What makes SMBs willing to share data with financial providers? →

First published on codat.io

In the context of small business credit, Open Finance has the potential to dramatically improve customer experiences and slash costs for lenders, but this is dependent on the willingness of small businesses to share their data with providers.

We recently did some research into the attitudes of UK SMBs to Open Finance and, in particular, data sharing with financial providers. Here are the key takeaways…

For the purposes of the research report, all SMBs in the market for credit, i.e. those who have indicated they are open to borrowing, are defined as “potential borrowers”.

Are SMBs willing to share their data? The short answer is yes

According to the research, two-thirds (67%) of small businesses that identify as potential borrowers say they would be willing to share data with credit suppliers. This figure increases to 90% of SMBs with more than ten employees, and to 96% for those with more than 50 employees. In other words, the larger the business, the more open they are to sharing data with credit providers.  

What types of SMBs are more likely to share data?

As well as typically being larger in size, businesses willing to share data tend to be dealing with a high volume of transactions and they are using specialist systems to manage their finances. This profile of business is more likely to have finance or IT specialists on board and feel the pain of managing the volume of data generated by their businesses more acutely. 

Growing businesses are more open to sharing their financial data — 78% of this group would share data compared with 67% of all SMBs surveyed. More generally, willingness to share data is also correlated with receptiveness to using new forms of finance — amongst businesses that said they were open to alternative lenders, 90% said they would share their financial data with credit providers, 23 % points higher than the overall average.

At the other end of the spectrum, sole traders and micro businesses tend to lack awareness and understanding of Open Finance and how sharing their data helps them.

Only 20% of sole traders have used Open Banking (vs. 81% of mid-sized firms) and 24% of micro-SMBs found the benefits of Open Finance appealing — a whole 37% pts less than those with more than 10 employees.  

Although large in number, the sole trader and micro businesses segment is less critical to credit providers because they are less open to borrowing and when they do borrow, they borrow less. The average value of a loan taken out by sole traders is 10 times less than the average loan taken out by mid-sized businesses. So, while increasing awareness among sole traders and micro businesses would bring some benefits, the biggest market opportunity for credit suppliers is maximizing openness to data sharing among the 10+ employee SMB segment. 

What motivates SMBs to share their data?

Better rates on loans is the most popular incentive to share data with credit providers, selected by 29% of SMBs, followed by more transparency in the decision-making process, chosen by 22%.

Attitudes to sharing financial data in return for access to better lending products and services — such as better rates and quicker service — vary significantly between different sizes of SMBs. Once again, the appeal grows along with business size.

Only 19% of sole traders find the value exchange of faster access to credit in return for data appealing. Among micro businesses (1-9 employees), that number increases to 38% and continues to grow to 61% and 70% for small (10-49 employees) and medium (50-249 employees) companies respectively.

Solving the issue of access to credit for larger SMBs is most critical because these businesses contribute significantly more to GDP than micro businesses. Companies with over 10 staff represent 5% of all businesses, but contribute 31% of turnover in the economy.

The key takeaway is that SMBs are open to sharing their data in return for improved lending products — namely better rates. The appeal of data sharing grows with business size and is correlated with an immediate interest in accessing credit. This makes sense — motivation to share data for better lending products will naturally be lower when a lending product isn’t an imminent business requirement.

How can financial service providers further increase SMB openness to data sharing?

While two-thirds of SMBs are already open to sharing their data, there’s still room for improvement. By focusing on the areas outlined below, providers can further increase the likelihood of customers sharing data, and therefore increase the quality of data available to them to make better credit decisions.

Focus on building trust and being transparent about data management

When asked about their apprehensions around sharing data digitally with credit suppliers, data management, security, and control represented the top concerns amongst SMBs. 

Specifically, the primary data and security concerns are knowing who has access to their business data, losing control of data, the inability to know what data has been shared, and an uneasiness with the extent of information lenders can see.

Furthermore, data security is also the second largest concern amongst those who worry about alternative lenders. When asked what, if anything, could be done to help alternative lenders build their trust, half of sole traders/micro businesses said they wished them to make clear limits around how they are going to use their data while 43% of small/mid-sized businesses said the same. 

Transparency about data usage, therefore, plays a big part in building trust, and so does clear and effective communication of the value exchange. In particular, financial service providers should focus on communicating the value of data sharing for their customers, what will be done with the data provided, and what actions the customer needs to take. 

