Only 9% of senior-level marketers say traditional ad agencies are doing a good job of evolving and extending service capabilities in the digital age, according to a study by the CMO Council.

Moreover, such firms are likely to be challenged in their retention of client relationships: 48% of surveyed senior marketers say they are hiring specialized digital marketing solution and service providers to implement new social, mobile, and interactive strategies in 2012, whereas 47% plan to build internal capabilities and use incumbent agency services less.

In addition, 45% of senior marketers say they are bringing in outside consultants to develop digital programs.

Below, additional findings from the Chief Marketing Officer (CMO) Council report on client/agency effectiveness titled "More Gain, Less Strain."

Senior marketers say most agencies are lagging or struggling to modify or adapt their core competencies and capabilities:

  • 29% say traditional agencies are acquiring—but not fully integrating—digital marketing capabilities.
  • 22% say agencies are playing catching up to new technology-driven digital specialists.
  • 22% say agencies are struggling to transition their business models and service offerings.

Overall, senior marketers are frustrated with agency contributions to business value creation, strategic thinking, and digital marketing, the report finds.

The Good and Bad of Working With Agencies

As to identity their top sources of aggravations with agency relationships, senior marketers cite the following top 5:  

  1. Agencies' lack of knowledge or understanding of their business: 50%
  2. Agreement on common analytics and metrics that define success and failure: 50% 
  3. Value-added strategic thinking: 44%
  4. Pricing and budgeting issues: 30%
  5. Integration of marketing plans and services: 28%

However, marketers do value the new ideas and approaches that agencies offer.

Fresh ideas, analytics, and perspectives are valued the most by client-side marketers (48%), followed by new methodologies and creative approaches (39%), quicker and more efficient turnaround of work (31%), and objective third-party advice and counsel (29%).

New Areas of Service Provisioning

Regarding new areas of services, marketers are squarely focused on digital: Most (62%) are considering outside resources to help them with mobile apps and mobile content development, as well as social media engagement and buzz building (60%).

More than one-half (52%) are adding new resources to help them with multichannel digital marketing (email, mobile messaging, and social Web), search marketing optimization (51%), and website design, development, and performance improvement (51%).

Customer relationship marketing (47%) and online demand generation and lead acquisition (39%) are also high on priority lists.

Accountability Is Lacking

Even with the huge level of media and creative spend on agency engagements, most senior marketers don't have formal methods in place to evaluate agency performance: 

  • 65% of senior marketers do not employ any form of ad scoring or tracking services.
  • 52% do not have a formal scorecard for rating agency performance on an annual basis. 
  • 23% have solutions or hosted services to enable agency benchmarking and evaluation
  • 24% have developed best-practice models or formal guidelines for client/agency relationship management. 

Consolidation of Agency Relationships Likely

Only 36% of senior marketers are firmly committed to their agency relationships in 2012: Nearly one-half of senior marketers say they plan to consolidate (22%) or may consolidate (27%) global agency rosters over the next 12 months, and another 15% are not sure.

Which agencies are at risk? Specialist resources such as public relations, market research, production, and analytics (46%) are most likely to be affected by consolidation efforts in 2012; marketing or management consultants (35%) are also strong candidates for turnover.

What Triggers Agency Change?

Not surprisingly, 45% of senior marketers say poor execution is the top contributor to agency review and/or change, followed by business performance issues (44%) and the need for new ideas and thinking (40%).

Other secondary factors likely to precipitate an agency switch are a change in marketing leadership (38%) and line of business dissatisfaction with agency performance (31%).

Marketers in Search of New Resources

As for adding new resources and capabilities to client/agency rosters during the year, marketers are focusing on emerging technologies, citing these top 5 areas: 

  1. Getting into the social media game: 57%
  2. Improving precision-marketing capabilities: 49%
  3. Mobile apps: 40%
  4. Marketing performance measurement (MPM): 40%
  5. Integrated campaign management to harmonize both offline and online functions: 38%

Other key findings among senior marketers related to measurement and effectiveness:  

  • 24% of marketers say they are satisfied with their current level of marketing automation and partner collaboration and 50% are comfortable with their agency or vendor procurement processes. 
  • 58% of marketers are unsatisfied with the current process of evaluating advertising effectiveness; 28% say they are comfortable with current protocols.
  • 53% say creative effectiveness measurement is part of their agency evaluation process, compared with 40% who do not address that area of agency performance.

About the data: Findings from the CMO Council study are based on a poll of 250 senior-level marketers in the US, India, Asia-Pacific, Africa, Europe, and the Middle East, conducted in the fourth quarter of 2011. The  respondents span industries, including IT, professional services, retail, financial services, media and publishing, electronics/miscellaneous technology, packaged goods, entertainment, travel and hospitality, energy, and education, among others.

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