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The State of Creative Agency Land

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THE STATE OF CREATIVE AGENCY LAND 2015 Sponsored by


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2 INTRODUCTION


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INTRODUCTION 33 The last several years have been a rollercoaster ride for creative agencies across the globe as economies struggle to recover from the financial crisis and technology transforms the industry. SURVEY RESPONDENT SENIORITY Is all well and good in Creative Agency Land, or are these dynamic organisations feeling the pressure? 3% ClickZ, together and sponsored by Deltek, decided to find out. 11% FREELANCE MID-LEVEL We asked almost 250 creative agency professionals from around the world to tell us about the challenges they’re facing and how their organisations are responding. Our respondents came from agencies of all sizes – from boutique agencies with fewer than 10 employees to global giants – across five continents. JUNIOR 3% 42% DIRECTOR 12% SENIOR Almost 60 per cent were director level or above, perfectly placed to have a high-level understanding of the creative agency landscape as it is today. 14% MANAGER 15% C-SUITE


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It was our goal to identify and understand the major challenges faced by creative agencies, along with the strategies being deployed to stay creative and profitable in the face of enormous changes. To do this we asked each respondent to rank what they saw as their organisation’s three most pressing concerns. While a range of issues were raised, the majority fell into two broad categories: resource management and planning; and charging and profitability. In this report we explore each of these in turn, along with how creative agencies are coping. 20% 15% FINDING AND RETAINING QUALIFIED STAFF STAFFING FOR AN ‘ALWAYS ON’ ENVIRONMENT ADDING NEW DISCIPLINES OR SERVICES 10% TOTAL RESPONSES TOP 3 CHALLENGES AGENCIES CURRENTLY FACE INTEGRATION 28% EMPLOYEE BURNOUT 5% 0% 20% 15% 2ND CHOICE 1ST CHOICE MANAGING RISING CLIENT EXPECTATIONS FOR CHEAPER, BETTER, AND FASTER WORK UNDERCHARGING CLIENTS FOR WORK DONE PROJECT SCOPE CREEP MARGIN PRESSURE 10% 5% 0% KEY 3RD CHOICE CHARGING AND PROFITABILITY TOTAL RESPONSES INTRODUCTION 4 4 RESOURCE MANAGEMENT AND PLANNING STAFF COST INCREASES OFFSHORING


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5 RESOURCE MANAGEMENT & PLANNING


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RESOURCE MANAGEMENT & PLANNING 6 TOP RESOURCE MANAGEMENT AND PLANNING CHALLENGES When asked to rank the top challenges their agencies face, our respondents captured a snapshot of an industry in which adequately staffing projects can be a struggle, creatives’ time is wasted and agencies are not making the best use of technologies to manage resources and planning. 13% FINDING AND RETAINING QUALIFIED STAFF 10% STAFFING FOR AN ALWAYS ON ENVIRONMENT 3% INTEGRATION 7% EMPLOYEE BURNOUT 9% ADDING NEW DISCIPLINES OR SERVICES 2% WORKING ACROSS HORIZONTALS


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RESOURCE MANAGEMENT & PLANNING 7 WHY IS EMPLOYEE RETENTION IMPORTANT? FINDING AND RETAINING CREATIVE TALENT IS CORE TO AN AGENCY’S SUCCESS COMPANIES WITH ENGAGED EMPLOYEES OUTPERFORM THOSE WITHOUT BY UP TO 22 PER CENT (BUSINESS REPORTER) ANNUAL RECRUITMENT AND RETENTION COSTS IN THE ADVERTISING AND MARKETING INDUSTRY: £184M ($287M) (IPA) AVERAGE TIME IT TAKES A NEW EMPLOYEE TO GET UP TO SPEED: FIVE TO SEVEN MONTHS (IPA)


