The last several years have been a rollercoaster ride for creative agencies across the globe as economies struggle to recover from the financial crisis and technology transforms the industry. Is all well and good in Creative Agency Land, or are these dynamic organisations feeling the pressure? ClickZ, together and sponsored by Deltek, decided to find out. We asked almost 250 creative agency professionals from around the world to tell us about the challenges they’re facing and how their organisations are responding.

1. THE STATE OF CREATIVE
AGENCY LAND
Sponsored by
2015

2. 2
INTRODUCTION

3. 3
Thelastseveralyearshavebeenarollercoasterride
forcreativeagenciesacrosstheglobeaseconomies
struggle to recover from the financial crisis and
technology transforms the industry.
Is all well and good in Creative Agency Land, or are
these dynamic organisations feeling the pressure?
ClickZ, together and sponsored by Deltek, decided
to find out.
Weaskedalmost250creativeagencyprofessionals
fromaroundtheworldtotellusaboutthechallenges
they’re facing and how their organisations are
responding.
Our respondents came from agencies of all sizes
– from boutique agencies with fewer than 10
employees to global giants – across five continents.
Almost 60 per cent were director level or above,
perfectly placed to have a high-level understanding
of the creative agency landscape as it is today.
SURVEY RESPONDENT SENIORITY
42%
DIRECTOR
15%
C-SUITE
14%
MANAGER
12%
SENIOR
11%
MID-LEVEL
3%
JUNIOR
3%
FREELANCE
3
INTRODUCTION
3

4. 4
CHARGING AND PROFITABILITY
TOTALRESPONSESTOTALRESPONSES
20% UNDERCHARGING CLIENTS
FOR WORK DONE
MANAGING RISING CLIENT EXPECTATIONS FOR CHEAPER, BETTER, AND FASTER WORK
PROJECT SCOPE CREEP
STAFF COST INCREASES
OFFSHORING
15%
10%
5%
0%
RESOURCE MANAGEMENT AND PLANNING
20%
15%
10%
5%
0%
STAFFING FOR AN ‘ALWAYS
ON’ ENVIRONMENT
EMPLOYEE BURNOUT
ADDING NEW DISCIPLINES
OR SERVICES
INTEGRATION
TOP 3 CHALLENGES
AGENCIES CURRENTLY FACE
It was our goal to identify and understand the major
challenges faced by creative agencies, along with
the strategies being deployed to stay creative and
profitable in the face of enormous changes. To do
this we asked each respondent to rank what they
saw as their organisation’s three most pressing
concerns.
While a range of issues were raised, the majority fell
into two broad categories: resource management
and planning; and charging and profitability. In this
report we explore each of these in turn, along with
how creative agencies are coping.
4
INTRODUCTION
KEY
1ST CHOICE
2ND CHOICE
3RD CHOICE
FINDING AND RETAINING
QUALIFIED STAFF
28%
MARGIN PRESSURE

5. 5
RESOURCE MANAGEMENT
& PLANNING

6. 6
10% STAFFING FOR AN ALWAYS
ON ENVIRONMENT
TOP RESOURCE MANAGEMENT
AND PLANNING CHALLENGES
When asked to rank the top challenges their
agencies face, our respondents captured a
snapshot of an industry in which adequately
staffing projects can be a struggle, creatives’ time
is wasted and agencies are not making the best use
of technologies to manage resources and planning.
6
RESOURCEMANAGEMENT&PLANNING
3% INTEGRATION
9% ADDING NEW DISCIPLINES
OR SERVICES
13% FINDING AND RETAINING
QUALIFIED STAFF
7% EMPLOYEE BURNOUT
2% WORKING ACROSS HORIZONTALS

7. 7
FINDING AND RETAINING CREATIVE TALENT IS
CORE TO AN AGENCY’S SUCCESS
COMPANIES WITH ENGAGED EMPLOYEES
OUTPERFORM THOSE WITHOUT BY UP TO 22 PER
CENT (BUSINESS REPORTER)
ANNUAL RECRUITMENT AND RETENTION COSTS IN
THE ADVERTISING AND MARKETING INDUSTRY:
£184M ($287M) (IPA)
AVERAGE TIME IT TAKES A NEW EMPLOYEE TO
GET UP TO SPEED: FIVE TO SEVEN MONTHS (IPA)
WHY IS EMPLOYEE
RETENTION IMPORTANT?
7
RESOURCEMANAGEMENT&PLANNING

