Nine out of ten brand leaders say they are seeing true commercial value from their agency partnerships but agencies could strengthen their role even further by delivering more of the strategic thinking clients value highly.
So says a new study from the IPA, produced in collaboration with Tracksuit, which examines the value agencies create today and what clients value most from their agency relationships. It also explores where a disconnect exists between expectation and delivery, and how agencies can bridge this and strengthen their role as strategic partners, for the benefit of all.
Launched at the flagship IPA Business Growth Conference, the report, “Bridging the gap. Redefining the value of agencies”, is based on a quantitative survey of 200 senior brand-side decision-makers responsible for selecting and managing agency relationships, with marketing budgets of between £1m and £250m, alongside 20 in-depth interviews with CMOs, senior marketers, agency leaders and industry commentators.
The research paints an overwhelmingly positive picture of client-agency relationships, with nine in 10 clients saying their agencies are either central to their commercial success or contribute meaningfully to their results. Furthermore, nine in 10 clients expect their use of agencies to increase or remain the same over the next three years.
When asked which services they value most in a strong agency partnership, clients ranked excellent quality of asset production highest (83%), followed by strategic brand expertise (80%) and superior specialist knowledge of key channels (79%). By comparison, development of a core creative idea or platform ranked joint tenth (74%), highlighting the breadth of capabilities clients now expect from agency partners.
Despite this positive endorsement, the report also reveals that when asked about the type of thinking clients value from agencies, there is a considerable disconnect between what they currently perceive they receive, versus what they perceive as extremely valuable or very valuable.
According to the findings, for all respondents the biggest gap exists regarding ‘Stretch and growth thinking’. While 83% of clients rate this type of thinking as extremely or very valuable, only 48% perceive they are receiving this. The second biggest overall value gap revealed is regarding ‘Challenging our brief and assumptions’, with 77% of clients rating this as extremely or very valuable, versus 43% that believe they are receiving this from agencies.
Furthermore, when splitting this out to look at the C-suite, EVP and VP respondent-level only, some of these gaps are more pronounced, with ‘Challenging our brief and assumptions’ leading the value gap, measuring 48 percentage points (85% value vs 37% perception of reception).
Further to these findings, the report highlights a number of factors that are influencing the changing agency environment, including the increase in in-housing over the past two years, with respondents citing cost and the need for speed, control and integration as reasons for driving the shift.
The ongoing pressure on agency remuneration is also an issue, with two-thirds of client respondents (66%) agreeing that the way agencies currently charge undervalues their work. And that they are interested in exploring alternatives, including outcome-based fees (54%) cited as the most preferred option.
There is also the growing importance of AI capabilities, with that nine in ten clients now describing AI skills as either critical or very important when evaluating or selecting both creative and media agencies.
Finally, clients recognise the importance of marketing being recognised in the boardroom, with 82% of respondents agreeing that agencies could “help me more in getting the customer heard at board level” in their organisations.
For agencies and clients to benefit further going forward, the report asserts the need for agencies to redefine their value and offers five core recommendations, including create better stories to reframe agency value; promoting the power of creative expertise; packaging and promoting critical thinking; influencing board level decision making; and orientating the agency to refocus remuneration around that value.
IPA director of value Ed Palmer said: “Agencies should take heart in the value marketers attach to the creativity, challenge and strategic rigour that they are uniquely placed to deliver. But there’s work to be done to ensure that agencies deliver what clients truly value in them, and that that value is recognised and compensated accordingly. At the IPA we’re committed to finding more ways to support agencies in doing this.”
Tracksuit global head of agency partnerships Talia Hickey added: “We’ve always believed agencies deliver enormous value for their clients. This research proves it, and then shows them how to deliver even more. The agency landscape has never been more diverse or dynamic, and that clarity is exactly what will help agencies step into their next chapter, bolder and more confident.”
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