While there is a lot of 2022 left, 2023 is closing in fast. What is the industry focused on in 2023? Social justice, DEI, ESG, climate change, or are these now old news in the hyper ADHD ad industry? What are the most formidable challenges your prospects see ahead? Changing consumer behavior, shifting demographics, polarization, misinformation, or are these giving way to inflation, job security, and interest rates? What tactics are trending up, and what is falling away? Is content still king, or will TikTok dominate? What is different about 2023 compared to 2022? How should all this social, economic, demographic, and innovation inform your agency's business development plans for next year? Glad you asked…
How many have been through this before? Raise your hand. Each year ahead promises the fulfillment of transformation and then seems barely a step forward. These last couple of years have layered on significant challenges, and today, we look back in awe at how we came through. Some were not so fortunate. Those who were are stronger today. As much as we might like to dwell on those accomplishments, the game clock gets reset in just a few months, and ad agency business development pros must hit their stride all over again.
New business is going to be more challenging – work smarter.
According to RSW/US, this year finds agencies with a more challenging landscape. For example, agencies report organic growth fell by 11% in 2022 as an effective way to generate new ad agency business. Also, only 32% of agencies said the number of opportunities for new business increased in 2022 versus 51% in 2021. In 2021, only 28% of agencies said obtaining new business (compared to the previous year) was harder or a lot harder. In 2022, it's risen to 43%. Agencies are not investing in the development of "new" new business. Instead, they rely on the low percentage tactics, all under 15%, attributed to phone calls, social media, inbound, and traditional mailings. 55% of agencies say it's harder to break through to prospects than last year. Get the complete survey here: https://bit.ly/3D7sim6
The economy will be a factor – use it to your advantage.
At the end of 2021, the economic drag caused brands to shift their thinking toward short-term goals. In many cases, brand building took a back seat to sales as marketers were pressured to make up for lost revenue. Strategies, tactics, and accountability reflected this thinking. Read Short-term thinking is the headline in 2021 https://bit.ly/3fhYm9f. 2022 ushered in greater optimism, and plans shifted slightly back to a balance between brand and sales. Here we are at the end of 2022 with new economic woes. It looks like the conversations in the boardrooms and CFO offices are shifting back to the same short-term thinking. Agencies must actively track this sentiment closely to align their offering with what marketers want.
The job market will continue to be challenging – make it an opportunity.
Staffing shortages continue to hold back brands and agencies. While the unemployment rate is down to 3.5%, the labor participation rate is also down to 62.3%. The great resignation, an entrepreneurial surge, boomerangs, and other factors continue, especially those in lower-wage and higher-stress industries. For these reasons, finding, hiring, and keeping staff is challenging, forcing dedicated workers to pick up the slack for unfilled jobs as marketing leaders feel pressured to achieve higher performance. These factors hit the in-house agency sector hard. Agencies can help fill the gaps or long-vacant roles at marketers' in-house agencies while developing and growing relationships and trust that could blossom into bigger things. Agencies can also help marketers reconsider what services should be in-house or outsourced.
From the RSW/US survey, hiring new business staff is not immune from job market issues. In 2021, 60% of agencies reported that their last new business hire was very to somewhat successful. That number dropped to 41% in 2022. In 2021, hiring for an agency's new business director position fell to its lowest level since 2010, with just 32% of agencies hiring a new business director in the past three years. In 2022, the number is, once again, at 32%. Agency growth looks to be slowing. It's critical heading into 2023 that agencies have a manageable framework for "new" new business.
To make matters worse, according to executive-search firm Spencer Stuart, the average CMO tenure in 2020 and 2021 was around 40 months—the lowest in more than a decade. Some companies are turning to fractional, aka temporary, CMOs as a result. The revolving CMO door makes it tougher to keep clients and more challenging to forecast.
"Marketing is probably the most challenging role to recruit for on an executive team because there are many layers to it," said Maryanne Martire, partner at executive recruiting firm Daversa Partners. "You can be incredibly successful building a narrative for a business one day, and then 12 months later, the company has shifted, and they want someone who's going to be very sales- or revenue-driven."
Agencies must be on their toes with existing clients, ever vigilant for leadership changes. Do whatever you can to document and promote your client's successes internally. At the same time, be on the lookout for leadership changes among your prospects. Those changes mean resource changes in the months to follow.
Polarization around every issue – navigate it carefully.
It used to be that we tried to homogenize our audiences as much as possible for expediency and efficiency. Today that doesn't work. Tomorrow, even less so. Demographics have splintered into thousands of unique cohorts. The social and cultural divide has widened and fractured many issues, which presents a huge challenge for brands and agencies. If you align with one, you alienate the other, forcing brands to choose, just like consumers.
While consumers say one thing in the survey, their purchase behavior says another. Many thought leaders across the industry cite research that confirms their bias, but throughout the modern consumer era, price/value is and will be the main driver. Those thought leaders warn that you will fade into obscurity if you don't take a stand. While it sounds altruistic, taking a stand pushes a brand into a niche it may or may not want to occupy. Common sense should prevail.