8. 8 SEVEN REASONS AGENCIES RELY ON FREELANCERS
34%
ACCESS TO
SPECIALIST SKILLS
20%
NEED FOR FLEXIBLE
AVAILIBILITY
18%
FULFILMENT OF
SHORT-TERM
PROJECTS
12%
NEED TO
COMPLETE
PROJECTS
FASTER
11%
REDUCTION OF
OVERHEADS
ASSOCIATED WITH
PERMANENT STAFF
4%
LACK OF PROPER
HIRING STRATEGY
1%
FREELANCER RATES
ARE CHEAPER
Our survey found that these staffing pressures
are being resolved at least in part by freelancers.
While freelancers allow for agility during busy
times,oftentheyarebroughtinasthefirstpointof
call, and instead of reviewing existing availability
across the business. Overuse of freelancers can
happen easily if a project is not properly scoped,
which will erode margins.
Despite these risks, almost 80 per cent of our
survey respondents work in organisations staffed
at least partially by freelancers. For 15 per cent,
freelancers make up half the workforce or more.
These freelancers are being brought in primarily
to provide specialist skills (34 per cent), create a
more flexible workforce (20 per cent) and fulfil
short-term projects (18 per cent).
8
RESOURCEMANAGEMENT&PLANNING
FIND OUT MORE ABOUT FINDING
THE FREELANCE BALANCE HERE

9. 9
53%
YES, VERY MUCH SO
Butthewidespreaduseoffreelancersisn’treducing
the pressure on permanent staff.
The vast majority of survey respondents — more
than 80 per cent — have seen the scope of their
role increase significantly in the past 12 months,
indicating that individual workloads are being
stretched as projects pile up.
THE SCOPE OF MARKETING ROLES HAS EXPANDED IN THE LAST 12 MONTHS
29%
YES, SLIGHTY
14%
NO, IT HAS REMAINED THE SAME
9
RESOURCEMANAGEMENT&PLANNING
4%
NO, THE SCOPE OF MY ROLE HAS SHRUNK

10. 10
28%
DISAGREE
And freelancers aren’t reducing the administrative
burden within creative agencies, either.
In fact, a full third of respondents report spending
more time on internal admin or control
requirements than doing the creative, client-facing
work at the core of their roles. The cumulative
impact of this can be significant, not only leading to
diminished time and space for creativity, but also
staff dissatisfaction, missed deadlines and budget
over-runs.
MARKETERS ARE SPENDING MORE TIME MEETING INTERNAL ADMIN
AND CONTROL REQUIREMENTS THAN DOING CLIENT-FACING WORK
RESOURCEMANAGEMENT&PLANNING
29% AGREE
8%
STRONGLY AGREE
29%
NEUTRAL
6%
STRONGLY DISAGREE
10
RESOURCEMANAGEMENT&PLANNING

11. 11
AGENCIES ARE DOING WELL AT BRINGING IN NEW TECHNOLOGIES TO
MANAGE RESOURCES AND PLAN, ALLOWING STAFF TO FOCUS ON CLIENTS
The good news is that technology exists to manage
resources and plan projects, allowing staff to focus
more on client work.
Unfortunately, more than 50 per cent of our survey
respondents do not agree that their agency is
making full use of these technologies, thus missing
a major opportunity to better resource and plan
projects.
So how are agencies grappling with challenges in
resource management and planning? While some
are coping well and putting existing tools to good
use, others are struggling.
11
RESOURCEMANAGEMENT&PLANNING
26%
7%
21%
38% AGREE
NEUTRAL
DISAGREE
8% STRONGLY AGREE
STRONGLY DISAGREE

12. 12
WE SPEND A LOT OF TIME FIGHTING, SADLY
MAKING SURE THAT EVERYONE WE
EMPLOY ADDS A NEW, VALUABLE SKILL
BURYING ITS HEAD IN THE SAND
MAKING SURE OUR SYSTEMS MATCHES OUR PROCESSES
AND HAVE USEFUL LITTLE TRICKS, LIKE RECORDING
TIME STRAIGHT FROM OUR CALENDARS.
HOW AGENCIES ARE OVERCOMING RESOURCE MANAGEMENT AND PLANNING CHALLENGES
WE’RE NOT — INSTEAD WE’RE REDUCING FIXED
STAFF COUNT AND HIRING FREELANCERS TO MEET
PROJECT NEEDS
USING PROGRAMMES TO KEEP TRACK OF
AVAILABILITY SO THAT WE CAN GET THE
RIGHT PEOPLE ON THE RIGHT PROJECTS.
REFINING FREELANCER
RECRUITMENT AND
SUPPORT PROCESSES.
SCOPING BASED ON WHAT WE
LEARNED FROM PREVIOUS JOBS
— IT MIGHT SEEM OBVIOUS,
BUT IT’S SO EFFECTIVE.
OUTSOURCING
RESOURCEMANAGEMENT&PLANNING

