OPINION: How brands and agencies can spot opportunity in the face of adversity

Tony Mattson, Head of Strategy, Havas Media Group

A crisis is brewing within strategy in media agencies. The discipline is under threat. This was the provocation that my colleague Eva Grimmett, Chief Strategy Officer at Havas Media Group, made recently. Coming from someone in her position, it caused quite a stir. And rightly so.

Gartner’s 2021 CMO Spending Survey[1] revealed that CMOs are under ever increasing pressure and a significant number (29%) have responded by in-housing skills and disciplines that previously would have been delivered by external agencies. While the 2020 survey showed a shift towards in-housing lower value, high volume capabilities such as production and digital performance, this year’s survey showed a worrying red flag with in-housing efforts focused on high value capabilities such as brand strategy and marketing strategy, innovation, and technology.

Research from Serpico by Croud[2] and Censuswide suggested that 49% of UK marketers are planning to move digital in-house. A report from MediaLink found that around 34% of marketers around the globe were considering more in-housing across all ad areas in 2020. In-housing is on the rise, and this presents an obvious challenge to external agencies.

Winston Churchill knew a thing or two about difficulty and his experiences led him to believe that there are two types of human beings. “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” I choose to be an optimist and believe that opportunities abound from the challenges facing agencies and agency strategists. A crisis might be brewing but it brings possibility for those prepared to lean into change.

Media agencies are service organisations. They exist to meet the media-related needs of marketers. The discipline of media strategy has developed over time as the media industry and the related worlds of commerce, culture, technology, and sustainability have grown more complex. What does it mean for agencies and strategists if considerations for this complexity are artificially removed through the act of limiting the scope of the service relationship between marketer and agency?

Let’s have a look at what needs agencies might serve in general and then turn to the specific challenges facing marketers in the financial services sector. These insights will inform a projection about how agency strategy might adapt and in parallel how marketers might adjust their agency relationships.

So, what media challenges do marketers face?

A report from the World Federation of Advertisers, titled The Capability Gap[3], revealed that advertisers are set to face considerable challenges in delivering their media aspirations due to a disparity in the breadth and depth of skills required by senior leaders to meet demand. The report identified five key areas where many are struggling: e-commerce and shopping, finding the right balance for in-housing and partners, and managing the challenges of environmental, social and governance agenda, as well as the more long-term challenges of measurement and transparency.

Interestingly, these point towards a diversification, perhaps even a transformation, in the requirements of an external agency strategists. No longer strategy as a hand on the tiller of campaign output. This research opens the possibility of strategy guiding and collaborating with experts in retail, organisational and operational design, ESG, advanced analytics and technology.

That feels exciting to me and participants in the research clearly felt the same way with 81% believing that media will occupy greater strategic prominence than in the past and 75% of predicting that media management will have more decision-making authority than it has done in the past. The future looks rosy but not as we know it.

Now let’s turn our attention to the challenges facing marketers in the financial services sector. The list below is extensive without being exhaustive.

Declining trust. The UK is in the bottom 10 most distrusted countries for financial services, according to the 2021 Edelman Trust Barometer[4]. The report showed a -4-percentage point loss of trust for the financial services sector year-on-year versus a +1-point gain for business in general after years of steady growth. This affected every sub-sector.

Sub-optimal media investment. The IPA’s Effectiveness in Context[5] study showed the value of brand building in the financial services sector both for driving sales activation in the short-term and long-term effectiveness. 42% of cases reporting 2+ brand effects also showed very large activation effects compared to 25% where no brand effects were reported. And where 2+ brand effects were reported, 2.1 very large business effects were seen compared to 0.8 where no brand effects were reported. However, financial services was the sector most notably out of balance with the optimum mix of brand building and sales activation investment, with brand showing a -26-percentage point shortfall.

Lack of integration. A study from Qualtrics[6] found banks could expect to see a +27.5% growth rate simply by improving their customer experience scores by 10%. However, many organisations are held back by the siloed nature of their customer experience programs.

Customer data management challenges. Understanding customers is essential to provide them with the products and services they need. Customer data is the bedrock of this. Royal Mail Data Services[7] spoke to financial services marketers across the UK about their marketing challenges and how these impacted customer data management strategies. These are the top six findings: the need to build loyalty, GDPR has risen in importance, turning data into business advantage, collaboration is key to success, collecting and managing customer data, and dealing with data quality.