For more tips on building trust and transparency, read our best practice guide. 

Increase awareness of Open Finance and alternative financing options

While there is a relatively high level of institutional trust in the main high street banks (58%), trust in online-only lenders is much lower (18%), which impacts the likelihood of SMBs sharing their financial data. 

Amongst those surveyed with low levels of trust in alternative lenders, the top reasons cited were unfamiliarity, with 58% selecting this answer, followed by concerns about data security (55%) and a perceived lack of regulation (44%). Campaigns designed to educate SMBs and increase awareness of alternative financing will not only result in new customers through the door but will also impact the propensity to share data once they become more familiar with them. 

Similarly, those who are aware of and understand Open Finance are more likely to have tried using it while those that are less aware are more likely to be conservative and mistrusting.

According to the research, 57% of SMBs that have heard of Open Banking have gone on to try it. Likewise, 67% of those that have heard of automatic digital data sharing for better credit provisions have gone on to try or consider integrating systems (27%/40% respectively).

Increasing awareness of Open Finance therefore will lead to greater numbers of UK SMBs sharing their data and opening their systems. The onus is on credit suppliers as well as the government to act now and set the right conditions for change by providing education, introducing awareness campaigns, and implementing new policies to drive SMB data sharing forward. 

What is composable commerce? And why does it matter?

First published on bloomreach.com

Traditional commerce platforms offer a one-size-fits-all solution from a single vendor, many complete with the basic capabilities to set up and run an e-commerce site.

This worked well for businesses in the first wave of digital commerce when companies went online for the first time and customers required simple, standardized experiences. 

Fast forward to the 21st century and that is no longer the case. The addition of new digital touchpoints that these original platforms were not built for, the ever-increasing consumer expectations for modern, engaging digital experiences, and the steady rise of e-commerce as the primary channel for most businesses to engage and convert customers have changed all of that.

In order to keep up with the latest e-commerce trends and the pace of rapidly changing consumer behaviors and expectations, let alone differentiate and innovate in a saturated market of online businesses, companies are rethinking their tech stack and shifting away from traditional commerce platforms. 

No single vendor can offer all of the applications needed to deliver e-commerce experiences that meet the demands of today’s customers. Meanwhile, the need to innovate and evolve marketing and merchandising rapidly means the legacy stacks that require a single code base to be tested and deployed no longer work.

Today, choosing one of these platforms may be fine to start out, but results in trying to “fit” business requirements to the architecture and limits your business's ability to compete. 

Enter the Composable Commerce movement. 

What is Composable Commerce?

Composable Commerce allows e-commerce teams to select and assemble best-of-breed commerce solutions and compose them to satisfy their unique business needs.

Instead of using a one-size-fits-all e-commerce functionality to serve business needs, Composable Commerce leverages modern technologies and approaches like MACH (Microservices, API, Cloud, Headless) and JAMstack (JavaScript, APIs and Markup) to adapt to the ever-changing market dynamics of today and tomorrow.  

The basic tenets of Composable Commerce are:

• Business centricity. It empowers business users to make changes to digital strategy, enable new business models and create unique experiences without heavily relying on IT.

• Modular architecture. It supports more agile delivery, faster time to market, and improved experiences across all touchpoints.

• Open ecosystem. It empowers brands to assemble best-of-breed solutions using various accelerators, third-party applications, pre-composed solutions, and best practices.

Gartner defines Composable Commerce as using packaged business capabilities (PBC) to move toward future-proof digital commerce experiences. 

By 2023, Gartner predicts that organizations that have adopted a composable approach will outpace competition by 80% in the speed of new feature implementation.

The message is clear: the future of commerce experiences requires application leaders to adopt a composable approach. We agree.

How is Composable Commerce Changing Commerce Experiences? 

Composable Commerce is all about using the best-in-class technology from various vendors rather than relying on a single vendor to provide a standard functionality that is supposed to work for everyone. 

A typical composable stack, for instance, would include a range of best-in-class services covering various capabilities and might look like the following: TaxJar for tax, ShipStation for fulfillment, Bloomreach for content or search services, Elastic Path for commerce and Stripe for a payment gateway, to name but a few.