13. 13
CHARGING
& PROFITABILITY

14. 14 TOP CHARGING AND
PROFITABILITY CHALLENGES
Oursurveyalsorevealedhugetensionssurrounding
how projects are priced and delivered. “Managing
rising client expectations for faster, better cheaper
work” was chosen more frequently than any other
response. Undercharging was another major issue
identified by our respondents.
14
CHARGING&PROFITAABILITY
PROJECT
SCOPE CREEP
OFFSHORING
MARGIN
PRESSURE
MANAGING RISING
CLIENT EXPECTATIONS
UNDERCHARGING CLIENTS
FOR WORK DONE
10%
8%
1%
2%
12%
19%
STAFF COST INCREASES

15. 15
HOW AGENCIES ARE
PRICING PROJECTS
Our survey respondents identified no fewer than
seven methods of pricing projects, indicating that
undercharging is a concern for creative agencies
regardless of how they charge for their work.
Time and materials, used by 34 per cent of our
respondents, is the most common pricing method.
Fixed price (27 per cent) and retainers (23 per cent)
are also common.
While profit margins remain healthy — 75 per cent
of our respondents reported margins of over 10 per
cent — research from KingstonSmithW1 has shown
consistentlythatthesemarginsareunderpressure,
falling as much as seven per cent in some sectors
since 2012.
34%
TIME AND
MATERIALS
27%
FIXED PRICE (RATE CARD)
23%
RETAINER /
FIXED FEE
14%
VALUE BASED
PRICING
2%
OTHER
15
CHARGING&PROFITAABILITY

16. 16
FOUR WAYS TO OPTIMISE
YOUR MARGINS
FOUR WAYS TO OPTIMISE
YOUR MARGINS
16
CHARGING&PROFITAABILITY
ENSURE THAT YOUR ENTIRE STAFF UNDERSTANDS
THE IMPORTANCE OF PROFIT MARGINS – GET
EVERYONE SPEAKING THE SAME LANGUAGE.
FORECAST EARLY AND USING DATA ONLY FROM
THE MOST RELIABLE SOURCES, LIKE SPECIALIST
PROGRAMMES.
AIM FOR A THOROUGH UNDERSTANDING OF THE
MARGIN ON EACH BILLABLE EMPLOYEE AND
PROJECT.
BRING ALL OF YOUR DATA TOGETHER INTO A
SINGLE PLACE FOR A MORE ACCURATE, COMPLETE
VIEW OF CURRENT AND FUTURE COSTS.

17. 17
This negative trend in profit margins could be due,
in part, to over-servicing.
The vast majority of our survey respondents — 75
per cent — told us that their clients change the
scope of their projects frequently and throughout
the development process.
However, less than 10 per cent of our survey’s
respondents said that they always charge their
clients more for additional work. A full 16 per cent
never or hardly ever adjust prices as project scopes
creep up.
CLIENTS CHANGE THE SCOPE OF PROJECTS FREQUENTLY
54%
AGREE
22%
STRONGLY AGREE
19%
NEUTRAL
3%
DISAGREE
1%
STRONGLY
DISAGREE
1%
OTHER
17
CHARGING&PROFITAABILITY

18. 18
Despite the fact that scope creep is having a
serious impact on the profitability of creative
agencies, almost half of respondents did not
agree that their agency has systems in place
capableofaccuratelytrackingandcomparing
cost estimates versus actual costs.
Clearly agencies are missing out on a valuable
opportunity to confront the issue with
technology — but what strategies are they
using?
Not surprisingly, some agencies have
struggled. But others have put systems
and processes in place to safeguard their
profitability and protect the time of their
most creative minds.
5.51%
DO AGENCIES HAVE SYSTEMS IN PLACE TO ACCURATELY
TRACK ACTUAL VERSUS ESTIMATED COSTS?
38%
AGREE
20%
DISAGREE
18%
NEUTRAL
18%
STRONGLY AGREE
6%
STRONGLY DISAGREE
18
CHARGING&PROFITAABILITY

19. 19
LOTS OF MEETINGS
ARE OCCURRINGREVISITING THE WAY WE QUOTE AND
INTRODUCING STRICTER TERMS AND CAVEATS
INTRODUCING NEW
WORKING PRACTICES TO
MANAGE SCOPE CREEP.
HOW CREATIVE AGENCIES ARE GRAPPLING WITH THE CHALLENGE
OF CHARGING AND SAFEGUARDING PROFITABILITY
TRYING TO BE MORE STRATEGIC IN DECIDING WHICH
ARE THE PROJECTS THAT WE CAN ADD MOST VALUE
TO, AND WHICH WILL ADD VALUE TO OUR AGENCY.
AVOIDING PRICE WARS WHEREVER POSSIBLE
NOT WELL. WE’RE PUTTING PRESSURE ON CREATIVES
TO BE MORE ‘EFFICIENT’, WHICH IS KILLING
CREATIVITY AND CAUSING BURNOUT
IMPLEMENTING PROJECT
MANAGEMENT AND FINANCE
SOFTWARE.
CHARGING&PROFITAABILITY

20. 20
CONCLUSION:
WHAT’S NEXT?