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RESOURCE MANAGEMENT & PLANNING 8 SEVEN REASONS AGENCIES RELY ON FREELANCERS Our survey found that these staffing pressures are being resolved at least in part by freelancers. 4% While freelancers allow for agility during busy times, often they are brought in as the first point of call, and instead of reviewing existing availability across the business. Overuse of freelancers can happen easily if a project is not properly scoped, which will erode margins. 11% REDUCTION OF OVERHEADS ASSOCIATED WITH PERMANENT STAFF Despite these risks, almost 80 per cent of our survey respondents work in organisations staffed at least partially by freelancers. For 15 per cent, freelancers make up half the workforce or more. LACK OF PROPER HIRING STRATEGY 1% FREELANCER RATES ARE CHEAPER 12% These freelancers are being brought in primarily to provide specialist skills (34 per cent), create a more flexible workforce (20 per cent) and fulfil short-term projects (18 per cent). FIND OUT MORE ABOUT FINDING THE FREELANCE BALANCE HERE ACCESS TO SPECIALIST SKILLS NEED TO COMPLETE PROJECTS FASTER 18% OF FULFILMENT SHORT-TERM PROJECTS 34% 20% NEED FOR FLEXIBLE AVAILIBILITY


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RESOURCE MANAGEMENT & PLANNING 9 THE SCOPE OF MARKETING ROLES HAS EXPANDED IN THE LAST 12 MONTHS 29% But the widespread use of freelancers isn’t reducing the pressure on permanent staff. The vast majority of survey respondents — more than 80 per cent — have seen the scope of their role increase significantly in the past 12 months, indicating that individual workloads are being stretched as projects pile up. YES, SLIGHTY 53% YES, VERY MUCH SO 14% NO, IT HAS REMAINED THE SAME 4% NO, THE SCOPE OF MY ROLE HAS SHRUNK


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RESOURCE MANAGEMENT & PLANNING PLANNING RESOURCE MANAGEMENT & 10 29% MARKETERS ARE SPENDING MORE TIME MEETING INTERNAL ADMIN AND CONTROL REQUIREMENTS THAN DOING CLIENT-FACING WORK And freelancers aren’t reducing the administrative burden within creative agencies, either. In fact, a full third of respondents report spending more time on internal admin or control requirements than doing the creative, client-facing work at the core of their roles. The cumulative impact of this can be significant, not only leading to diminished time and space for creativity, but also staff dissatisfaction, missed deadlines and budget over-runs. NEUTRAL 29% AGREE 28% DISAGREE 8% STRONGLY AGREE 6% STRONGLY DISAGREE


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RESOURCE MANAGEMENT & PLANNING 11 AGENCIES ARE DOING WELL AT BRINGING IN NEW TECHNOLOGIES TO MANAGE RESOURCES AND PLAN, ALLOWING STAFF TO FOCUS ON CLIENTS The good news is that technology exists to manage resources and plan projects, allowing staff to focus more on client work. Unfortunately, more than 50 per cent of our survey respondents do not agree that their agency is making full use of these technologies, thus missing a major opportunity to better resource and plan projects. 8% STRONGLY AGREE 38% So how are agencies grappling with challenges in resource management and planning? While some are coping well and putting existing tools to good use, others are struggling. 26% 21% 7% STRONGLY DISAGREE AGREE NEUTRAL DISAGREE


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12 HOW AGENCIES ARE OVERCOMING RESOURCE MANAGEMENT AND PLANNING CHALLENGES RESOURCE MANAGEMENT & PLANNING MAKING SURE THAT EVERYONE WE EMPLOY ADDS A NEW, VALUABLE SKILL OUTSOURCING REFINING FREELANCER RECRUITMENT AND SUPPORT PROCESSES. MAKING SURE OUR SYSTEMS MATCHES OUR PROCESSES AND HAVE USEFUL LITTLE TRICKS, LIKE RECORDING TIME STRAIGHT FROM OUR CALENDARS. SCOPING BASED ON WHAT WE LEARNED FROM PREVIOUS JOBS — IT MIGHT SEEM OBVIOUS, USING PROGRAMMES TO KEEP TRACK OF BUT IT’S SO EFFECTIVE. AVAILABILITY SO THAT WE CAN GET THE RIGHT PEOPLE ON THE RIGHT PROJECTS. BURYING ITS HEAD IN THE SAND WE SPEND A LOT OF TIME FIGHTING, SADLY WE’RE NOT — INSTEAD WE’RE REDUCING FIXED STAFF COUNT AND HIRING FREELANCERS TO MEET PROJECT NEEDS


