Creative Agencies in 2021

REFLECT, RECHARGE,
MOVE ON:
Creative
Agencies
in 2021
Introduction
There has never been a past year quite like this one – so how are
creative agencies responding to the challenging times? In early 2021,
Campaign and Deltek surveyed more than 300 agency professionals
around the world about how they’re faring in the pandemic and their
expectations for the year ahead. The results provide insights for
all those seeking to emerge from the current uncertainty with
a stronger, more resilient and more future-proof business.
Key trends
01
02
CLIENTS Encouragingly, most respondents (80%) have a
similar sized or larger client base than a year ago. But the client
mood is still cautious: three-quarters have a ‘wait and see’ attitude.
And new business is a key focus for 77% of agencies in 2021.
WORK Continuing last year’s trends, many agencies are
working harder than ever to hang onto business: 61% are
producing more work and offering extra services, but 36%
are seeing lower profit margins. Profitability is a focus for 58%
of agencies, and efficiency for 52%.
03
TALENT Attracting and retaining talent is the number-one
04
PAY Don’t count on a pay rise in 2021. Only 29% are expecting
05
TECH Agencies who have embraced digital transformation have
area for agency improvement. Over a third (39%) intend to grow
their team in 2021, while 33% plan to increase freelance resource.
Another 33% say their agencies lack the specialist skills to drive
digital transformation.
pay per head to increase – although encouragingly, those in the
know about remuneration are most optimistic.
fared better in terms of growing their client bases and increasing
profit margins over the past year. In total, 87% of respondents are
in the process of evolving their digital systems or already have a
mature system; but others are stagnating digitally and in danger of
being left behind.
Reflect, Recharge, Move On: Creative Agencies in 2021
2
Agency-client
relationships
D
espite the challenging business conditions, many agencies
report surprisingly positive experiences in terms of client
numbers. The majority have either retained the same
number of clients as they had 12 months ago (36%) or actually
grown their client base (44%).
Meanwhile 43% say their client relationships have lasted around
the same length as before, while a similar number (40%) are
enjoying longer relationships year-on-year.
Only 15% of respondents have fewer clients than they did a year
ago, and only 13% are seeing client relationships end more quickly.
This was actually a healthier picture than at the start of 2020,
when nearly a quarter of agencies (23%) reported losing clients
How many clients do you have compared
with 12 months ago?
5% Don’t know
36% Same as before
44% More clients
15% Fewer clients
How long are your client relationships
compared with 12 months ago?
4% Don’t know
40% Longer client
relationships
43% Same as before
13% Shorter client
relationships
Reflect, Recharge, Move On: Creative Agencies in 2021
year-on-year and a similar number
(28%) said their client relationships had
become shorter.
“Many agencies are
enjoying longer client
relationships year-on-year”
So why are more clients sticking with
their agencies? One answer may be
that existing client contracts may have
remained in force for much of the year;
but in any case, clients may be reluctant to
make an agency change in the midst of so
much other upheaval. Global research by
ID Comms finds that in the initial pandemic
disruption, 69% of agency leaders have
seen normal pitching processing put on
hold. Meanwhile a UK survey by Alchemis
finds the majority of clients are less likely
to consider alternative marketing agencies
during the pandemic, and have grown
closer to the incumbents – who have
often re-imagined campaigns with
considerable resourcefulness.
Meanwhile, the broadly positive results
regarding client growth and retention
may obscure just how badly client losses
have affected certain industry sectors,
such as travel and events brands, during
the pandemic. One respondent sums
up the uneven impact: “In general, most
people I’ve spoken to have not been all
that impacted. My clients were mainly in
the events sector, so I’ve had to start again
from scratch.”
3
Agency productivity
and profits
Agencies appear to be working hard and stretching themselves to
retain their client base. The majority (61%) are now offering more
services than they did a year ago.
How many services do you offer compared
with 12 months ago?
Meanwhile, most agency professionals
(61%) told us they are producing more
work than they did a year ago.
1% Don’t know
30% Same as before
61% More services offered
8% Fewer services offered
How much work have you produced
compared with 12 months ago?
2% Don’t know
19% Same as before
18% Less work produced
61% More work produced
How do your profit margins compare
with 12 months ago?
13% Don’t know
This diversification may reflect agencies’
adaptability and willingness to do more
for clients in the Covid-19 era. However, it
also continues an ongoing trend: last year’s
survey found that even more agencies
(68%) had broadened their service
offering year-on-year.
25% Higher profit margins
27% Same as before
36% Lower profit margins
Reflect, Recharge, Move On: Creative Agencies in 2021
Again, this is a similar picture to last year,
when 62% said they were producing more
work year-on-year.
