Four Imperatives for Agencies in 2023
Jessica B.
COO | Operator | Orchestrating Tech, People & Business to Create Exceptional Experiences
Earlier this month, a prospective client reached out to wish me a happy new year.?We'd been talking about process re-engineering at the end of 2022, and he was following up on that conversation.??He told me that, after confronting the brutal truths of their business position, they had decided to shut down operations.??
As the speed of new technology accelerates, and as agencies struggle to differentiate themselves in a market where the services themselves are rapidly changing (think about what ChatGPT will bring to Communications or DALL-E to art departments), agency owners find themselves struggling to differentiate in a complex landscape of marketing services. To add to the complexity are market pressures we have not seen for decades:?a talent exodus,?commodification of services, disruptive technologies and the opportunities they bring, and unsustainable fee models that drive operations to be so lean that there is little capital to invest in infrastructure or innovation, service delivery improvements or client experience.
But, agencies - like any other company - can embrace new modalities, innovate their business model,?and make some bets on the short and mid-term future.?Here are four imperatives that agencies should adopt to attract new clients, retain key talent and be attractive to new talent as they enter the workplace.
Imperative 1: To Retain Talent - Improve Employee Experience
Agencies are facing a talent shortage.?Creatives, technologists, producers, and executives are leaving advertising and communications and going to Big Tech, MarTech, Consultancies, or doing freelance work.?The reasons are many, but at the root is the experience of working in an agency.?
Agencies must focus on making the Employee Experience a great one if they want to attract and retain talent.?From the hiring process to onboarding and training, from resource management to career management, from legacy systems to modern technologies, the best talent will go to the environments that provide the experience they seek, regardless of their career stage.
Agencies suffer from technical and process debt. These old and broken systems create a frustrating work experience. Agency employees are tired.?Managers, due to pressures to be billable, are not able to be the career coaches that younger talent needs to grow into the marketing leaders of tomorrow.?Remote work doesn't benefit the next generation of workers like it helps working parents or older workers.?The lack of process and support infrastructure, including modern collaboration and communication platforms that are standard in big tech, don't exist in many agencies, and recruiters know this.
Imperative 2: Re-engineer your process and make it tech-enabled where possible
One of my mentees, a copywriter, asked me in our last session if he should be afraid of ChatGPT taking his job.?My answer was a resounding "No!" but my advice to him was:?think not about the technology eliminating the job, but instead, how can it enhance it? Make it better, more efficient, and optimized.?
When a new technology emerges, a great way to envision how it could help an existing business process is to map out the process in simple steps, calculate the cycle time for completing each step and look at where the process could be optimized.?Your delivery and back office processes could be improved with automation,?a low-code collaboration platform, and new applications for machine learning and artificial intelligence.?Look to enable each process with technological improvements - automation can improve delivery workflow, finance workflow, and HR workflow.?Machine learning and AI can produce early drafts of research and reports.?
Nothing is more demotivating than old technology and broken process.?The confusion caused by broken processes is quietly expensive. Invest in process mapping, and consider which areas of the process can be better enabled by technology today (automation) and tomorrow (generative AI).?
Imperative 3: Explore other pricing models
There are four basic fee models in marketing services:?Fee-based (fixed or T&M with cap), Cost Plus, Percentage of Media Spend, and Value / Performance-based.?A fee model based solely on the billable hour does not produce the best work for the client nor the best financial outcome for the agency.?
As you are (possibly painfully) aware, the dominant model is fee-based, with many agencies having to make broad assumptions regarding scope and staffing before enough information is known.?This is like asking how much a house costs without any blueprint to use to make an educated estimate.?Why would an agency agree to quote a price without enough information to ensure that the price is right??A few reasons:
领英推荐
Fee-based models focus on billing hours rather than delivering value to clients.?In this era of downward rate pressure and upward salaries (I recently discovered that the blended rate I used at iCrossing in 2009 is *still* the blended rate used at a leading holding company in its advertising group) more emphasis is placed on being billable for 90-100% of the employees work week.?What happens when being 100% billable isn't enough?
Additionally, scopes are rarely written well, projects need to be managed with risk plans in place, and there needs to be more contingency when scoped hours are not enough to cover the work product through to completion.
What's the solution??
Aim to eliminate T&M with a cap for any project except commoditized work, in which you know the level of effort required to complete the job.?If clients demand hourly rates behind the fixed fee quote, then estimate in stages, and quote a price for the phase of work that is being scoped.?Provide a range for the remaining phases.?Use milestone-based revenue recognition rather than individual hours worked.?Doing so allows the agency to recognize (and collect) revenue at specific project milestones and reduces the risk of under-scoping a project or workstream.?
