of Innovation labs and product incubators
Nearly half (47%) of agencies report to have an innovation lab or product incubator within the business.
These have led to a number of direct impacts that include: significant revenue growth for the company (20%), talent retention (53%) contributed to new business wins (54%).
Benefits of innovation labs, particularly financial/business orientated benefits, are directly proportional to the longevity of their innovation efforts.
After three years, nearly four in 10 agencies (38%) indicate that their product incubators and innovation labs are driving significant growth for the company. That figure falls to 18% if the lab has only been in existence for 1-2 years, and into the single digits if it is 12 months or younger.
Clearly, moving from a service-based model to product development involves a steep learning curve for agencies and production companies which takes time to flatten.
Clients not entirely satisfied with agency digital work
There was a lukewarm reaction to questions about client satisfaction on agency work. This year clients rated their satisfaction with each of the key services they buy from agencies.
On a scale of one to five not a single service scored better or worse than three.
Considering this includes services for which clients plan to increase spend, this points to the possibility of even greater churn in client-agency pairings as marketers look for new partners to deliver at a higher level as a result of increased hopes and expectations.
With so much optimism and investment coming to digital it’s crucial to turn this general malaise and discomfort around. Otherwise the trend for agencies with digital roots to be the lead among all agency partners, which three quarters (76%) of agencies believe will become more likely, will never be the norm.
Case studies included in this edition
Campus Party by Blue Cadet for Spotify; New Phone Feeling by Big Spaceship for Samsung; Bump by B-Reel for MTV; Pathbreaker by Perfect Fools for Wyborowa Vodka; iFly50 by Born05 for KLM; My Garage by INDG for Yamaha; Global Media Center by Ratio and Brooklyn United for Netflix; Drive Responsively by VLT for BMW; Help a child in need with an emoji by Energize for UNICEF; Programmatic by Doubleclick for Google; Visit Victoria by Tourism Victoria; In the company of Huskies by Destination Ireland; Sons of Gallipoli by Jam3; Peanutize Me by Ludomade for The Peanuts Movie; Killer Instincts by Phenomblue for Creata; and Fueled by Love by SapientNitro for British Airways.
About The SoDA Report
SoDA – The Digital Society is the voice of the digital agency and production community, and its annual digital trends study provides insight into constraints that face client-side marketers, where and how they plan to spend their budgets, what they most value from agencies, and how both marketers and agencies view their relationships in 2016.
In addition to research The SoDA Report V1 2016 includes 15 exclusive opinion piece articles by the industry’s most senior executives, interviews with agency and client thought leaders, plus case studies from some of the world’s best digital marketing campaigns.
For more information, visit www.thesodareport.com