However, with many economies facing the prospect of the deepest – if perhaps not the longest – recession in living memory, the medium-term future for marketing shows few signs of becoming any more straightforward. This includes advertisers successfully navigating agencies’ rapidly-evolving charging structures.
Changing agency models, post-Covid
Throughout 2020, most brands paused, cut, or cancelled large swathes of their marketing investments. Zenith Media has calculated a 9.1% decrease in global media spend for the year, with recovery expected to take at least three years.
The financial stress experienced by agency holding companies in this period of decreased brand investment has led agency holding companies to transform their operating models in an attempt to protect margin and profitability. Changes include agencies offering more services internally, moving expenses to billable costs, and cutting staff costs.
These have been achieved by reducing headcount, shortening the working week, and asking staff to reduce salaries and/or forego increases. Agency cost-cutting could impact their ability to meet contractual commitments, and these changes demand increased vigilance and scrutiny from brands.
Marketing investment is currently being planned on ever-shorter horizons, with budgets subject to rapid and radical alterations, often at a moment’s notice. In this environment, brands need to be certain that their agency partners are delivering the services, products, and personnel set out in their contracts.
For almost all brands, the terms and conditions set out in late 2019 will bear little connection to actual delivery in 2020. With lay-downs radically different from plan and agencies reassessing charging structures behind the scenes, now is a very good time to focus on – and potentially rewrite – the fine details of agency contracts.
Transparency and compliance from all agency partners
In recent years, many of the world’s leading brands have worked with their agency partners to secure a much clearer and more transparent understanding of all the links in their marketing supply chain, with most attention and most progress made so far in media.
Transparency challenges cannot be said to be fixed in media – especially as increasing swathes of media are traded programmatically and through non-disclosed models. These services are being offered across digital display but also increasingly non-traditional digital channels such as TV and digital out-of-home.
What’s more, while media is often the largest single-line item in many marketing budgets, it only represents about a third of the $1.7 trillion invested in marketing globally each year. FMCG brands, for example, often spend ten times as much on retail promotions as they do on media, and smart brands are increasingly assessing contract compliance from all of their agency partners.
These include retail promotions spend – from merchandising to shopper marketing – creative, influencer marketing, promotions, and PR, all of which should be subject to keen scrutiny.
Scrutiny and vigilance a must
The watchwords for brand marketers in the years ahead are scrutiny and vigilance – scrutiny of the ways in which their agency partners are investing their hard-won marketing dollars to ensure better outcomes and vigilance to ensure that the terms of their contract are being adhered to and met. Contract compliance across the marketing disciplines will be the cornerstone of open, trusting partnerships between brands and their agencies throughout the 2020s.