Welcome to the latest Agency Wire, where we follow major trends in the communications and marketing industry.
2017: The Year of The Zero-Margin Agency?
According to a recent Digiday article, one of the most talked about agency appointments of 2016 - DDB and McDonald's - signifies a coming shift in client-agency relationships: the rise of zero-margin agreements. While the average agency margin in the US is typically between 13 and 15 per cent, the zero-margin agreement can make sense from the agency side. It will give smaller agencies a chance to win the marquee clients they need to get on the map, and the increasingly popular revenue-sharing model ties the agency's business goals to the client's success, leading to a more fruitful partnership. Advertisers are increasingly shifting towards this type of performance-based remuneration model, since agencies with "skin in the game" are more likely to operate in the client's best interest.
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Braving Today’s Disruptive World of Marketing
Digital disruption has been a hot-button term in 2016 for both agencies and marketers alike. From their ability to provide cutting-edge digital service offerings to whether or not agencies can actually find the right digital talent to fulfill client demands, the rapid rise of digital has certainly raised a lot of questions. As a result, agencies often feel that clients are demanding that they provide a full digital service stack, and do more work for less money. However, it is crucial to point out that marketers on the client side, especially in the financial sector, are also feeling the pressure from digital disruption, with many feeling a squeeze their bottoms lines. There are three things that marketers and agencies alike must consider when facing digital transformation: only the adaptable will survive, no industry is immune, and most importantly, no one can do it alone.
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R3 is a global marketing consultancy focused on improving the effectiveness and efficiency of marketers and their agencies. Founded in 2002, we work with eight of the world's top twenty global marketers.
Through our regular "AgencyScope" research, now covering more than 1,000 marketers in China, India and other markets, we are learning about true client preferences for the best local agencies in each market and helping agency holding groups form strategic partnerships with the best local agencies.