Marketers need strategic help navigating these issues as they pursue even greater marketing returns. These decisions can impact performance more than any other variable and significantly affect brand integrity and appeal. Today's cancel culture is a powerful and relentless influence on business leadership, especially the communications team. Agencies need to be strategic advisors and offer research, scenario planning, and other tools to help guide and lead their clients through these choppy waters. Great results are critical, but strategic vision and leadership are differentiators.
The agency model is or isn't changing – roll with it.
Some say the agency model forever cycles from full service to specialization and back to consolidation. Before the pandemic, the traditional agency model was losing its luster as specialized service offerings and small independent creative agencies increased. Marketers, desperate to achieve short-term results, changed how they buy agency services and from whom. They shuffled agency rosters to deploy greater expertise by channel and audience, and many agencies struggled to adapt.
Today, according to PWC, that model is breaking. Driven by technological developments, evolving consumer habits, and cost pressures, clients are increasingly seeking unified, best-in-class teams that can work across disciplines and agencies. The marketing giants have begun integrating their operations in response to client and external market pressures. https://pwc.to/3D9oG2L Production services may be the most urgent focus because of the overwhelming need for more content across more media and platforms, often without additional budgets.
As economic pressures mount, PWC says clients increasingly ask for cost transparency, visibility into production supply chains and vendor relationships, and demonstrating the careful stewardship of client budgets. All this argues for consolidating agency services to generate demonstrable production efficiencies through best practices like price normalization, project bundling, talent resource management, volume discounts for commodities such as travel and equipment, and consistent client reporting and analysis.
Agencies should develop sound justification for what they do and why their size, services, or whatever is a better solution in this current market than the might and efficiency of the giant holding companies. Agencies should also look at their processes and client relationships to find ways to be more transparent and better stewards of their client budgets.
Differentiation is the priority for 2023 – just do it.
Given these marketplace dynamics, what should agencies do in 2023? Should they be an expert in TikTok or Performance Marketing? Does industry experience even matter anymore? Will fast-acting digital remain at the top of the menu? I say YES to it all. No matter what your agency does or where your expertise fits, the most critical and impactful aspect of your new business plan is differentiation. It’s also the hardest thing to express. http://bit.ly/2Cdz9KI
Agencies can successfully do whatever services or solutions they offer if they stand out from the hundreds of other agencies who do the same thing. It can't be lip service. It must be authentic, meaningful, relevant, and consistent across the entire customer experience. 40X results is not differentiation. Purpose-driven is so 2021. Differentiation must be something tangible and provable that the agency does in service to their clients, something that achieves what is in high demand today. In this era of short-term thinking, one might feel that 'We get results faster' speaks directly to a marketer's need. Yes, but it is the result of the things that differentiate the agency. Also, too many agencies claim it, which makes it unbelievable and no different than others.
Agencies must stand out in a highly competitive and fast-changing market as the economy continues to recover in fits and starts. To set the proper footing for 2023 requires decisive action now. We know that marketers will be demanding sharper, demonstrable expertise. We know marketers will do more self-directed research and discovery to find new agency partners. We also know in this process that agencies will have limited opportunity to influence those marketers on their journey. Agencies must be sure that the information and experience the marketer encounters on the website, in their content, press, and social media makes the best impression and clearly answers the problems that the marketer is looking to solve.
Robust and relevant differentiation is the most impactful action agencies can take to create sustainable growth in the coming year. As a part of the planning process, get the leadership together and work through your current differentiation and positioning to see if it will set your agency apart in the new year. Is it compelling and relevant to the needs today? When I help agencies define a differentiating position, I follow a process that layers the agency's competitive landscape, peer set analysis, prospect insights, market needs, and industry trends to uncover meaningful opportunities to stand apart. These five inputs bring to light the gaps and opportunities and guide any divergent thinking at the agency into a market and customer-centric positioning that is stress-tested for 2023.
The great thing about a positioning that everyone buys into is how well it guides all other agency strategies. It becomes the litmus test for everything the agency says and does so that all activities are consistent and complementary to how you want the agency to be known. Likewise, it makes it easier to say no to activities, investments, and prospects who don't fit. Furthermore, it provides peace of mind for the leadership, knowing this direction will help achieve the growth goals you set for the year.
However you do it, you will benefit greatly from an outside-your-bubble perspective. I'd say it is mandatory. Whether you use me or anyone else, having an objective sounding board helps move the process faster, is a great BS detector, and keeps everyone focused on the right goals. I know from experience working with hundreds of agencies that this process gets results faster. There are other processes that are effective as well. Whichever course you take, be sure to have that outside voice of reason.
If you'd like help finding your differentiation or developing your 2023 new business plan, schedule a call. If you know someone who might benefit from this post, please forward it. And I always enjoy a spirited conversation if you want to kick around ideas. Don't forget to sign up for my new business newsletter if you are not yet a subscriber. Find me on LinkedIn for daily tips and insights. #LetsGrow!