Good Agency Partnerships Are Really Needed Now

Companies are asking their marketing leaders to do more with less while also maintaining good relationships with outside marketing resources, according to a Forrester Research report.

Jay Pattisall, Forrester principal analyst and lead author of the report, says chief marketing officers are looking to reduce expenditures as much or more than other C-suite executives, with much of that reduction geared toward spending less on outside agency marketing resources.

As a result, Forrester predicts that marketing agencies will have cut 50,000 positions by the end of 2021. A couple have already made drastic cuts—IPG reportedly cut its worldwide staff of more than 50,000 by 6 percent, while Dentsu cut 6,000 positions in 2020.

At the same time, though, the lack of internal staff and other resources means that companies need the external resources to fulfill their marketing goals.

Not surprisingly, company cuts in agency spending lead to distrust during contract negotiations or project scoping. Rebuilding that trust needs to start with CMOs and the tones they set for partnerships, Pattisall says. “When they set objectives for a kind of a collaboration for partnership and then align the objectives and the incentives for their partners to meet those objectives, the feeling of competition between the different partnerships begins to dissolve because they are aligned around meeting a common objective.”

Competition can exist among internal groups and external groups if one is compensated differently than another or one’s work is valued more than another, Pattisall cautions. “So creating a level playing field around an aligned set of objectives and a very clear incentive structure starts to put you toward the path of better partnership.”

Compensation models disincentivize the CMO-agency partnership, Pattisall adds. The way agencies are paid discourages the partnership that CMOs need to produce growth.

“It’s time to reinvent the economic relationship governing marketing agency partners with a model that provides revenue growth with budget efficiency,” Pattisall says. “The potent combination of fewer people working with more technology establishes a new partner model that transcends economic misalignment and enables a firm and its partners to flourish.”

The solution is the pairing of human labor with digital labor, which Forrester calls the human-technology equivalent (H/TE). The firm defines this as “the unit that calculates the labor produced from the combination of human skills and the processing power of technologies like robotic process automation, machine learning, computer vision, and advanced artificial intelligence that augment, assist, and improve the work.”

Companies should consider talent as an investment in the distinction and value they need for a competitive advantage, according to Pattisall. “A workforce adept at creativity and technology provides higher returns than investments in technology alone. Teams leveraging creativity elevate their ability to collectively energize a brand’s products, services, and experiences.”

The technology part of the human-technology equation provides intelligence, accuracy, and scale, the report says. AI, computer vision, machine learning, and robotic process automation can be considered fundamental contributors to creative solutions.

“Marketers who are reliant on their agencies’ talent are also reliant on their agencies’ technology and should incentivize partners to invest in a full range, such as data-driven precision and scale,” Pattisall says.

Using H/TEs provides compelling ROI, according to the report: Shifting full-time equivalent (FTE) investments to H/TE investments will enable firms to gain an additional $927 million in profits through 2031 and nearly double their compound annual growth rate from 2.7 percent using FTEs to 4.1 percent using H/TEs.

Such a change will also improve agency productivity and value, according to Forrester. “Investing in H/TEs enables employees to be more effective at thinking, reasoning, and empathizing and machines to be better at accuracy, scale, and efficacy. Our models show that H/TEs ultimately bring a 12 percent increase in agency productivity and a 21 percent increase in client profitability.”