Scott Knox, the managing director of the Marketing Agencies Associations, gives his view on the IPA Bellwether report.
I’ve always looked forward to reading the IPA Bellwether Report. It can be a good sense check for agency forecasting: a good back up to individual client information.
That said, the world has changed greatly and, although top-line budgets can indicate change, we can’t avoid the realtime nature of client/agency relationships, the nature of marketing/boardroom relationships and the evolving, often confusing, landscape of the creative and business services sector.
How to make money couldn’t be more complicated. Through the MAA’s Agency Growth Driver report conducted among MAA member agencies, we have found that the top five financially performing agencies are more like tech or management consultancies than they are creative services businesses.
They are delivering IP, building unique platforms and bringing in £100k+ per capita. They are not necessarily doing that on the back of the top 300 brands either.
Much like the Labour Party cry over the "cost of living crisis" (the notion that while we see the economy improve, the majority of the population are yet to feel this), I can’t help but feel that the same applies to the agency sector.
Although overall budgets appear to be increasing, the intensity of pressure applied by purchasing shows no sign of abating – the commoditising practices by some corporations employed over the past six years in the name of an economic crisis are still in full vigour.
A cost of creative crisis
Turning a profit is much more difficult than before, getting paid on time is getting critical and the enormous costs and processes involved in new business are growing. We should perhaps be calling this period a "cost of creative crisis". This is very much what it feels like in doing business with the top 300 brands.
The top financially performing agencies are gaining more profit through working with two types of client: non-blue-chips and the experimental budgets of blue-chip brands. Agencies are not making the money on the biggest slice of blue-chip budgets, but more towards their experimental budgets, budgets siphoned away to test and learn, those that need consultancy and deeper creative/technology understanding.
As some of us head into the school summer holidays and spending a bit more time with our children it might be worth reflecting on the relationship between control and rebellion, or nurturing and success.
It sounds like I am saying that we should look upon agencies as children, which doesn’t sound too great, but we have to accept that agency folk are entrepreneurial by nature and driven by creativity and technology.
What I am saying to brands is that if you apply too much pressure – we will pay you in 97 days; we own all of the ideas presented at pitch stage; we want the same, well more actually, but with 15 per cent off; you need to pay £40,000 to remain a supplier; we will select our partner agency by price and online; we can’t give you all of our data – the best creative and tech minds will seek out better opportunities to explore their craft. So, if brand spend is increasing, marketing success will only come with better and fairer business practice.
So back to the Bellwether Report, hurrah for the upturn, but more bravery is needed to end the cost of creative crisis.
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