Keeping pace with the digital transformation of the marketing industry could soon see UK agencies ﬁnding themselves in hot water. The pace has been set by Silicon Valley; its continuous delivery of new consumer platforms, marketing technology and hardware are forcing marketing agencies to keep up in order to deliver valuable futures on behalf of their clients. With thousands of extra staff required to fulﬁl this demand, it’s imperative that the industry begins to demonstrate its ability to deliver new disruptive digital services.
Technology and automation will not solve this problem for marketing agencies. Relevant skills and teams capable of working in blended, cross-industry disciplines are required for agencies to thrive during this evolution of the marketing industry. A recent study by Distributed revealed that 80% of marketing agencies are currently running ad-tech in their campaigns, yet only 37% described themselves as ‘tech savvy’. This insight follows the trend currently appearing in broader market research into the growing skills gap. According to a survey conducted by Nimbus Ninety and Ensono, two-thirds of decision makers claim they do not have the skills to service new IT models, highlighting particular gaps in data science and AI.
Artiﬁcial intelligence and the automation it promises to bring is the much-vaunted silver bullet for the marketing industry. However, we’re yet to see an example of AI being used by an agency that isn’t gimmicky or a thinly veiled PR stunt. The understanding of what these new technologies can do for marketing agencies and their clients simply isn’t part of the industry’s DNA yet. And without specialist teams capable of understanding both sides of the coin, there is a great risk of agencies betting big on tech, only to ﬁnd that their clients are left underwhelmed.
Expensive skills, declining margins
Marketing agencies are caught between a rock and a hard place. On one hand, they face rapidly shrinking proﬁt margins (down to 9% in 2017 from 36% in 2014); on the other, they ﬁnd themselves with a need to up-skill in emerging channels without any guarantee of these delivering profitable revenue. The workforce entering the market is either inexperienced or unspecialised. Distributed’s research shows that 1.5 million marketing managers with data science skills will be required by 2018, leaving them with some hard decisions to make.
Cost will be a major factor in their decision making. The IAB currently estimates that hiring a new staff member costs companies an average of £18,000 and will take in the region of ﬁve months. With senior digital skillsets more sought after than ever, salaries are often grossly inﬂated due to demand.
Some companies are relying on contractors or temporary staff to try and defend these blind spots, which is also a signiﬁcant investment, both in time and cost, not to mention the added risk of hiring the wrong team member.
The reality is that the digital landscape has evolved so quickly that agencies have struggled to keep up, and will continue to struggle, unless they address the skills gap on a playing ﬁeld that they can understand and build on. There is a myriad of new skillsets that are now required by marketing agencies that were not necessary three years ago. Agencies must realise that attempting to offer everything through a permanent team is a sureﬁre way of accelerating already shrinking margins down to zero.
Marketing agencies need to be careful that they don’t attempt to become development agencies, as they simply don’t have the pedigree to pull this off. The agency of the future requires expertise in narrow specialities such as machine learning and AI, to aid digital transformation. They also require broader skillsets, such as data storytelling and a holistic knowledge of the marketing industry.
Agencies must focus on building teams that can design roadmaps for their clients and let specialist teams outside the building take care of delivery. These external specialist teams exist to provide senior technical and strategic support to an agency, offering experience in a wide range of new digital domains. They can act as an extension to agencies, introducing new digital skills into the workplace with minimal investment. This allows agencies to service their clients effectively and meaningfully without having to upsell or cross-sell services because they have had to invest in a permanent team.
The smartest agencies will embrace innovation not only in technology but also in ways of working, allowing them to increase their ability to deepen their client’s relationships with their customers and provide meaningful futures for both their agency and their brands.
By Callum Adamson, founder of Distributed
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