At Bloomreach, we define these as Commerce Experience Services, allowing companies to bring customer and product understanding, coupled with machine learning, to all aspects of interactions with customers - a real game-changer for commerce.  

Composable Commerce, therefore, embraces uniqueness and differentiation.

The business benefits include the ability to:

• Enable commerce experiences on any touchpoint

• Deliver highly differentiated commerce experiences to engage customers with your brand and products

• Enable commerce experiences with complex business requirements e.g. highly personalized marketing automated campaigns that provide e-commerce personalization campaigns to keep at-risk shoppers from churning

• Outmaneuver competition with the flexibility and speed needed to rapidly adjust to customer and market needs

The technical benefits of Composable Commerce include the ability to:  

• Embrace an API-first headless architecture without the complexity and risk of being locked in to a specific vendor, allowing for components to be added in/out as and when they are needed

• Respond quickly to changing business requirements

• Increase efficiency and reduce costs associated with system management and staffing by leveraging modern technology

The Composable Commerce Hub from Elastic Path 

Our partner Elastic Path has reinvented the concept of the traditional vendor marketplace with the Composable Commerce Hub, which includes all of the pieces for a brand to quickly and confidently launch unique commerce experiences.

The Composable Commerce Hub is the first and only open exchange of business solutions powered by an ecosystem of leading digital commerce providers.

It is a central location that brings together a robust library of Pre-Composed Solutions and Accelerators. Whereas traditional vendor marketplaces were home to just partner integrations, the Hub includes all of the pieces for a brand to combine with the Composable Commerce Platform to quickly and confidently launch with a DIY Commerce Solution.

This Composable Commerce Hub makes DIY Headless accessible for all, whether a brand wants to use a Pre-Composed Solution to get up and running quickly and customize on demand, or custom compose their unique solution from Accelerators and the API-first Headless Commerce Platform to meet unique commerce requirements easier and faster.

The Bloomreach Commerce Accelerator allows our customers to rapidly launch and power an e-commerce website, which implements all of the underlying Elastic Path functionalities such as checkout, address updates, basket management, signup, and so on, without the need for extensive Elastic Path integration work.

At the same time, customers can take advantage of Bloomreach technologies from Search and Merchandising, SEO and Recommendations to Content Management and Marketing Automation. 

As such, every customer can finally unlock the power and flexibility that comes along with headless, regardless of their digital maturity or commerce experience. In turn, companies can launch faster and innovate to meet their unique requirements so that they crush the competition, exceed customer expectations, and meet ambitious revenue goals.

Visit the Composable Commerce Hub to learn about our accelerator that integrates Elastic Path with Bloomreach Experience Manager and Bloomreach Search & Merchandising with minimized development effort, giving customers a head start in client engagement and brand awareness.

As early adopters, they will leapfrog industry laggards.

The 12 (email) myths of Christmas

FIRST PUBLISHED ON PHRASEE.CO

On 25 December this year, a large man in a red suit with white fur trim will fly around the world in a sleigh pulled by eight magic reindeer. This man will sneak into billions of homes in a single night and load each one of them up with presents (all the presents were made by elves, BTW). He will do all of this without making a sound or being seen by anyone. Oh, and he’s also been doing this every year on the exact same day since the beginning of time. 

Yes, it’s myth season. A magical time when we fill our children’s heads with utter nonsense to make Christmas Day the premiere event on their collective annual calendars.  

Myths like these can be helpful. They fill our homes with joy, delight our progeny to no end, and give parents around the world the perfect opportunity to offer empirical evidence of the many benefits of good behavior (good behavior = good presents). 

Other myths are far less helpful, particularly those perpetuated within the common consciousness of the email marketing community. In the email game, where we don’t have the considerable benefits of magic reindeer and helpful elves at our disposal, they can actually be quite harmful to the crucial quest of accomplishing our marketing goals.   

So, much like many of our parents had to do at a certain point in our lives, we’ve decided to dispel a few of email marketing’s most enduring myths this holiday season. It is our hope that our revelations will result in far fewer tears.  

Now, let’s have a look under the tree and unwrap the email marketing truths Santa has left for us. 

Myth 1: Email is dead (or dying).

The myth: New user interfaces, social media platforms, and messaging services have made the email channel obsolete, and people will stop using it altogether in the near future, thus rendering email marketing completely useless. 

