New Survey Data Proves It: Agencies Need to Be More Aggressive to Win Clients in 2018

Referrals are in decline, and in-house agencies abound

No longer can agencies exclusively rely on referrals and networking to drive the success of their firm.
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If you’re not feeling it yet, you will.

The changing agency and marketer landscape has significantly impacted the way agencies find and win new business. No longer can agencies exclusively rely on referrals and networking to drive the success of their firm. Once a vital source of new business for marketing agencies, referrals from marketers as a source of agency new business have dropped significantly since my firm, RSW/US, first started measuring their importance as a new business resource in 2007.

In 2007, 94 percent of marketing agencies we surveyed selected “referrals” as one of their three primary sources of new business for the firm.

Back in the day, agencies worked their contacts, and there was less of a need to actively and proactively search for new business. Agency principals would network, the phone would ring with a new referral, and the business would grow.

Today there are more agencies going after fewer agency of record (AOR) opportunities. There are more big networked agencies pursuing opportunities they would have never considered a decade ago. There are fewer marketers, because big conglomerates are consolidating companies and cutting staff.

In 2011, the number of agencies listing referrals as a primary business source fell to 71 percent.

And in our most recent Marketer-Agency Survey, the importance of this source dropped to an all-time low of 64 percent.

So why the decline?

We believe one of the primary reasons for this decline is the fact that a significant number of marketers are now using in-house agencies. In this year’s survey, 67 percent of marketers stated they had an in-house agency.

Last year, 61 percent of agencies stated that the new business they won involved working with an in-house firm. So it’s clear this trend is not reversing itself any time soon. With more agencies sitting inside the four walls of a marketer’s business, there are fewer opportunities for marketers to be exposed to outside firms—thus lessening the number of potential referrals.

While this is somewhat concerning, I don’t expect this trend to consume the industry to the point of threatening the standalone agency model. Just like we have seen marketers ebbing and flowing on consolidating agencies and expanding rosters over the past decade, I suspect we’ll see the same thing here as well. The other heartening statistic is the fact that most marketers are using in-house firms for basic design work and social media. So while social media firms and one-off designers should be concerned, I don’t believe we will see wholesale shifts to full-on in-house firms—like we’ve seen at places like AARP.

Project ‘sampling’ on the rise

In addition to the growing number of in-house agencies limiting the number of opportunities for new business, the other changing dynamic is the growth of project work versus retained work. This year, 41 percent of agencies state that 51 percent or more of the business they received was in the form of project work. While only a slight uptick from last year (40 percent), we see it each and every day. Our clients are either winning project work outright as their first assignment with a new marketing client, or they are actually having to compete for project work—something they have never experienced before.

We suspect what is driving this growing trend to push out project work, versus assigning a single or a couple of AORs, is the fact that there are simply so many agencies knocking on the doors of marketers. In this same survey, 60 percent of marketers said they receive six to 10 calls a week from agencies, so the competition is fierce. This creates less of a need to refer agencies or seek referrals when you have the ability to “sample” agencies via the use of one-off projects.

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