Legacy technology. The Financial Conduct Authority (FCA) published a report[8] earlier this year showing 92% of the UK’s financial services companies still rely on legacy technology, which slows innovation and increases risks.

Contribution to climate change. Research by Greenpeace UK and WFF[9] indicates UK banks and asset managers were responsible for financing 805m tonnes of carbon in 2019, equivalent to 1.8 times the annual net emissions of the UK as a whole. Finance is one of the biggest contributors to climate change in the UK and financial institutions are under fire for not doing enough to tackle climate change in the UK, despite the recent focus on green financing.

On the face of it, you might think many of these do not look like media challenges. But you would be wrong. For everything communicates and therefore everything is media: the implicit and explicit signals given by the products and services a company develops. The same goes for the way a company promotes these services. The sum total of all touchpoints with and experiences for customers and prospects. An organisations actions in relation to ESG topics. The way a company approaches and applies customer data. The decisions about martech and adtech that support these approaches. And the advanced analytics required to assess marketing’s contribution to an increasingly wide range of outcomes.

These are all media-related needs. And appreciating that is important in the face of the challenges outlined at the top of this article. This appreciation also informs my projections for how agencies and their strategists will need to adapt and how marketers might adjust their agency relationships to garner the most benefits from them.

Agencies first.

Lean into the in-housing challenge. In Serpico’s report, 29% of respondents said they intend to enlist the support of an agency to realise their in-house goals. Why? Because they need help setting up operations, recruiting talent, forging relationships with data, technology, and media partners. These capabilities exist in agencies, so rather than spot the difficulty in the opportunity, agencies should instead work to realise the opportunity in the difficulty.

Break the model. The strategic challenges facing marketers are wide and deep, and most have only a passing resemblance to campaign delivery, the legacy service of external agencies. In response, agencies should think less about the lead strategist and more about strategic units. Teams that are smaller, faster, and more diverse in nature – comprising media, creative, data science and engineering capabilities – to solve client challenges.

Focus on outcomes. Performance-related fees have been around for a while, but their application remains limited. This must change. To realise media’s potential to have strategic influence across an organisation, agencies need to be 100% aligned around the right KPIs. By expanding the scale of value-based compensation, it will allow agencies the flexibility to switch in and out different expertise along the way.

Now for marketers.

Encourage challenge. One risk of limiting scopes of work through in-housing is that it will limit the ambition and incentives for agencies to bring fresh thinking and expertise to the table. My experience of reports from TRR (The Referral Rating Company) is that this would run counter to what marketers want and need. They will need to foster this through strong agency relationships.

Build partnerships. Another unintended consequence of the trend towards in-housing is that it could lead to an increase in transactional relationships between marketers and agencies, as constraints are placed around the scope of supplied services. Empathy, openness, and honesty will become important traits, and these can only be built through a partnership.

Share ambitions. The best partnerships are rooted in a shared sense of success, with collaboration and cooperation baked in at every step of the way. From uncovering problems to addressing them with creativity and measuring their effectiveness.

So, in the face of the difficulties that challenge the status quo of agencies, I choose to be an optimist and believe fundamentally that opportunity is just around the corner for those bold enough to take the right steps.

[1] https://www.gartner.com/en/marketing/research/annual-cmo-spend-survey-research

[2] https://insight.serpico.io/report

[3] https://wfanet.org/knowledge/item/2021/09/08/Capability-gaps-creating-significant-challenges-for-large-advertisers-WFA-research

[4] https://www.edelman.com/trust/2021-trust-barometer/trust-financial-services

[5] https://ipa.co.uk/knowledge/publications-reports/effectiveness-in-context

[6] https://www.qualtrics.com/uk/experience-management/customer/breaking-down-silos/

[7] https://thefsforum.co.uk/knowledge-hub/tactic/facing-customer-data-challenges/

[8] https://www.fca.org.uk/publications/multi-firm-reviews/implementing-technology-change

[9] https://www.cityam.com/financial-services-industry-is-one-of-the-uks-biggest-contributors-to-climate-change/