Introduce value-based pricing -?a performance bonus for exceeding target KPIs or a separate negotiated model for tiers of services (examples:?art production, process-driven work, strategic thinking, bespoke development) to be applied depending on the type of work delivered, as these types have a different value to the client and the agency.??
Ultimately, the goal is to earn more revenue for the value your agency delivers while lowering billability targets, thus enabling employees to avoid burnout, engage in learning and development or community projects, or take on internal innovation projects.
(ps. Consider hiring a strategic procurement resource to develop relationships with these gatekeepers in the client organization.?It's an investment that pays off!)
Imperative 4: Productize standard services
Imagine if you could take a part of your process, standardize it, and sell it via a subscription to your clients as an additional revenue stream...
Financial management is challenging for professional services because of revenue unpredictability from quarter to quarter, a product of project-based work, short contracts, and client budget pauses and cutbacks.?A few years ago, the "subscription economy" was all the rage for getting predictable, recurring revenue.?Agencies provide customized services - services that are knowledge-based?and require additional human resources to scale.?However, a productized service is a service that can be customized just enough to be valuable to all clients. These still require human resources, but fewer, due to the standardization of the service.?Intellectual property is one area that could translate into a productized service - research, thought leadership, statistics, content - agencies develop content continuously; why not offer clients a subscription to research, thought leadership, or analysis that is done inside the agency??Data products, training, and workshops are all potential ideas to bring in additional revenue from your existing client base.
I hope these imperatives are helpful to you. I'd love to hear from agency leaders and employees on what you believe to be agency imperatives for 2023. Share your success stories, and if you are an agency leader, let us know if you'd like to be a guest on our forthcoming podcast: "Pod Save Advertising."
Need help with your strategic planning and operations? We are a team of independent operators and technologists and our goal is to help your agency grow and thrive.
Contact us at [email protected]
CEO MKTG2.U. Board Member: Tinuiti, Bounteous, Real Chemistry, Vytalogy, WebFX, Bond Loyalty, Horizon Services & Anteriad. Senior Advisor New Mountain Capital. Chairperson & Co-founder NEAR. Past Board Member Mars
2 年Jessica, I truly appreciate leaders who share their knowledge as a gift to the industry. This is valuable, thank you. Agree with all of your points... Employee Experience is critical. We must Tech Enable our processes. To stay viable, and more so competitive, we all must look at pricing, and your call out to move, where possible, to value-based pricing is absolute correct. Productizing standard services is also an important one. But, perhaps the gem in this was the PS under pricing: "Consider hiring a strategic procurement resource to develop relationships with these gatekeepers in the client organization.?It's an investment that pays off!" I strongly agree with this point. Again, thank you for this gift to the industry.
Lead Content Designer at Atlassian
2 年Jessica Burdman Amazing insights in this piece. Bravo. I work for a company with an incredible employee experience. But like all things in business it’s a work in progress. There is that tension between the customer, the revenue and the employee. We need new narratives, not platitudes to make the case for a better employee experience. What do we all mean by a better employee experience? Trust. Agency. Respect. Autonomy. Play.
Great insight Jessica Burdman. I would add that allowing for authenticity is a critical part of the employee experience. Employees want to be heard and feel a sense of belonging, which should be a core consideration throughout the processes of onboarding, training, career development -- every step of the employee lifecycle. Equity needs to be foundational to the experience if we want to retain talent and support continued growth. I also agree we need to focus on tech-enabled processes vs. tech-driven processes. So many times companies see technology as the fix to process problems; but until we take a hard look at where the processes are falling down, we can't expect any one technology -- or several as is often the case -- to address the pains being felt by the agency, and often the client. Always appreciate your vision!
CX Strategist, Digital Innovator, and Architect of Intelligent Experiences
2 年Fantastic piece Jessica Burdman. The points made about employee experience especially are spot on. The modern agency business is way more of a grind than it ever was and throw on top of it all of the issues you’ve mentioned from lack of coaching to underinvestment in infrastructure and you’ve got a perfect storm. Oh also add generational attitudes toward work and post pandemic realities where so many people got to confront their grinding at work lifestyles and re-evaluated. There’s much opportunity to attract talent by focusing on a better employee experience. Good stuff. Thanks for putting it in writing.