All this effort on the part of agencies to
add services and increase output isn’t
necessarily translating into higher profit
margins, however. Only a quarter of
respondents (25%) are seeing margins
increase, compared to 63% for whom
profit margins have either remained static
or shrunk.
The results here are also consistent with
the previous year’s: in 2021, 36% of agency
respondents are seeing lower profit
margins year-on-year, while 37% did in
2020. So the current crisis is unlikely to
be the sole cause of declining profitability
– rather, it has cemented an ongoing
trend. While many agencies are clearly
willing to increase output and stretch their
service offering to please their clients, their
current business models (and a highly
competitive market) are unfortunately
not allowing them to reap any rewards in
terms of increased profit margins.
4
The current challenges
and how agencies and
clients are responding
The pandemic obviously brings many operational challenges
for agencies – the greatest of which is resource management
(a problem for 64%). This is followed by collaboration (47%) and
client relationships (43%).
“Resource management,
collaboration and
client relationships are
challenges for agencies”
From a working process or operational perspective,
what were the challenges that you have faced during
the pandemic? Select all that apply.
70%
64%
60%
47%
50%
43%
35%
40%
33%
30%
20%
11%
10%
er
Oth
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ma
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em
Pro
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0%
Reflect, Recharge, Move On: Creative Agencies in 2021
5
In terms of how clients are responding to 2021, the picture
is mixed. As many as 40% of agencies say their clients have
a renewed sense of confidence; but a third disagree with
this view. And while around half (51%) say their clients are
planning to maintain spend levels in 2021, a similar number
(49%) think client spend will decrease. Just one in five (23%)
predict increased client spend. The dominant mood is one of
caution, with three-quarters saying their clients have a ‘wait
and see’ attitude.
It is perhaps telling that at least a quarter of respondents offer
no opinions on questions regarding their clients’ confidence and
spending plans for this year. Clearly, many are still unsure of
where they stand with clients as we head into 2021.
This somewhat confusing picture no doubt reflects the reality:
that different sectors and organisations are faring very differently
right now. Research by WARC Data predicts a 6.7% rise in
global ad spend in 2021, but says it will take at least two years for
the advertising market to fully recover, with only three sectors
expected to top worldwide 2019 revenues in 2021: telecoms
and utilities, media and publishing, and business and industrial.
The automotive and travel sectors are seeing the most drastic
spending falls – although both are predicted to bounce back with
double-digit growth this year.
At an organisational level, for every client that is looking to scale
back marketing budgets, others may be looking to use creative
communications to reach restricted consumers, explore new
markets or capitalise on present opportunities. One of our survey
respondents has this playing out in their shifting client base –
seeing ‘bigger businesses wanting to cut back on marketing’
they are now ‘working with smaller businesses that are excelling
in the pandemic.’
Indeed, despite record declines in ad spend in 2020, a recent
report from the Advertising Association finds that one in five
UK advertising and marketing companies has had at least one
revenue stream increase in the era of Covid-19. The pandemic
presents opportunities as well as challenges – for some, at least.
How are clients reacting to the potential
end of the pandemic?
1. With a renewed sense of confidence
27% No opinion
40% Agree
33% Disagree
2. With a cautious wait-and-see attitude
13% No opinion
12% Disagree
75% Agree
3. With plans to up spend in 2021
27% No opinion
23% Agree
50% Disagree
4. With plans to maintain spend in 2021
27% No opinion
51% Agree
22% Disagree
5. With plans to decrease spend in 2021
33% No opinion
49% Agree
18% Disagree
Reflect, Recharge, Move On: Creative Agencies in 2021
6
Agency teams,
talent and pay packets
So what does 2021 hold for agency workforces? Again, the picture
is mixed. Over a third (39%) expect their team to expand in 2021,
although a similar number (36%) foresee no change. Close to a
fifth (16%) anticipate their team shrinking (though few expect job
losses of more than 30%).
While this sounds broadly positive, it may reflect the fact that
some agencies have already had to reduce teams in 2020. Market
research firm Forrester reports that advertising agencies will
have shed over 100,000 jobs globally by the end of this year. But
at least some of these may be hoping to rehire lost staff.
Do you expect your team size to shrink or
expand in 2021?
4% Shrink by more than 30%
9% Expand by more than 30%
39% Expand by
less than 30%
12% Shrink by less than 30%
36% No change
Do you plan to increase your freelance
versus employee ratio?
23% I don’t know
33% Yes
44% No
Reflect, Recharge, Move On: Creative Agencies in 2021
Some are predicting a freelancing boom
fuelled by the pandemic, which would see
agencies turning to freelancers to fill skills
gaps after downsizing in-house teams.