The gift of truth: For every dollar a brand invests in email marketing, it receives 42 dollars in return, according to Litmus data. Despite the doom and gloom predictions that have plagued the email channel for the past decade or so, it remains a key revenue generating channel for many brands. Virgin Holidays, for example, indicates that (with a little help from Phrasee) the brand’s email revenues have actually increased in recent years to the tune of “millions of dollars” in increased email marketing revenue. 

Myth 2: An email’s subject line is the primary reason subscribers decide to open your email.

The myth: A good email subject line always means more opens.

The gift of truth: Optimized email subject line copy is a crucial element in subscribers’ decisions about opening/ignoring a marketing email. However, data compiled by SuperOffice has shown that it is actually the second most important factor in this ROI-critical decision (47% of people open an email based on subject line). In truth, the same data showed that 69% of email users credit the sender name (or “from name”) as the primary driver in their email opening decisions. In reality, both a positive perception of your brand’s sender name AND effective subject line language are of crucial importance in driving robust open rates.

Myth 3: Certain keywords alone make emails go straight to the junk folder.

The myth: Words you consider to be spammy effect deliverability.

The gift of truth: Let us be clear on this point: there are DEFINITELY some words that should never be used in an email subject line or anywhere else for that matter (hint: if you wouldn’t say it to your mother, don’t say it in an email). Spam filters use advanced machine learning technology to identify junk mail. While individual words are factors, these words alone are not determining factors. A variety of other criteria such as subject lines, sender name, historical engagement rates and so on combine to trigger spam filters. So, a subject line like “Free viagra delivered by Britney Spears” will most certainly be flagged as spam but mentioning the word “free” in a line won’t necessarily.

Myth 4: Click-through rate is the most important email marketing metric brands should test and optimize for.

The myth: All email campaigns should be optimized toward click-through rates, because that’s where the money is.

The gift of truth: A campaign’s click-through rate is extremely important. After all, driving customers down the path to purchase is the ultimate goal of every email marketing campaign. However, in subject line multivariate testing, open rates generate much more robust and useful data for predicting how a campaign will perform in many cases. This is because open rate is correlated with other performance metrics such as click-through rate and conversions. Further along subscribers’ journeys after they open an email, the sample sizes get smaller and performance data becomes less reliable. Thus, optimizing a campaign toward open rate is a much better approach than optimizing towards clicks-through rate.

Myth 5: The more emails you send, the more you annoy recipients.

The myth: If sending three emails per week generates $100 in revenue, it stands to reason that sending six emails per week will generate $200 in revenue. Therefore, sending more emails is always the best strategy.

The gift of truth: Campaign Monitor reports that 45.8% of email subscribers who have flagged a marketing email as “spam” did so because that brand “emailed too often”. Email frequency is much debated but the important thing to consider is the relevancy of the content within those emails. If you are a valued brand that respects the relationship it has with subscribers, increasing the frequency of the emails you send won’t necessarily damage the brand-subscriber relationship.

Myth 6: Including an emoji/offer/first name etc. in a subject line always boosts results. 

The myth: If you want better email subject line performance, add in an emoji, a specific offer, or a subscriber’s name and watch the increased opens roll in. 

Emojis, offers (i.e. 50% off!), and subscriber names work… sometimes. Modern digital audiences are fickle, and their tastes and preferences change all the time. That’s why an ongoing, robust multivariate testing strategy is so important to email subject line success. Every brand should be experimenting with different language variants, but without scientifically sound methodologies in place to allow them to learn from their results, such tests will accomplish little and show diminishing returns over time. The good news is that Phrasee’s deep learning engine can do all of this at scale for any brand.   

Myth 7: The best time to send your email is on Tuesday at 10 a.m.

The myth: There is an optimal day/time to send marketing emails, so you should always send your emails then.

The gift of truth: There are dozens of blog posts out there that tell us that X time on X day of the week is the optimal moment to launch our latest email marketing campaign. The thing is, though, each one says that a different day/time is the best. How can this be? There are two reasons. 1) The data used to determine optimal send time may not be of a scale sufficient to determine this definitively, leaving the resulting insights open to random variance. 2) Every brand, and every audience, is different. That’s why testing such things at scale on your brand’s own unique audience is the only sound way to learn about how/when/where your subscribers interact with your brand’s emails.

Myth 8: Nobody checks their email when on the toilet.

