Want to hear more from some of the agencies involved? Why not check out B2B Marketing Ignite USA, our virtual confernece taking place on 2-3 June.
In last year’s US Agencies Benchmarking Report, 100% of US agencies were expecting ‘growth’ or ‘strong growth’ for their agency in the year ahead. Of course, the survey was conducted pre-pandemic, so it would have been interesting to see their responses had it been conducted in, say, March 2020.
In this year’s survey, meanwhile, 96% are expecting ‘growth’ or ‘strong growth’ for the year ahead. The remaining 4%, meanwhile, are expecting to remain flat, as opposed to seeing a reduction.
Whilst this 4% is not negligible, personally, I like to see the bright side, and I’d say that’s not too bad given the year we’ve just escaped. Had these numbers been significantly worse – say, 20% expecting to remain flat or see a reduction – would we have been that surprised?
Not only are the vast majority of US agencies expecting ‘growth’ or ‘strong growth’ over the next 12 months, they also see the current state of the market for B2B marketing services as ‘good’ or ‘strong/very good’ (92% combined). Only 6% see the market as ‘static’, and 2% see it as ‘challenging’. Fortunately, absolutely nobody sees the market as ‘dire’.
So, in the worst economic year in many of our lifetimes, most agencies are expecting a good year to come, and see the market as being in a great place. Of course, it’s not that straightforward, but at least it shows the marketplace isn’t in completely dire straits.
Despite the good feeling, headcounts have taken a hit
Unfortunately, it’s not all good news. We asked agencies to provide their headcount as of 1 September 2019 and 1 September 2020. In 2019, the average headcount amongst agencies that took part in our survey was 81. In 2020, this dropped to 75 – a year-on-year decrease of -7.4%. For reference, in last year’s report, agencies reported an average increase of 6% year-on-year. In the two years prior, they reported increases of 31% and 29%, respectively.
So, whilst most agencies may be continuing on the road to growth, there have been casualties along the way. Of course, this is not surprising given the uncertainty around the pandemic, particularly in the first few months of its existence.
Average gross income has increased
Our survey went on to ask about agencies’ gross income in their most recently closed financial year, as well as in their previous financial year.
For clarity, most agencies included in our report closed their most recent financial year on 31 December 2020. In other words, their most recent financial year was the year of Covid-19. This may seem like an obvious point to make, but compare that to our UK Agencies Benchmarking Report, wherein most agencies closed their most recent financial year in March 2020, before the pandemic was truly underway and so before its effects could be truly felt.
In this sense, the US report findings are particularly interesting. Despite headcounts taking a hit, the average US gross income in the most recent financial year was $14.8 million. This is an increase of 8.17% from these same agencies’ gross income from the previous financial year, in which the average US gross income was $13.7 million.
Although an 8.17% increase in US agency gross income is by no means a negative, it is important to compare this against previous growth. In last year’s report, agencies reported an increase in US gross income of 16%. In the two years prior, they reported increases of 58% and 17%, respectively. So, while agencies are continuing to grow in the face of adversity, they are undoubtedly pushing against some quite considerable resistance.
What services are US agencies focusing on?
So, what services are US agencies offering their clients? As part of our survey, we listed a number of major services, and asked survey participants to select one of the following options:
- ‘We’re considering adding this in more than a year’s time.’
- ‘We already offer this service.’
- ‘We aren’t interested in offering this service.’
- ‘We’re considering adding this in more than a year’s time.’
‘Data analytics’ saw 96% of survey participants say that they already offer this service, or that they are considering adding it within the next 12 months. ‘Digital development’ followed closely behind at 92%, while ‘ABM’ came in at third place, with 84%.
In last year’s report 70% of survey participants were already offering ABM as a service. This year, this figure has 82% – a significant increase in a year.
Winning the business
But just how are US agencies winning business in the first place? Our survey – quite bluntly – asked: ‘Where does your new business come from?’ Agencies were then presented with a list of ways they might win business, and could select: ‘common’; ‘very common’; ‘rare’; or ‘unknown’.
As in last year’s report, direct referral remains the number one way in which agencies are winning new business, with 72% of agencies saying this is a ‘very common’ way of winning new business.
In second place, at just 38%, is ‘referral from an external individual (not the client)’. The gap between first and second place goes some way in showing the extent to which direct referral is crucial for US agencies.
Following closely behind in third place is ‘pitch’, with 32% of agencies saying this is a very common method of winning new business. Request for proposal, advertising, media exposure (i.e. B2B Marketing) and specialist referral agencies also followed.
Although ‘pitch’ remains an ever-popular method for agencies to win business, this does not necessarily mean pitching is easy. In fact, only 8% of agencies have won 81% or more of their pitches in the last 12 months.
Pressure on clients’ budgets is this year’s key challenge
Of course, winning pitches isn’t the only challenge faced by B2B marketers. In order to establish just what issues agencies are facing this next 12 months, we presented agencies with a list of potential challenges, and asked them to describe each as: ‘very significant’; ‘significant’; ‘neither significant nor insignificant’; ‘insignificant’; or ‘n/a’.
As you can see by the table, ‘pressure on clients’ budgets’ is the number one challenge faced by US agencies this year. This is up two places from last year, when ‘ability to attract/retain quality staff’ held the number one spot. It is of course not surprisingly that pressure on clients’ budgets has taken the number one spot, as this past year has seen many organizations tighten their belts in an effort to see the pandemic out. Still, the ability to attract/retain quality staff remains a key challenge, coming in at second place.
Also of note is the fact that data privacy has risen a number of places from last year, whilst ‘embracing and managing internal digital capability’ and ‘business model transformation’ finished bottom, with 0% of agencies describing these as a ‘very significant’ challenge.
Final thoughts
The state of the marketplace is strong. Optimism is rife. Revenues are up. But headcount has taken a hit. It would be unfair to paint a picture of a rosy marketplace when so many agency-side marketers have been casualties of the pandemic. However, it’s also undeniable that the US agency marketplace has proven itself remarkably resilient.
In a year in which so many organizations – in fact, entire industries – have been dealt catastrophic blows, the agency marketplace appears to be weathering the blows and continuing to grow.
Overall, things are looking good, but, as there always have been and as there always will be, there are challenges to overcome on the road to growth. How agencies overcome these challenges will be fascinating to see.