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13 CHARGING & PROFITABILITY


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CHARGING & PROFITAABILITY 14 TOP CHARGING AND PROFITABILITY CHALLENGES Our survey also revealed huge tensions surrounding how projects are priced and delivered. “Managing rising client expectations for faster, better cheaper work” was chosen more frequently than any other response. Undercharging was another major issue identified by our respondents. 19% MANAGING RISING CLIENT EXPECTATIONS 12% 8% 10% PROJECTCREEP SCOPE UNDERCHARGING CLIENTS FOR WORK DONE 2% STAFF COST INCREASES MARGIN PRESSURE 1% OFFSHORING


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CHARGING & PROFITAABILITY 15 HOW AGENCIES ARE PRICING PROJECTS 14% 2% OTHER VALUE BASED PRICING 34% TIME AND MATERIALS Our survey respondents identified no fewer than seven methods of pricing projects, indicating that undercharging is a concern for creative agencies regardless of how they charge for their work. Time and materials, used by 34 per cent of our respondents, is the most common pricing method. Fixed price (27 per cent) and retainers (23 per cent) are also common. While profit margins remain healthy — 75 per cent of our respondents reported margins of over 10 per cent — research from KingstonSmithW1 has shown consistently that these margins are under pressure, falling as much as seven per cent in some sectors since 2012. 23% RETAINER / FIXED FEE 27% FIXED PRICE (RATE CARD)


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CHARGING & PROFITAABILITY 16 FOUR WAYS TO OPTIMISE YOUR MARGINS ENSURE THAT YOUR ENTIRE STAFF UNDERSTANDS THE IMPORTANCE OF PROFIT MARGINS – GET EVERYONE SPEAKING THE SAME LANGUAGE. FORECAST EARLY AND USING DATA ONLY FROM THE MOST RELIABLE SOURCES, LIKE SPECIALIST PROGRAMMES. AIM FOR A THOROUGH UNDERSTANDING OF THE MARGIN ON EACH BILLABLE EMPLOYEE AND PROJECT. BRING ALL OF YOUR DATA TOGETHER INTO A SINGLE PLACE FOR A MORE ACCURATE, COMPLETE VIEW OF CURRENT AND FUTURE COSTS.


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CHARGING & PROFITAABILITY 17 CLIENTS CHANGE THE SCOPE OF PROJECTS FREQUENTLY This negative trend in profit margins could be due, in part, to over-servicing. 1% STRONGLY 1% DISAGREE OTHER DISAGREE 3% The vast majority of our survey respondents — 75 per cent — told us that their clients change the scope of their projects frequently and throughout the development process. However, less than 10 per cent of our survey’s respondents said that they always charge their clients more for additional work. A full 16 per cent never or hardly ever adjust prices as project scopes creep up. 19% NEUTRAL 54% AGREE 22% STRONGLY AGREE


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CHARGING & PROFITAABILITY 18 DO AGENCIES HAVE SYSTEMS IN PLACE TO ACCURATELY TRACK ACTUAL VERSUS ESTIMATED COSTS? 5.51% Despite the fact that scope creep is having a serious impact on the profitability of creative agencies, almost half of respondents did not agree that their agency has systems in place capable of accurately tracking and comparing cost estimates versus actual costs. Clearly agencies are missing out on a valuable opportunity to confront the issue with technology — but what strategies are they using? 6% STRONGLY DISAGREE 20% 38% DISAGREE AGREE Not surprisingly, some agencies have struggled. But others have put systems and processes in place to safeguard their profitability and protect the time of their most creative minds. 18% 18% STRONGLY AGREE NEUTRAL


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CHARGING & PROFITAABILITY 19 HOW CREATIVE AGENCIES ARE GRAPPLING WITH THE CHALLENGE OF CHARGING AND SAFEGUARDING PROFITABILITY LOTS OF MEETINGS ARE OCCURRING REVISITING THE WAY WE QUOTE AND INTRODUCING STRICTER TERMS AND CAVEATS TRYING TO BE MORE STRATEGIC IN DECIDING WHICH ARE THE PROJECTS THAT WE CAN ADD MOST VALUE TO, AND WHICH WILL ADD VALUE TO OUR AGENCY. IMPLEMENTING PROJECT MANAGEMENT AND FINANCE SOFTWARE. AVOIDING PRICE WARS WHEREVER POSSIBLE INTRODUCING NEW WORKING PRACTICES TO MANAGE SCOPE CREEP. NOT WELL. WE’RE PUTTING PRESSURE ON CREATIVES TO BE MORE ‘EFFICIENT’, WHICH IS KILLING CREATIVITY AND CAUSING BURNOUT


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20 CONCLUSION: WHAT’S NEXT?


