Clients and agencies fear rivals

clients and agencies fear rivalsBusiness might be looking up for both clients and agencies but increased competition and an ongoing squeeze on budgets mean most people in the marketing industry are tossing and turning in bed at night.
According to a new study by agency selection specialist AAR, the three biggest challenges clients face at the moment are an increase in competition (63%), understanding consumers’ requirements (55%) and low budgets (53%).
Meanwhile the three biggest challenges facing agencies are also an increase in competition (72%), downward pressure on profit margins (49%) and recruiting talent (45%).
Where budgets remain the same or less than in 2013, a majority of clients will extend contracts with existing agencies rather than going to the market. However, the report found that clients are planning, on average, to add two new agencies to their roster in 2014.
AAR chief executive Kerry Glazer (pictured) said: “We are gradually emerging from five years of austerity, and consumer confidence and spending power is beginning to return. During a recession, marketing is one of the first budget lines to be cut but when the economy improves, it is one of the first to come back.”
Encouragingly, three quarters (76%) of clients and agencies say the volume of work going through agencies is increasing. This additional activity is being seen most clearly in the transport, energy, retail, financial services and FMCG sectors.
Among agencies, almost all (92%) say clients are asking them to take on more work, of the same (60%) or extended (32%) scope.
“Our study is good news,” notes Glazer, “because it shows that marketers are thinking about the right changes to make in response to the increase in consumer confidence. There is, however, still the challenge of obtaining approval for more budget from their board and it’s important to note that while we are seeing pockets of confidence, this is not a UK-wide scenario.”
The report also found that, perhaps unsurprisingly, both clients and agencies have a distorted view of the pitch process. It found that 77% of clients say, in pitches, agencies all too often set an expectation that is rarely delivered on, while 90% of agencies say this about clients. And, when clients do appoint an agency, many are disappointed afterwards, citing problems such as the agency not costing ideas fully at pitch, the agency over-promising on their capabilities and agencies not foreseeing problems with the ideas pitched.
AAR managing director Paul Phillips said some of the results of the study are “bewildering”. He added: “[Many] are actually very easy to solve, such as lack of enthusiasm, senior people talking too much, not bringing the core team, lack of demonstrated interest in the existing agency roster. Others might be symptomatic of the peculiarities of the pitch process.”

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