Agency of the Future - Summary Findings

Agency of the Future SUMMARY FINDINGS

SUMMARYFINDINGS

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Agency of the Future SUMMARY FINDINGS

IntroductionThe signs of the emerging digital consumer have been clear for some time: increasing sourcing and purchasing of goods online, the decline of newsprint (particularly for newspapers) and the parallel rise of internet usage as entertainment, including video streaming, music downloading, watching television on the internet and the growth of social networking sites.

This, of course, creates new challenges and opportunities for marketers trying to reach consumers, who arguably are becoming more fragmented, and difficult to reach through traditional mass media. As such, there are clear signs that marketers are shifting advertising and brand budgets to online channels.

New StudyA new survey commissioned by Sapient has established that marketers are recognising the need to make greater use of digital marketing, and accordingly are looking to marketing agencies with proven expertise in digital marketing techniques.

The study, conducted by Redshift Research between July and August 2008, measured current and future usage of digital marketing activities among 500 companies employing more than 1,000 employees across the UK, Germany, Switzerland, Sweden and the Netherlands.

Agency of the Future SUMMARY FINDINGS

The study covered five business sectors, as shown below.

*Weighted data for pan Europe Total

*Weighted data for pan Europe Total

Number Employees (Total)*

Business Sector (Total)*

Agency of the Future SUMMARY FINDINGS

Key Survey Findings

> Marketers are moving to agencies with greater knowledge of digital marketing

> The overall level of digital marketing activities is expected to increase significantly by up to 45% over the next twelve months, pushing up digital marketing to account for almost one third of all marketing activities

> Digital channels are already firmly established, with 20% of current marketing activities going through digital channels, such as the internet, mobile or email communication

> Larger enterprises make greater use of digital marketing opportunities than smaller organisations

> 70% of marketers want their agency to use ‘pull interactions’ such as online communities rather than traditional ‘push’ campaigns

> 30% of marketers expressed interest in leveraging virtual communities (public and private) to understand more about their target audience

> While knowledge of the digital marketing space is increasingly important, pre-requisite skills of successful agencies continue to be based on creativity, knowledge of brands and a thorough understanding of consumers audiences

> 48% of managers felt that expertise in digital and interactive media is critical or very important for marketing agencies

Agency of the Future SUMMARY FINDINGS

Increasing Importance of Digital Marketing

The proportion of digital marketing activities is reported to increase from 20 to 29% in the next twelve months

Currently, 20% of marketing activities across the 500 European companies surveyed is carried out through a digital channel, such as the internet or emails. Companies in the Netherlands are making greatest use of digital marketing, where 29% of marketing is considered to be via a digital channel. This compares with just 14% in Switzerland.

Currently what % of your marketing is done via a digital channel (e.g. internet, mobile email, interactive tv)?

In 12 months what % do you anticipate being through a digital channel?

Figure 1: usage of digital marketing channels, by country

Agency of the Future SUMMARY FINDINGS

The survey, however, suggests that companies are making plans for much greater usage of digital marketing in the future. Within the next twelve months the proportion of digital marketing activities is expected to rise from 20% to 29% - an increase of approximately 45%.

While all countries in the survey are expected to show increases in the use of digital marketing, the relative change will vary considerably between countries. The lowest rate of increase is in Sweden (22%), followed by the UK (26%) and the Netherlands (17%)*.

Germany appears to be moving from a country currently showing average usage of digital marketing, to in 12 months a much higher than average usage, along with the Netherlands. Compared with Germany and the Netherlands, the UK, Sweden and Switzerland look to become the laggards of digital marketing.

* The % change in usage of digital marketing over twelve months. For example, in Sweden an increase from 18% to 22% represents a change of 22%

Agency of the Future SUMMARY FINDINGS

Larger organisations may have greater resources and capabilities to utilise new digital marketing techniques and technologies compared with smaller organisations. However, the internet also provides opportunities to smaller organisations with fewer resources. This research only included enterprise scale companies, but even here, it is clear that the largest organisations (defined as 5,000 + employees), already make greater use of digital marketing compared with companies at the smaller end of the scale (1,000 – 5,000 employees). See figure 2.

Currently what % of your marketing is done via a digital channel (e.g. internet, mobile email, interactive tv)?

In 12 months what % do you anticipate being through a digital channel?

Figure 2: usage of digital marketing channels, by size of organisation

Agency of the Future SUMMARY FINDINGS

Required Expertise for Marketing and Advertising Agencies

The need for expertise in digital marketing is beginning to challenge the longer established techniques, such as direct marketing

There is much evidence of the growing importance of new media and digital marketing. This research shows marketers expect their agencies to have expertise across a range of disciplines, including digital media. The most important skills, by far, is creativity, knowledge of branding and a proper understanding of consumer audiences. Despite the growing importance of digital marketing, expertise in print media is still relatively more important than digital media. However, expertise in interactive and digital media is already seen as equally important to the much longer established area of direct marketing. Although Social media lags behind other disciplines, it is still a relatively recent phenomenon. In this research there are signs that is has already gained traction with marketers, with 34% considering social media expertise to be important.

