For the needs of this research, we interviewed 230 small business owners who have worked with a marketing agency at least one time in the past. The scope of the study was partly to discover whether or not business owners had a positive experience with a marketing agency, and partly to identify trends that could be useful to the agency owners.
The results of the research are presented in the first chapter. This is the primary outcome of this research and can help agency owners understand what business owners think of marketing agencies. In the second chapter, we make six predictions on the future of agencies. In the last section, we share some final thoughts, regarding the outcome of the study.
In this chapter, we will present the answers by 230 small business owners that we interviewed during our research. Even though all questions are important, the data on some occasions were not as accurate as we wanted them to be. This is why we excluded them, and kept only the data that makes sense, and is useful for the reader.
What do business owners think of agencies? Here are their answers.
65.71% of business owners replied that they have worked with an agency in the past. This means that almost seven out of ten (7/10) small businesses have experience with an agency, and have either a positive, negative or neutral experience from this experience.
68.42% of business owners rated the service they have received one, two or three stars. With a certain level of confidence, we can say that this describes a somewhat negative or (at least) average experience. Even though we are not able to know how subjective these answers are, the responses paint a clear picture: most small business owners are not happy with the services they have received.
As you can imagine, this affects of their perception on the agency industry in general, but—as you will see later—is not enough to prevent them from working with an agency again in the future. Last but not least, it’s important to stress that not all the agencies are the same, and not all the clients are the same.
On a scale from one (1) to five (5), with five (5) describing an excellent experience.
The truth is that quality—especially when it comes to marketing—is (once again) subjective. The reason why this is happening is that quality can’t be measured—at least not all of the times, and is highly correlated to each client’s expectations and even budget. Nevertheless, the answers that business owners gave us are astonishing.
First of all, this was a multiple choice question, meaning that the users could pick up more than one answer. 94.74% of business owners replied that the reason why they rated the service as average or bad, was the quality of the provided services, while 31.58% of the users have chosen the price as the most important factor. Thus, despite what many people think, the quality of provided services seems to be the factor that forms the overall experience that a business owner has with an agency.
Note: This was a multiple question answer, which means that users could choose more than one answers if they felt that the factor that influenced their decision was both the “Quality of Work” and the “Price” of the provided services.
This is a crucial question; it shows us what most people think of agencies. Of course, the perception is highly correlated to past experiences. For example, if someone has worked with an agency in the past, and results were satisfying, their opinion of agencies would be highly—or at least fairly—positive. Having that said, with 68.42% of business owners rating the service as average or below to average, we could say that this would form an overall negative perception towards marketing agencies.
However, this is not the case in our study. As you can see, more than half of the people asked (54.45%), said that they have a “fairly positive” or “highly positive” perception. This means that even though there was a negative experience in the past—mainly because of the quality of provided services—people have still a positive perception towards marketing agencies.
When asked if they would work with an agency again in the near future, only 17.2% of the business owners interviewed replied “No.” This means that despite the negative experience they may have in the past— which was mainly affected by the quality of the provided services—businesses still want and probably need the help of marketing agencies.
This is very important as it helps us understand that despite the “trust issues” there may be, businesses still need—and want—the guidance of marketing agencies. An opportunity that has to be taken? Maybe, but only if agencies identify the real needs of their clients and try to level-up their services and overall quality. Because, even though most people responded “Yes” or “It depends,” we are not sure as to what the conditions should be for that to happen.
This was one of the most critical questions of our research. Deliberately, we limited the answers to just two: “Execution” and “Expertise.” We firmly believe that execution and expertise are the two main reasons why a business owner may reach out to an agency.
Contrary to popular belief, 68.97% of business owners replied that what they are looking for when hiring an agency is guidance through the agency’s expertise. This contradicts with what most agency owners think: that their clients want them for their execution. However, as the research indicates, most business owners prefer someone that knows and that will guide them through the various steps of effectively running and growing a business.