The myth: The best time to get people to read emails is when they’re at their desk at work, sitting on their couch at home or using their laptop.

The gift of truth: In a survey among 940 Americans about their smartphone consumption habits, 38.7% of respondents said they check their email on the toilet. And due to a little thing called social desirability bias, we believe the percentage of people who do this is actually much larger. So, the next time you check your inbox on the porcelain throne, don’t think you are alone. This is the dirty secret of the modern age.

Myth 9: Short subject lines produce better results.  

The myth: There is an optimal email subject line length, therefore all your subject lines should be exactly that long.  

The gift of truth: In the wild, short subject lines can perform well and longer subject lines can perform well. The reason so many people like to shout about “optimal” email subject line length is because it is easy to measure. Subject line length is but one element of many that can impact email subject line performance. In isolation, however, the length of a subject doesn’t make a subject line good or bad, nor does it have a statistically significant effect on how it will perform. 

Myth 10: What works this week will work next week.

The myth: A subject line structure that performs well on your audience will continue to do so in future campaigns. 

The gift of truth: Using similar language from campaign to campaign results in something we at Phrasee like to call “subject line performance decay”. Put simply, as a brand uses the same (or similar) subject line language in several campaigns, the impact of that language (measured by open rate) declines over time. By contrast, our data has shown that using diverse language and regularly multivariate testing subject lines results in an average open rate uptick of between 5% to 10% per campaign.

Myth 11: Anything that boosts the performance of your next campaign is worth doing. 

The myth: If you can increase KPIs for your next campaign with high-pressure or dishonest language and other spurious tactics, you should go ahead and do it.

The gift of truth: There is no shortage of tricks and sneaky tactics that a brand can use to increase email marketing performance over the short term. However, measured over time, such tactics result in little more than loss of brand value, sender reputation damage, and higher unsubscribe rates. Targeting negative emotions such as guilt, fear, and anxiety in your brand’s audience is not a sustainable email marketing strategy. Taking the long view and protecting the valuable relationships you’ve built with your subscribers is of infinitely more importance than a short-term uplift in opens and clicks.

Myth 12: AI-powered copywriting can’t write email marketing language in your brand's voice effectively.

The myth: AI-powered copywriting sounds robotic and won’t engage human consumers effectively. 

The gift of truth: There are plenty of examples of amusingly bad AI- written copy, nonsensical AI-generated stories, and terrible AI-composed song lyrics out there. However, these do not reflect the current capabilities of the AI deep learning technologies available today. Here at Phrasee, our AI-powered copywriting technology has been generating short-form copywriting that is indistinguishable from copy written by humans (and performs better in 95% of cases!) for quite some time. Our AI is capable of writing copy in your brand’s unique voice and accurately predicting which language will perform most effectively on your brand’s unique audience. 

A return to ethics

FIRST PUBLISHED ON phrasee.co

The North Face’s recent Wikipedia hijacking shows that there is still a lack of understanding of a basic tenet in digital marketing: just because you can do it, doesn’t mean you should.  

Marketers have always tried to game the system. Think back to the days of black hat SEO tactics, involving techniques like keyword stuffing, cloaking and private link networks, used to gain higher site rankings in search results.  

We’re still seeing unethical marketing practices if recent attempts to top Google’s image search results are anything to go by. And amidst a stark political climate and a growing wave of tech criticism, a flush of scandals have occurred, the most famous of which being none other than the Facebook and Cambridge Analytica data breach.  

But what is the difference between what happened with Cambridge Analytica and something like Amazon recommendations gone wrong, for example? This is a question addressed by Professor David Weinberger, an American technologist and author. He asks if the Cambridge Analytica scandal, which was characterized as taking personal agency and autonomy against people’s personal will, was really all that different to what digital marketing does today. After all, the practices used by Cambridge Analytica and digital marketing are alike in that they are both data-driven, they target users and they trigger behavior.  

The difference between them, he argues, comes down to this: the misalignment of interests. With Amazon recommendations, users are shown what influenced the recommendations – the user’s data – and are allowed to remove the sources of data. Amazon acknowledges agency, is transparent about how it works and gives some control to the user. The example is also low value and represents a shared interest between users and Amazon: users provide their data in exchange for better and more personalized product recommendations.  

With Cambridge Analytica, on the other hand, there was no shared interest, there was no personal agency, control or transparency and the stakes were high.  