However, our survey finds that agencies’
intentions regarding freelance resource
vary considerably. While a third do plan
to increase their ratio of freelance to
permanent staff, a larger number (44%)
expect the balance to remain the same.
In the current uncertainty, it’s perhaps
not surprising that nearly a quarter
(23%) of respondents just don’t know if
their agencies will use more freelance
resources. Or that some are cautious
about doing so; one respondent
acknowledges that their agency is turning
to freelancers more, but is mindful of
balancing that with their in-house team’s
strengths: “[Our focus is] managing the
advent of the rise of the freelancer, being
supportive, but ensuring they do not dilute
the benefits a full-service agency can bring
to clients at scale.”
“In the current uncertainty,
it’s perhaps not surprising
nearly a quarter of survey
respondents don’t know
if their agencies will use
more freelance resource”
7
Do you think your agency will increase or
decrease pay-per-head in 2021?
3% I think we will decrease payper-head by more than 20%
3% I think we will increase payper-head by more than 20%
10% I think we will
decrease pay-per-head
by less than 20%
26% I think we will
increase pay-per-head
by less than 20%
58% No change
Agency professionals are not necessarily
counting on a raise in 2021. While over
a quarter (29%) expect pay per head to
increase, the majority (58%) anticipate no
change, and more than one in 10 (13%)
expect pay decreases.
Encouragingly, however, those who are
involved in their company’s compensation
plans are slightly more optimistic about
future pay than most: 41% of them expect
pay per head to increase, compared to
46% who predict it will remain the same.
Comparison between whether or not respondents are
involved in devising their company’s compensation plan.
Increase pay
No change
70%
Decrease pay
64%
60%
46%
50%
41%
40%
30%
22%
20%
13% 14%
10%
not
invo
lved
invo
lved
Reflect, Recharge, Move On: Creative Agencies in 2021
I am
I am
not
invo
lved
invo
lved
I am
I am
I am
I am
invo
lved
not
invo
lved
0%
8
What agencies are
focusing on – and where
they need to improve
The bottom line is a top priority for agencies in 2021. The most
important focus, for more than three-quarters (77%), is new
business; followed by profitability (58%), efficiency (52%) and
cash flow (51%).
are focused on talent strategy. Issues
such as positioning and pricing, financial
modelling and risk management were
less of a focus for agencies – despite the
fact that attention in these areas could
drive the efficiencies that so many are
keen to make.
Getting the right team in place is also a strong concern: 46%
are concerned about diversity and equality, and the same number
What are the most important areas of focus for your business in 2021? Select all that apply.
77%
80%
70%
58%
60%
52%
51%
47%
50%
46%
40%
40%
33%
30%
30%
19%
20%
17%
10%
3%
er
Oth
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Reflect, Recharge, Move On: Creative Agencies in 2021
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0%
9
“Attracting and retaining the right talent” is rated the numberone improvement area for agencies in 2021, identified by 54%
of respondents. It was, however, neck and neck with a “more
profitable new business strategy” (53%).
Interestingly, the top three areas for improvement are the same
as last year’s, but with a reshuffling of priorities. “Improving
productivity and efficiency” was at the top of agencies’ wishlists
at the start of 2020 but only comes third in this year’s survey,
while last year’s number-three priority, “attracting and retaining
the right talent”, overtakes new business strategy to take the
top spot.
In which area(s) do you think your agency needs to improve?
Select all that apply.
60%
54%
53%
50%
41%
37%
40%
37%
26%
30%
20%
10%
3%
Reflect, Recharge, Move On: Creative Agencies in 2021
er
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So why has retaining talent become the
number-one improvement area, at a time
when we might expect the agency talent
pool to be flooded with newly unemployed
professionals? The pandemic makes
employee wellbeing a priority, and brings
home to agencies the value of their top
talent (not least because high performers
in complex roles are 800% more
productive than average performers).
It also highlights skills shortfalls within
“The pandemic brings
home to agencies the
value of their top talent”
agencies at a time when, according to a
recent McKinsey Global Survey, nearly nine
out of 10 executives and managers say
their organisations are already facing skills
gaps, or expect these to develop in the next
five years. Meanwhile, many project-led
agencies have already slimmed down their
workforce as far as possible to match their
pipeline and revenue, and now urgently
need to avoid staff burnout (a very real
concern, given that US research suggests
73% of the advertising and marketing
industry have experienced workplace
burnout recently). Although 37% of those
surveyed want to improve client solutions
technology and 23% feel internal support
systems could be better, tech was less of a
priority area than talent. Some already feel
they have the right technology and digital
systems in place – but as we shall see in
the section below, those agencies are
the minority, and many are still wrestling
with barriers that are hampering their
digital development.