As we can see, 42.3% of business owners consider hiring in-house to be more—or, somewhat more—beneficial than outsourcing to marketing agencies. (Based on replies with six, seven or eight stars.) On the other hand, there is 30.8% of business owners that stand in the middle, and another 26.9% of business owner that doesn’t consider outsourcing to marketing agencies more beneficial than hiring someone in-house.
Of course, this has to do both with the experience that the business owner had and the needs that a business has at a given time. For example, if a business operates in a very niche industry, where very few marketing agencies have experience, it is only natural that this business would choose to hire someone in-house, train them and educate them than hiring an agency that doesn’t have much of experience in their field.
The fact that 57.7% of business owners replied that hiring an agency is not more beneficial than hiring someone in-house shows us that there is an opportunity for junior executives and T-shaped marketers. This is also one of the predictions that we’ll elaborate more in the next chapter.
On a scale from one (1) to eight (8), with eight (5) being the highest.
What will the future of agencies look like? This is a question that many agency owners have. However, this is a question that many small business owners should have too. The future of marketing agencies will affect how businesses execute their strategies, manage their resources or hire their employees.
The following predictions are based on our study and personal views on how agencies will operate in the future. They can help agency owners and people working in the marketing industry better understand the trends, the opportunities and the threats that will come up the following years. Here are the most critical predictions:
An essential aspect of running a marketing agency is that hiring marketing talents has become very difficult. While agencies are trying to scale and keep their profit margins stable, they have to make cheaper hires, which—most of the times—fail to meet expectations.
“Marketing talent is hard to find and hire”
On the other hand, hiring marketing talent at a higher rate means that the newcomer will have to manage more accounts, to prove ROI. However, this contradicts with high-quality. Moreover, it means that agencies have to be involved in low-engagement services if they want to scale and grow.
This is why junior executives will become attractive for agencies. It only makes sense: a junior executive is always on the edge of technology, will probably not ask for the same salary as an expert, and will be willing to work hard to prove their employer’s choice right.
However, junior executives will not become attractive just for agencies. As we saw earlier, 68.97% of small business owners prefer expertise over execution. Of course, that doesn’t mean that businesses don’t need execution. It just means that if they had to choose, they would prefer someone who can guide them through their high expertise. This is an opportunity for junior marketing executives who are up-to-date and have some level of knowledge.
Employing someone who is both experienced and is great at execution, means that: this person is of a certain age and thus is not cheap. This is why most businesses (especially early-stage startups) prefer young talents that can work under the guidance of a vendor, such as a marketing agency.
As you probably know, creatives services can be easily productized and scaled in terms of quantity. This is happening because these services are more about proper execution rather than the right expertise. Plus, getting to specific expertise within these services is easier compared to other services.
In addition, creative services have a straightforward execution process that can easily be productized. Other services like online advertising are not easily productized because many factors are affecting the result and because—most of the times—results are unpredictable. (In advertising, results are affected by competition, market trends, algorithm updates and more.)
“Productized services are ideal for creative services”
Productized services are in high demand right now. These repetitive services work with a subscription-based model, where the client pays a flat monthly fee for the services they are receiving. The reason why services like graphic design, web design, or content creation are productized is exactly that they can be scaled in terms of quantity.
This indicates an opportunity for agencies—especially the creative ones—that need to scale their business model and generate recurring revenue. However, high-expertise services like PPC advertising or software development are not so easy to productize. This means that marketing agencies should be aware of the dangers of productizing, before deciding to change their business model.
To sum up, hiring someone in-house for creative positions—especially when the cost is continuously dropping—is more expensive than buying a productized service like Design Pickle or ManyPixels. Thus, these services will be outsourced more and more as the time passes; and, that is both an opportunity and a threat for creative agencies.
This is not an outcome of our study. We believe that remote working will be used heavily in the future, especially from agencies. Agencies now can go fully remote, hire cheaper in third countries and discover talents that they couldn’t employee otherwise. Also, the level of expertise from talent all around the world has risen significantly.
