Julia Manoukian

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March 9, 2018

Traditional Marketing Agencies Fight to Survive. How Does This Impact Experiential? [Roundup]

Julia Manoukian

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Trade show season is just around the corner, and brands will introduce innovative experiences at these live events. Plus, more companies will incorporate experiential into their marketing strategies than ever before. The latest talk in the experiential community is around the question of traditional agencies, and their evolving role in the experiential landscape. Read on to learn more.

Do Conventional Marketing Agencies Need to Change?

Marketing agencies are struggling to adapt to change. That's the opinion of Rei Inamoto, founder of business innovation firm Inamoto & Co. In a recent Adweek article, Inamoto points out that big brands are reducing the amount of cash they spend on advertising campaigns. "Obviously, agencies are at an inflection point," he says.

Inamoto outlines four principles that marketing agencies should embrace when working with brands: process, structure, culture and leadership.

  • Process: Agencies should reduce the number of tasks they take on and have more clear objectives.
  • Structure: Agencies should reorganize the structure of their business.
  • Culture: Marketing isn't just for young creatives. Agencies should hire staff with lots of experience who can help grow their business.
  • Leadership: Agencies have more visibility when they grow their business and more people will know about their company. However, agencies shouldn't jeopardize the trust of their existing customers for "fame."

"In the age of radical transparency, media complexity and perpetual connectivity, perhaps the business we should be in is helping brands gain trust with their customers and users," Inamoto says.

You can read the full article here.

It's not just Inamoto's article that outlines the struggles that marketing agencies currently face. Just last October. Nigel Gilbert, chief marketing and communications officer from British bank TSB, said media agencies suffer from a loss of trust similar to big banks. "In the digital era, trust is the big issue in marketing, just as it has been in banks over the last 10 years," he says.

Gilbert notes some of the reasons why customers and clients are losing trust in agencies. These include programmatic advertising, where a company's ads might appear alongside controversial content on websites like YouTube. "How did the big five agency holding companies lose the trust of their customers?" he asks.

This lack of trust has led to many big brands decreasing digital ad budgets. Last year, both Unilever and P&G drastically scaled back on digital ad spending by 59 percent and 41 percent respectively. P&G, in particular, reduced the number of websites it used to run digital ads by 33 percent.

"The news is particularly noteworthy because of the size of the marketers involved -- P&G is the world's largest advertiser and Unilever is no slouch when it comes to investing in ads -- and therefore could impact the bigger picture if the downturn continues or if other brands follow suit," says David Kirkpatrick, writing for Marketing Dive.

How does this all relate to experiential? Well, as ad budgets tighten across many industries, brands are creating memorable experiences instead of spending cash on digital ads. Companies are looking for alternative ways to connect with customers and increase visibility.

Fewer New Business Opportunities for Creative Agencies in 2017

There were fewer new business opportunities for creative agencies last year, according to research from international consultancy firm R3. Revenue decreased by 10 percent in 2017 compared with the year before. Moreover, year-on-year revenue dropped by 16.9 percent. The study analyzed 7,400 new business opportunities from 700 agencies across the world.

The reason for the drop? More clients completed projects in-house. "Clients are under their own constant margin pressure, and in some cases, the agencies have become the scapegoat for these pressures," Greg Paull, the principal and co-founder of R3, told Adweek.

You can read the full article here.

Perhaps the rise of experiential marketing is also behind the lack of new business opportunities for creative agencies. Marketers increased the amount of money they spent on experiential marketing in the final quarter of 2018, with budgets growing 5.5 percent overall, according to an IPA Bellwether Report.

Are more businesses choosing experiential agencies over traditional creative agencies? Maybe. There has certainly been a shift toward experiential in the last few years, and conventional marketing channels have had to play catch-up. "I'm not here to say that traditional channels are dead, but 89 percent of ad content is ignored by the consumer," says AgencyEA co-founder Fergus Rooney, speaking to Adweek.

Customers crave unique, personalized experiences. Seventy-seven percent of consumers have chosen, recommended or paid more money for a product from a brand that provides them with a personalized service or experience, according to one study.

Moreover, the majority of event marketers believe live events are now the most effective marketing channel. As a result, many companies are launching experiential marketing divisions and setting up shop at trade shows and exhibitions.

These recent marketing developments are having a significant impact on the experiential space. As digital ad budgets drop and new business opportunities for creative agencies decline, experiential marketing is still booming. Do you think the trend will continue for the rest of 2018?

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