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Agencies are declining new business amid talent crisis – here’s what clients should do

Agencies are declining new business amid talent crisis – here’s what clients should do
Written by publishing team

The talent crisis has reached the point where agencies are becoming more selective about what they offer. Kristen Downton, Associate Partner, International Observatory explains.

Earlier this summer, we warned that the battle for the agency’s talent would intensify. This expectation has now become a reality.

Even agencies admit it, with Havas London CEO Xavier Reis recently saying the company needs to look beyond traditional hiring grounds to find the talent it needs.

And it’s not just the agency’s talent that is the problem – the demand for photo studios and post-production facilities is intense. Warc’s Global Marketing Index saw activity growth of 64.2% during July and August. UK ad spending is expected to grow by 18.2% in 2021 (Advertising Corporation/Warc Expenditure Report) – the largest annual growth ever.

These resource pressures are affecting the marketing ecosystem, but the impact on playground activity is becoming particularly acute.

The management of the agency has to carefully coordinate its resources to ensure that it continues to serve existing clients, introduce recent new business acquisitions and carefully evaluate its ability to deliver.

The agency’s capacity has been squeezed from two directions – an increase in marketing activity in the second half of 2021, along with a reduction in staffing.

To balance the books through 2020, agencies have had to cut staff numbers – in the latter half of that year Omnicom and IPG cut staff by 10% (10,000 jobs total), while WPP cut 5,000 jobs and Dentsu 6,000. See some agency staff Whether the agency culture is right for them, particularly when faced with new opportunities, including greater stability in client teams to build their internal capabilities.

So when it comes to promotion, agencies have had to be very selective about the opportunities they pursue.

In a recent presentation activity, we saw even the largest global holding companies have to turn down new business opportunities as they are operating at or near full capacity. It’s unusual for agencies to pull out of promotions once they’ve committed to the process, but we see this happen frequently, even when the potential fee opportunity is very high and the brand’s high profile. Anecdotal evidence suggests that some major brands have paid up to six figures to encourage agencies to participate in big promotions.

Our regular discussions with the heads of new companies indicate that they have been asked to participate in too many presentations. This trend is likely to continue until the end of this year and into early 2022.

So what are the implications for clients considering giving a presentation?

  • Having a clear understanding of the current agency landscape is critical – find out which agencies are busy with new client and business, and which agencies have lost key employees in strategy and creativity in particular.

  • Understand the types of agencies capable of carrying out a specific brief – “usual suspects” are not always the most appropriate. Look beyond the big name, big reputable agencies to research a wide range of potential partners with a long and extensive list to pick up many talented agencies that can fly under the radar in normal times.

  • Having a truly engaging and concise RFI is essential to inspire and motivate agencies and ensure the right agencies are willing to participate and stay in the process.

  • Organize a well-managed presentation so that agencies’ time is spent effectively and efficiently. It is important that agencies have time to respond and respond through the presentation process.

  • Be realistic about timing—especially as time is running out to complete a full presentation process this year. It would be helpful to add more pressure by having short schedules.

  • Finally, be realistic about costs and negotiations. This is not the time to juice a lemon for small savings.

As business prospects improve, agencies have to re-hire and adjust ways of working as well as review ownership commitments and future requirements. This, along with rising inflation, will likely mean that there will be some significant upward shifts in agency costs.

The next few months will be tough for brands that want to accelerate their exit from the pandemic with refocused plans and revised strategies.

Finding the right agency partners to help them perform at their pace will be critical because without the right talent in their business, results are likely to be suboptimal.

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