All these paint a clear picture: remote hiring is more attractive and will become more popular as time passes. Of course, there are some drawbacks when it comes to hiring remotely, but all these can be overcome if there are: willingness and a straightforward process as to how things are done.
This is the most important prediction for agencies. As we mentioned earlier, 68.97% of business owners want agencies to “guide their execution effectively through their high expertise.” Once again, we have to be clear about this: it’s not that businesses don’t want execution; it’s just that they expect someone who can bring innovation and knowledge. But, how does that affect agencies? This shapes a future where agencies can coach and guide, rather than offer low-quality execution.
“It’s difficult to support both high-quality execution and top expertise”
It is evident that it’s difficult to support both high-quality execution and top expertise. With confidence, we can say that this is the reason why many agencies can’t meet expectations while trying hard to keep everyone happy. However, doing everything is a surefire way to fail—at least at some of the things that you’ve hired for.
Most business owners need someone to guide them through the right path to success. And, this is an opportunity for agencies that can’t support both support both high-quality execution and top expertise. By choosing one of the two roles, agencies can prove their value and have their clients happier.
Of course, many agencies do a great job both at executing and bringing in high expertise. So, this prediction is not for them. This prediction is for agencies that struggle to find a product-market fit while trying to find clients that get high value out of their services.
By being more specific as to what their services are, marketing agencies will be able to: 1) get closer to their clients, understand them better and serve them in a way that is meaningful for both parts and 2) increase the actual value that business owners receive. Moreover, this will allow agencies to scale more efficiently, by providing low-engagement services to their clients.
Agencies that don’t have a strong value proposition or differentiation point will massively die. There is a reason behind that prediction. With the cost of hiring, tools, real estate and online promotion rising, agencies must serve more clients with a higher profit margin. However, the agency model is not scalable in many ways.
“Agencies have to change their pitch and mix of services”
It is essential that agencies have to change their sales pitch and the mix of services to differentiate from the competition. As you already know, there are many agencies out there. From social media to paid advertising and SEO, business owners have many choices when it comes to choosing an agency for their business.
However, the fact that there are so many agencies in the market may be frustrating for business owners and even prevent them from hiring an agency at all. This is why agencies have to reposition themselves, and sell services based on needs and not based on their profit margin.
“Agencies are trying to “processize” and productize their services”
Agencies are trying to productize their services, to scale their business. How is that affecting the service though? It affects it mainly in terms of personalization, as repetitive and low-engagement services are usually less-personalized.
This means that—even though agencies are trying to find new ways to scale their business models—at the same time, they lack personalization. This is a significant outcome since it allows us to identify that productization can indeed affect personalization. Thus, agencies need to find a balance between the two; this way, they will be able to grow and offer personalized service at the same time.
This is why agencies have to niche down their services and be very specific as to what their target audience is, and find a way to differentiate from the competition. This way, they will be able to serve a smaller set of clients that have particular needs and have a higher perceived value for the provided services.
Besides smaller agencies, bigger and global agencies will have a hard time too. The reason is simple: marketing services already saturate the most developed countries. Also, in these countries, customers have developed higher sophistication when it comes to digital marketing services and products, which means that they have higher expectations and—in most cases—expect a higher level of personalization.
Of course, this doesn’t mean that the global agencies will die—similarly to smaller agencies that haven’t yet found a product-market fit—but, they will surely have a hard time. What will save them is the processes they have developed over the years, as well as the penetration in countries with lower digital marketing awareness and sophistication.
The results of this research helped us better understand—not only how business owners think of agencies—but, also what are the threats and opportunities for the agencies. It is evident that agencies have to change their process and be more specific as to what their audience is if they want to survive.
The research indicates that businesses need agencies, but not in the traditional sense. Agencies will have a more leading and consultative role, rather than execute and be the one that moves all the needles. The future is bright, and we are looking forward to it.
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