Once again B2B Marketing has run its annual survey of B2B agencies. While it is always interesting to see who has done well and which agency is this year’s Chelsea winning the premier B2B league title, there are many more stories hidden if you look at the data closely enough.
The survey throws up some interesting results and gives us a good snapshot of the state of the B2B nation, and in what direction we think it is moving.
The first point to recognise is that our universe is expanding. Last year’s top 30 showed a total B2B gross income of £76 million. This year, the top 30 provide a gross income of £93 million: a massive 22 per cent increase.
We are of course measuring gross income rather than turnover, but making a very broad assumption that the average B2B agency operates on a gross margin to a turnover of say 45 per cent, then 2006 shows a total spend on B2B business of £206 million from the top 30 agencies and £222 million from the top 40. This seems a very creditable growth rate in the industry as a whole and although these figures are small by comparison with FMCG and B2C, it shows that money is flowing into the B2B sector, and that businesses that sell to other businesses are recognising the value of marketing.
So last year when 18 per cent of agencies thought the sector was ‘very buoyant’ and 53 per cent thought it was ‘buoyant’, they were right. This year’s numbers are interesting by comparison. Only five per cent think the market is ‘very buoyant’, though 75 per cent think it’s still ‘buoyant’. It looks as though this time there is more of a guarded optimism about the future, and people are perhaps expecting solid growth: a period of consolidation rather than the spectacular results of the previous year. Yet overall, more agencies expect growth than they did previously, showing that the market trend is still upwards.
Guarded optimism
What we then would like to know is; where has all this growth come from? What sectors and activities have increased and what have decreased?
It seems from the relative results that most of the top 40 agencies are covering a wider spread of sectors than they used to. While of course many of the agencies are sector specialists, just looking at the sector involvement this year compared to last, shows both increased activity from most sectors and clearly more agencies involved. The big winners are technology and services. For example, 80 per cent of agencies have technology clients, when only 62 per cent did last year. Financial services (55 per cent now, 42 per cent 2005) professional services (70 per cent 2006, 38 per cent 2005) and business services (68 per cent 2006, 31 per cent 2005) are all big winners. Across the board, more agencies seem to cover an increasing number of areas. Is this because there is more activity and the specialist agencies can’t cover it all? Or does it reflect a general trend away from sector specialisation stemming from a desire to diversify by agencies or a desire to use broader ranging agencies by clients? And what have we been doing that’s different this year?
Brand bandwagon?
I think one of the most striking results is that every agency on the list now claims to carry out branding. Last year this number was at 81 per cent. Clients are clearly demanding this type of work and agencies are competing to supply it. This also applies to much more of the consultancy work we are undertaking as agencies. Marketing strategy, planning and business development planning are all activities that have grown out of nowhere. It is gratifying to see agencies have woken up to the threat posed by the consultancy practices, and are fighting back to retain the high ground of working with clients. This higher value and increasingly cerebral work, seems to have become a key part of what B2B agencies are offering.
This is the way agencies will survive and prosper in what can otherwise be a low cost entry, low perceived-value service industry. There is a degree of pessimism whether this is an offering that can be sustained, with agencies believing their marketing strategy advice will be less popular next year than this. I don’t think 2006 was the peak, just that agencies are naturally conservative in their belief that it is an area capable of growth.
People are biggest assets
Also hidden amongst the data is the question, what do the agencies see as their biggest challenge? And this in itself tells a story of the positive view that agencies have of the future in B2B marketing. While the pressure on client’s budgets is still the number one threat to agency wellbeing, it is at a lower level than last year. At the same time more agencies see attracting the right staff as a problem. We have clearly grown, taken on more people and have discovered that talent is hard to find. It will be interesting to see the effect this might have on agency bottom-line numbers as the fight over staff increases salary cost. Perhaps this is the subject of another survey.
Finally, one last piece of gratifying research: more B2B agencies are members of ABBA than any other trade body, except the DMA. And membership is growing. Thank you.