10
Digital transformation –
and the journey to achieving it
What do you want to gain from Digital Transformation?
Select all that apply.
59%
60%
50%
50%
43%
43%
42%
40%
40%
30%
20%
10%
3%
er
Oth
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ce
0%
Where is your agency on its Digital Transformation journey?
2% Other
11% No digital transformation
initiatives in place
The pandemic has not only accelerated
the pace of digital transformation, but
also made it more of a necessity than
ever. Most agencies (59%) recognise that
transforming their digital systems could
increase their agility and motivation, and
half anticipate it generating data-driven
insights. But these are far from being the
only potential gains.
The broad range of answers here shows
that agencies are well aware of the diverse
applications of digital transformation
– from front-end customer experience
to back-end practicalities such as
consolidating internal processes. However,
relatively few agencies consider themselves
to be fully digitally evolved as yet.
Less than one in five (19%) of those
surveyed say they have mature digital
systems and strategies in place, although
37% do at least have solid digital
transformation plans under way.
With 31% of respondents still in the early
stages of developing their digital strategy,
and around one in 10 (11%) stagnating
digitally with no initiatives in progress, tech
is evidently not top of everyone’s agenda.
19% Mature, fully integrated
digital management systems
31% Exploring digital
transformation options
37% Digital transformation
plans under way
Reflect, Recharge, Move On: Creative Agencies in 2021
11
Comparison between the agencies that are more and less
mature in their digital transformation journeys.
More clients
Fewer clients
59%
60%
47%
50%
40%
35% 34%
30%
24%
20%
20%
12%
10%
10%
It probably should be, however – as the
agencies that are either well on the way to
digital maturity, or have already reached
it, are doing better than their peers, as we
discover from looking at the segmented
data. For example, 59% of respondents
at digitally mature agencies (and 47% of
those at maturing agencies) have actually
grown their client base over the past
year – whereas only 35% of the agencies
with undeveloped or non-existent digital
strategies managed to do so. On the other
hand, only 10% of the mature agencies
(and 12% of the maturing agencies) have
shed clients over the year, compared to an
average of 20% of those with little or no
digital strategy.
pla
ce
tem
s in
rw
Profit decline
50%
45%
43%
34%
30%
sys
Ma
tur
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Pla
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No
Profit increase
40%
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Exp
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np
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ves
i
np
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s
0%
33%
25%
21%
21%
16%
20%
10%
sys
pla
ce
Meanwhile, 34% of digitally mature (and
25% of maturing) agencies have been
able to increase profit margins yearon-year, compared to just 21% of those
with an undeveloped digital strategy, and
16% of those with no digital strategy at
all. Conversely, the most digitally evolved
agencies are the least likely to have seen
profitability decline. Only 21% of digitally
mature agencies, and 33% of maturing
agencies, report lower profit margins yearon-year – compared to 45% of those with
little or no digital strategy.
Ma
tur
e
Pla
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s un
der
opt
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lori
Reflect, Recharge, Move On: Creative Agencies in 2021
tem
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wa
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0%
“Agencies either well on
the way to digital maturity,
or have already reached
it, are doing better than
their peers”
12
Despite the clear benefits associated with digital transformation,
respondents are wrestling with numerous obstacles to delivering
it – the biggest being competing investment priorities (34%) and a
lack of specialist skills (33%) or available capital (30%).
After all, if not now, when? The world has
changed beyond recognition around us,
and far-sighted agencies are seizing the
opportunity to evolve, too. As another
respondent puts it: “I think agencies that
have done well in 2020 are those that
took lockdown as a chance to improve.”
Successful agencies have not only been
prepared to go the extra mile for clients
and do things differently in order to survive;
they are also treating the present moment
as a wake-up call to plan ahead and futureproof themselves as far as possible for
2021 and beyond.
Many agencies seem to be struggling to make digital
transformation a top business priority and find the funds or
talent to do it properly. There is a disconnect between agencies
wanting to evolve, and actually being prepared to invest the time
and technology to enable change. As one agency professional
observes: “While everyone wants digital transformation in paper,
when it comes to implementation, stakeholders would rather
maintain [the] status quo. Hopefully the changes brought about
in 2020 will accelerate change!”
What are your main barriers to Digital Transformation? Select all that apply.
40%
34%
33%
30%
28%
30%
27%
26%
21%
19%
20%
14%
14%
12%
10%
10%
2%
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13
About Campaign
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About Deltek
Better software means better projects. Deltek delivers
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superior levels of project intelligence, management
and collaboration. Our industry-focused expertise
makes your projects successful and helps you achieve
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