21. 21
“IDENTIFYING AND RETAINING THE RIGHT
TALENT — DIGITAL SPECIFICALLY —WILL REMAIN
A CHALLENGE FOR SMALLER, INTEGRATED
AGENCIES.”
To be successful in the fast-paced environment of
the ever-evolving agency land, creative agencies
around the world need to have one eye on the
future.
We asked which trends will come to the fore over
the next three years. Our respondents identified
four key challenges which they believe will shape
thefutureofcreativeagenciesacrosstheglobe:the
skills gap; data; technology; and the rise of in-house
teams.
Theriseofdigitalhasrevolutionisedthewaytheworld
works, consumes media, communicates and shops.
Entire industries have met their end in the last two
decades as others have blossomed out of nowhere.
The marketing industry has not been immune, and
the rise of social media, mobile and web has changed
what it means to be a marketer. Even as agencies
struggle to attract young people with the digital skills
necessary for survival, the skillsets of their most
senior colleagues have been rendered obsolete.
The skills gap was of major concern to our
respondents, who identified issues including:
THE SKILLS GAP
“JUNIOR STAFF HAVE MORE
KNOWLEDGE ON DIGITAL THAN
SENIOR DIRECTORS.”
“THERE IS A GENERAL LACK OF
SKILLS IN THE INDUSTRY. I THINK
WE NEED TO SEE GREATER SUPPORT
AND ORGANISATION AROUND THE
INTERFACE BETWEEN FREELANCERS
AND AGENCIES IN THE LONG-TERM.”
21
CONCLUSION;WHAT’SNEXT?
MIND THE GAP

22. 22
The world is awash with data, but all of that
information is costly to buy and time-consuming to
verify, clean and put to good use. Those who aren’t
able to meet the data challenge could be in serious
peril as it becomes more and more important to the
way all businesses operate.
Oursurveyrespondentsseedata—fromhowtouseit
tohowitwillchangetheindustry—asamajorconcern
for the coming years.
DATA
“THE USE OF DATA WILL
REVOLUTIONISE THE WAY WE DO
THINGS. UNFORTUNATELY, IT WILL
BRING HUGE CHANGES WHICH WILL
NOT ALWAYS BE WELCOME.”
“THE AMOUNT OF DATA AND INFORMATION
AVAILABLE IS INSANE. MOST AGENCIES’
RESOURCES ARE TOO LIMITED TO PUT IT TO
GOOD USE.”
22
CONCLUSION;WHAT’SNEXT?

23. 23
“CONSUMERS ARE
ALREADY HAVING THEIR
FIRST ENCOUNTER WITH
ROBOTS IN THE RETAIL
ENVIRONMENT.”
The pace of technological change is picking up and
everyone needs to get on board or be left behind.
Marketers are no exception to this and, as robots
start popping up on shop floors and software sorts
our mail, staying ahead of the curve will be a
major priority.
TECHNOLOGY “TECHNOLOGY IS THE BIGGEST CHALLENGE
—ALL AGENCIES NEED TO KEEP UP OR WE
WILL BE LEFT BEHIND.”
23
CONCLUSION;WHAT’SNEXT?

24. 24
As the global economy recovers from a deep
and protracted recession, agencies are facing
competition from a new quarter: the in-house
marketing team.
Suddenly the job market is awash with graduates fully
versed in digital. And, with budgets under pressure
and costs soaring, bringing marketing in-house is
an attractive proposition to financially squeezed
organisations.Thistrendwashighlightedbyseveralof
our respondents as one to watch in the coming years.
THE RISE OF IN-HOUSE TEAMS
“AGENCIES ARE BEING
SQUEEZED OUT AS BRANDS
TAKE SKILL IN-HOUSE.”
“CLIENTS ARE RECRUITING
IN-HOUSE SO THAT THEY CAN
ENSURE 24/7 AVAILABILITY
OF THE SKILL SETS THEY
NEED, RATHER THAN
RECEIVING SET TIME FROM
AN AGENCY.”
“FURTHER SPECIALISATION IS BEING DRIVEN AS
CLIENTS TAKE SKILLS IN-HOUSE, PARTICULARLY
DATA MANAGEMENT AND ANALYSIS.”
24
CONCLUSION;WHAT’SNEXT?

25. 25
For more information on the challenges facing the creative
industry, and expert advice on how to overcome them, visit
www.clickz.com and www.deltek.com/whatif
WANT TO KNOW MORE?
@ClickZ
@Deltek
@Deltek_UK
THE STATE OF CREATIVE
AGENCY LAND
Sponsored by
2015