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CONCLUSION; WHAT’S NEXT? 21 To be successful in the fast-paced environment of the ever-evolving agency land, creative agencies around the world need to have one eye on the future. We asked which trends will come to the fore over the next three years. Our respondents identified four key challenges which they believe will shape the future of creative agencies across the globe: the skills gap; data; technology; and the rise of in-house teams. MIND THE GAP “IDENTIFYING AND RETAINING THE RIGHT TALENT — DIGITAL SPECIFICALLY — WILL REMAIN A CHALLENGE FOR SMALLER, INTEGRATED AGENCIES.” THE SKILLS GAP The rise of digital has revolutionised the way the world works, consumes media, communicates and shops. Entire industries have met their end in the last two decades as others have blossomed out of nowhere. The marketing industry has not been immune, and the rise of social media, mobile and web has changed what it means to be a marketer. Even as agencies struggle to attract young people with the digital skills necessary for survival, the skillsets of their most senior colleagues have been rendered obsolete. The skills gap was of major concern to our respondents, who identified issues including: “JUNIOR STAFF HAVE MORE KNOWLEDGE ON DIGITAL THAN SENIOR DIRECTORS.” “THERE IS A GENERAL LACK OF SKILLS IN THE INDUSTRY. I THINK WE NEED TO SEE GREATER SUPPORT AND ORGANISATION AROUND THE INTERFACE BETWEEN FREELANCERS AND AGENCIES IN THE LONG-TERM.”


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CONCLUSION; WHAT’S NEXT? 22 DATA The world is awash with data, but all of that information is costly to buy and time-consuming to verify, clean and put to good use. Those who aren’t able to meet the data challenge could be in serious peril as it becomes more and more important to the way all businesses operate. Our survey respondents see data — from how to use it to how it will change the industry — as a major concern for the coming years. “THE USE OF DATA WILL REVOLUTIONISE THE WAY WE DO THINGS. UNFORTUNATELY, IT WILL BRING HUGE CHANGES WHICH WILL NOT ALWAYS BE WELCOME.” “THE AMOUNT OF DATA AND INFORMATION AVAILABLE IS INSANE. MOST AGENCIES’ RESOURCES ARE TOO LIMITED TO PUT IT TO GOOD USE.”


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CONCLUSION; WHAT’S NEXT? 23 TECHNOLOGY The pace of technological change is picking up and everyone needs to get on board or be left behind. Marketers are no exception to this and, as robots start popping up on shop floors and software sorts our mail, staying ahead of the curve will be a major priority. “TECHNOLOGY IS THE BIGGEST CHALLENGE — ALL AGENCIES NEED TO KEEP UP OR WE WILL BE LEFT BEHIND.” “CONSUMERS ARE ALREADY HAVING THEIR FIRST ENCOUNTER WITH ROBOTS IN THE RETAIL ENVIRONMENT.”


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CONCLUSION; WHAT’S NEXT? 24 “AGENCIES ARE BEING SQUEEZED OUT AS BRANDS TAKE SKILL IN-HOUSE.” THE RISE OF IN-HOUSE TEAMS As the global economy recovers from a deep and protracted recession, agencies are facing competition from a new quarter: the in-house marketing team. organisations. This trend was highlighted by several of our respondents as one to watch in the coming years. Suddenly the job market is awash with graduates fully versed in digital. And, with budgets under pressure and costs soaring, bringing marketing in-house is an attractive proposition to financially squeezed “FURTHER SPECIALISATION IS BEING DRIVEN AS CLIENTS TAKE SKILLS IN-HOUSE, PARTICULARLY DATA MANAGEMENT AND ANALYSIS.” “CLIENTS ARE RECRUITING IN-HOUSE SO THAT THEY CAN ENSURE 24/7 AVAILABILITY OF THE SKILL SETS THEY NEED, RATHER THAN RECEIVING SET TIME FROM AN AGENCY.”


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25 WANT TO KNOW MORE? For more information on the challenges facing the creative industry, and expert advice on how to overcome them, visit www.clickz.com and www.deltek.com/whatif @ClickZ @Deltek @Deltek_UK THE STATE OF CREATIVE AGENCY LAND 2015 Sponsored by


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