Introduction to the 2016-17 Digital Outlook Study
The respondent base for this year’s study proves once again that digital is on the minds of business leaders and key decision makers. Client-side respondents were just as experienced as those who responded last year with 86% at the level of director of marketing or above. These high-level business leaders also command substantial marketing budgets: 64% have $5 million to $100 million or more to spend; and 30% were at the high end of this spectrum with budgets of $50 million or more.
With this kind of money on the table, one might expect clients to be increasing investment in digital initiatives — and one would be right. While 11% report decreasing their budgets for this year, which is statistically even versus last year, 55% of client-side respondents expect to increase their spend in some way, either by an increase in overall marketing dollars or an increase in the digital allocation of a steady overall budget. This eight-point uptick year-on-year is likely due to optimism around the performance of digital programs, as opposed to excitement around emerging tech and creative strategies as we’ve seen in years past. For proof, just look to the areas in which large majorities of clients plan to increase their spend:
- Digital experiences (82%)
- Content development (76%)
- Digital projects (71%)
While marketing creativity held a steady second place in value comparison to 2015, the newly introduced strategic leadership was declared the most valued skill in clients’ relationships with their agencies. This supports the notion that clients are prioritizing execution over big ideas when it comes to agency relationships. Considering that emerging technologies topped the list last year, we believe this may also point to a trend of getting back to digital fundamentals, where clients are remembering that trendy tech is fun to talk about but may not be as successful at helping them reach their goals as solid data-driven strategy.
The good news is that agencies agree that these are the skills and services that are most valued by their clients. The bad news is that that’s where the agreement between agencies and their clients ends. Disconnects between marketers and their partners is a common topic, but when particular discrepancies in priorities and perceptions persist, as they do for the third year in our study, they demand a deeper look.
We asked respondents on both sides whether clients’ organizational structures hinder or facilitate innovation. Forty-eight percent of client-side respondents said it helps while 51% of agency respondents said it hinders. A more startling disconnect emerges when it comes to perceived strengths within those organizational structures. Agency respondents believe that clients are very weak in the areas of executive management, user experience, and technology, while clients said their companies had little to no gap at all in these areas.
Even more important is the continued discrepancy between the reasons agencies think they were fired and the reasons clients cite for ending their relationships. Agency respondents said that changes in management were the No. 1 reason they were fired, just as they did last year. However, this year, this response was chosen by 56% versus 33% last year — a whopping 23-percentage-point increase. According to clients, the primary reason they fired their agencies was pricing or value, a new option this year, which garnered 37% of responses. Perhaps even more telling is the distribution of the rest of the responses on the client side. While cost overruns were second in last year’s study, this year that response is eighth, behind each of the following choices, which received between 20% and 24% of responses:
- Unhappy with creative
- Unhappy with strategy
- Unhappy with project management/account management
- Mismatched agency size/ability
This generalized dissatisfaction adds context to similarly lukewarm client satisfaction on agency programs. This year we asked clients to rate their satisfaction with each of the key services for which they turn to agencies. On a scale of one to five, not a single service scored better — or worse — than the mid-threes. Considering that this includes those services for which clients plan to increase investment, it points to the possibility of even greater churn in client-agency pairings as marketers look for new partners to deliver at a higher level on their increased hopes and expectations.
While 53% of agency respondents believe that working relationships with their clients are improving overall, it’s clear that there’s still lots of room for improvement. And with so much optimism — and investment — around digital it’s crucial to turn this general malaise and discomfort around. Otherwise, the trend for agencies with digital roots to be the lead among all agency partners — which 76% of agency respondents agree is becoming more likely — will never be the norm.