The Chief Marketing Officer (CMO) Council report More Gain, Less Strain says the shift to digital, social, and mobile channels is significantly impacting agency relationships, compensation models, and use of marketing technology as well as measurement systems.

Just 9% of senior marketers believe traditional advertising agencies are doing a good job of evolving and extending their service capabilities into the digital age, while 22% viewed their agencies as struggling to transition their business models and service offerings. Another 51% saw their agencies as playing catch-up with regards to new technology, or acquiring but not integrating digital marketing capabilities.

The CMO Council’s analysis of how its global members are “optimizing marketing partner performance and value in a digital world” was conducted during the second half of 2011 with partner Ace Metrix. The report included best-practice discussions with more than 20 leading brand advertisers like Colgate-Palmolive, Coca-Cola, Kia Motors, Ricoh, PepsiCo, L’Oreal, Weight Watchers, The North Face, and Renault.

“There’s an underlying level of frustration among senior corporate marketers worldwide when it comes to agency contributions to business value creation, strategic thinking, and digital marketing development,” noted Donovan Neale-May, CMO Council Executive Director. “Our members report quite a bit of switching of digital marketing resources, as well as a view that big, global agencies don’t have a truly integrated offering and capacity to execute in an effective, localized way in emerging markets.”

As a result, many are turning to specialized boutique agencies in regional markets that have deep domain knowledge in specific geographies and vertical industry sectors.

The report also included perspectives from CMO Council board members worldwide who found that:

  • Agencies are struggling to evolve as marketing and traditional media go digital in all areas of campaign execution and audience activation
  • There is a power shift from master agency control of accounts to a more digitally empowered client wielding new partner and provider connections and resources
  • The advent of informal, viral, and mobile device-driven “developing nation” markets is straining and testing traditional agency capabilities and client relationships

Traditional agencies are likely to be challenged in their retention of client relationships, as 48% of survey respondents reported they are hiring specialized digital marketing solution and service providers to implement new social, mobile, and interactive strategies; another 47% plan to build internal capabilities and use incumbent agency services less. In addition, 45% are bringing in outside consultants to help set up and structure digital programs.

When it comes to new areas of outside service provisioning and agency use, survey results focused on the following priorities:

  • Mobile apps and mobile content (62%)
  • Social media engagement and buzz building (60%)
  • Multi-channel digital marketing, including email, mobile messaging, social, and web (52%)
  • Web design, development, and performance improvement (51%)
  • Search marketing optimization - paid and organic (51%)
  • Customer relationship marketing (47%)

“Marketing expenditures are under incredible pressure from both CFOs and CMOs in today’s business environment. Objective, quantifiable measurement of creative effectiveness is a requirement - not just to address the concerns around accountability, but also to provide a platform for communication between the client and agency,” noted Peter Daboll, Ace Metrix CEO, a study partner. “It is critical for companies to adopt measurement tools and technologies that can be deployed broadly within and across organizations, because the client/agency relationship is now far broader in its organizational scope than at any time in the past.”

Fundamental economic pressures and internal competency considerations are influencing agency selection and use across the marketing mix. Among the top five cited in the survey are:

  • Breakthrough creative, new skills, and fresh approaches are needed in marketing
  • Budgets are flat and more value must be realized from marketing investments
  • New digital marketing competencies are lacking inside the organization
  • There is a greater need to integrate both online and offline marketing campaigns
  • An increasingly metrics-driven environment is driving greater accountability

In today’s “Digital Age” there are many challenges the agency business must evolve to overcome: client/agency relationship management, performance measurement, and accountability. The ever growing number of new contenders, keen to displace advertising agencies by taking a strategic leadership role in helping global marketers, embrace integrated multi-channel digital marketing practices, which means that all of us - agencies and their clients - must not only keep up to date on all trends digital but go digital too!

By Ralph Leonard