How important are the following areas of agency’s expertise (% Critical and very important)

Figure 3: relative importance of agency expertise

Agency of the Future SUMMARY FINDINGS

The research indicates that different industry sectors have variable requirements for digital media. The sector least likely to be engaged with interactive digital media and to require their marketing agencies to have expertise in digital marketing techniques is the construction sector.Two sectors stand out for being relatively more interested in digital media – Retail and Wholesale, and Business and Finance. In the case of the business and finance sectors, while the fundamental skills of creativity, branding and understanding consumer behaviour are still considered to be the most important skills, interactive/digital media is much more important than direct marketing, but also the gap between print media and digital media is far less pronounced. See Figure 4, below.

How important are the following areas of agency’s expertise (% Critical and very important)?

Figure 4: relative importance of agency expertise, by industry sector

Agency of the Future SUMMARY FINDINGS

Observers have written a great deal in recent years about the challenge of digital technologies on traditional media. The consumption of media has moved from passively watching television and reading newspapers to a more diverse range of media consumption which includes the internet, mobile phones and timeshifting recorded television.

All of this has placed new demands on advertisers to reach increasingly fragmented audiences. Marketers are grappling with a string of different methods, which have one objective in common – to engage with and find ways to continue a dialogue with consumers.

In this research only a small minority of marketers do not think new strategies to engage with consumers is necessary. Quite the reverse – 74% of marketing managers agreed with the priority of using “pull interactions” to get closer to consumers, 32% of which were strongly in favour. (see figure 5).

The retail and wholesale sector appears to appreciate the trend most acutely, where 87% agreed with the objective statement of using pull interactions.

Agency of the Future SUMMARY FINDINGS

Q6 To what extend do you agree with the statement “It’s becoming increasingly important that my agency uses “pull interactions” to engage with consumers” (e.g. engaging with consumers through social media, interactive media rather than pushing messages through mass media)?

Figure 5: the need for “pull interactions” to engage with consumers

Agency of the Future SUMMARY FINDINGS

Social networking has gained significant ground in recent years with the widespread use of Facebook and other popular sites. Some businesses (both business to business and business to consumer) have sought to engage with customers and consumers by establishing exclusive online communities for their brand, or sought to reach out via existing social networks.

This research indicates that marketers among UK enterprises are currently least interested in using social networks, while businesses in Switzerland and Germany are most likely to see value in engaging with consumers via social networks. (see Figure 6).

Q9 Are you interested in leveraging public and private virtual communities (e.g. social networking sites) to understand more about your target audience?

Figure 6: interest in using social networks to reach target audiences

Agency of the Future SUMMARY FINDINGS

Q1 How confident are you that your current agency is well poised to take your brand through challenges and opportunities of interactive advertising and marketing media?

Figure 7: Agency competency in digital marketing activities

Sourcing Marketing Agencies with expertise in Digital Channels

So how well prepared are organisations for taking advantage of digital marketing? The research implies (as we have seen) that different industry sectors and countries are adopting digital marketing at different speeds.

Companies in the UK appear to be falling behind Germany and the Netherlands in terms of usage of digital marketing. A higher proportion of companies in the UK are also less confident of the abilities of their appointed marketing agency to utilise digital marketing techniques. The reverse is true in Germany. Companies here are placing increasing importance to the digital space, and feel their agencies are sufficiently expert to take advantage.

Agency of the Future SUMMARY FINDINGS

In the last year, overall 20% of marketers indicated that a new agency has been appointed with greater knowledge of digital media.

In Germany, 25% of companies indicated that an agency has been appointed in the last or next twelve months with greater digital media expertise. (see figure 8).

As well as appointing new agencies, many companies choose to hire an additional agency for the purposes of specific campaigns which utilise digital or interactive techniques

Figure 8: Timeframe of appointing a new marketing agency

Q2 Have you switched agencies in the last twelve months, or plan to in the next twelve months to an agency with greater knowledge of digital media?

Agency of the Future SUMMARY FINDINGS

In most of the countries surveyed there was a clear tendency to use additional agencies, but particularly in the UK, where 41% of managers claimed to have hired an additional agency in the last twelve months, or plan to in the next twelve months. (See figure 9).

The exception was in Germany, where only 13% have appointed an additional agency in the last twelve months. The reason for this maybe cultural, insofar as the research indicates an overwhelming preference in Germany to use a single, full service agency, rather than several specialised agencies. 62% of managers in Germany preferred a single agency, as opposed to 37% in the Netherlands, 44% in the UK, and 52% for all companies included in the survey.

Figure 9: Timeframe of appointing an additional marketing agency for digital campaigns

Q3 Have you hired an additional agency to handle digital or interactive campaigns in the last twelve months, or plan to in the next twelve months?

Agency of the Future SUMMARY FINDINGS

More information...

Beate Keller, Sapient

[email protected] Fon: +49 89 552 987-111

www.sapient.com