As if it weren’t tough enough for interactive agencies, advertisers are increasingly reluctant to enter into long-term agreements with them — requiring some immediate changes in how they market themselves, according to a new study by Jupiter Media Metrix.
In large part, advertisers’ standoffish attitudes are a result of the current economic turmoil. With corporate profits down, advertisers find themselves cutting marketing expenditures and, more often than not, shunning retainer-based contracts that can lock them into a financial commitment for months.
Instead, 37 percent of advertisers favored paying their agency on a per-project basis, according to a recent Jupiter survey. Only 23 percent said they preferred the straight retainer model.
“Advertisers are ambivalent about the future of their agency relationships, preferring project-based compensation during uncertain economic times,” said Jupiter senior analyst Marissa Gluck. “As advertisers respond to a dismal economic climate by slashing their marketing budgets, it is not surprising that their approach to agency compensation reflects such austerity.”
Similarly, fiscal concerns are prompting advertisers to shop around, with well over half of the advertisers surveyed by Jupiter expressing doubt over the future of the relationship with their current agency.
According to Jupiter, 27 percent of advertisers currently using an agency are working to bring their online advertising work in-house. Twenty-one percent said they’re not certain of whether they’d remain with their current agency. And 18 percent said their relationship with their agency was based purely on cost, rather than on quality of service — and thus, could be easily changed.
Nevertheless, Jupiter found that about 34 percent of advertisers say they’re willing to stick it out with agencies, as long as those firms continue to deliver.
As a result of the findings, Gluck said that the key to ensuring that clients don’t leave — and to laying the groundwork to woo new, more reluctant advertisers — is a major revamping of how interactive shop sell themselves.
“Agencies must start to rethink pricing, structure, and most important, how they market themselves,” she said. “This means focusing on marketing the competencies that make them indispensable to clients, such as cross-client learning, idea generation and brand building.”
Jupiter also found that advertisers who entrust their accounts to a single interactive shop are about twice as likely to outsource both execution and strategy, as opposed to keeping one in-house. In many cases, that naturally translates into higher billings.
Again, Gluck said, the trick to capitalizing on this trend and acquiring a client’s entire account involves effective marketing. But i-shops need to do more than just promote their strategic and creative services; they especially need to highlight their more human side.
“Agencies have flung around the term ‘strategy’ as one of their core competencies for years, rendering it hackneyed and misunderstood,” she said. “The pre-eminent factor influencing an agency affiliation is often indefinable — human relationships. When choosing and reviewing an agency, the final verdict often comes down to chemistry, an imprecise and intangible selection criterion, but an essential one.”