The capabilities of technology and marketing today mean that we need to learn about the alignment of business and customer interests. Don’t do it just because you can. Don’t do it just because you think it’s good for your business. Only do it if you can make both your business better and your customers feel better.   

That’s why Phrasee launched Emotions Matter, a campaign that is part of our mission to remove fear, anxiety and doubt from marketing. In 2019, marketers are still actively encouraging the use of negative emotions to sell more and, as an industry, we need to do better.  

As part of the second phase of the campaign, Phrasee carried out an online survey with Vitreous World into attitudes towards unethical marketing among consumers and marketers. Over 4,000 consumers and 400 marketers split evenly across the UK and the US were surveyed and the results really do prove that ethical marketing is a no-brainer. 

The research shows that unethical marketing not only leads to the erosion of trust for a brand, but it’s also bad for business. According to the findings, 68% of consumers say that they would not buy from a brand that used negative emotions in its marketing. Furthermore, 69% of consumers say they would buy more from a brand over time that used positive marketing.  

Phrasee calls this impact that marketing and communicating to customers in an ethical and responsible way has on a business Return on Ethics (ROE). Brands wanting to boost sales, customer loyalty and team morale should swap pressure for positivity and put ROE at the top of their priority lists.   

Responsibility and good practice in marketing = better business results.  

Stay human and reap the rewards.  

What SAP’s acquisition of Qualtrics means for the experience economy

FIRST PUBLISHED ON ECONSULTANCY.COM

READ THE FULL PIECE HERE

Blockbuster software deals have made headlines this year, with SAP’s $8bn purchase of Qualtrics becoming the latest in a series of acquisitions led by legacy tech companies vying to bolster their cloud businesses.

What does the acquisition mean in the context of the experience economy, one of the biggest global trends to have emerged in marketing in recent years?

Prior to the SAP-Qualtrics deal announcement this week, the last quarter of 2018 also featured Adobe’s $4.75bn acquisition of Marketo and IBM’s mega $34bn purchase of Red Hat. Whilst Adobe’s acquisition is intended to bolster its Experience Cloud platform and direct-to-consumer marketing, the IBM-Red Hat deal is intended to boost IBM’s offering in the growing hybrid cloud market.

Meanwhile, the purchase of online market research software company Qualtrics by SAP, best known for its financial software and enterprise resource planning (ERP) business, is intended to help move its customer experience initiative forward.

Some may view the M&A activity in the cloud computing space negatively, perhaps as another sign of disruption and the demise of business models. Faced with competition from the likes of Amazon Web Services, Google Cloud Platform and Microsoft’s Azure, not to mention start-ups, the struggle for relevancy is real for legacy tech. The deals represent a bid for growth in a changing market.

The Qualtrics deal, however, may also be viewed as an opportunity and serves as an important lesson for brands. The combination of operational data from SAP’s core business with Qualtric’s data on consumers, employees, brands and products or experience data (trademarked as O-data and X-data) presents a powerful proposition. By understanding what is happening and why it is happening, SAP-Qualtrics is intent on stitching together different pieces of the customer experience management puzzle.

After all, by making sure that companies react before consumer behaviours start influencing the balance sheet, companies will be in a better position to limit churn and retain their customers.

According to Econsultancy’s Customer Experience Management report, 71% of respondents cited ‘improved customer retention’ as the most important benefit of a CXM strategy – a finding not so surprising given that it is generally more expensive to acquire a new customer than to retain an existing one.

Whilst developing customer insight capabilities is an essential component of delivering a data-led CXM strategy, this same report finds that data gathering and interpretation as well as having data in the same place so that it can be connected are key challenges for businesses.

Enterprise data is notoriously messy and on multiple systems, often legacy ones. The other challenge of connecting this data is observed by Azlan Raj, VP of Customer Experience EMEA at Merkle. According to Azlan, another issue is “making sure that there’s the right infrastructure within the business, because one of the things you want is confidence within your data. It also allows you to get that full picture”.

The full picture is something that legacy software companies are now striving towards in a bid to offer a one-stop shop for customers. Experience management is about helping companies get a complete picture of an enterprise from the viewpoint of customers, employees and anyone else whose opinion matters to the business. By getting closer to that often mentioned ‘single customer view’, companies will be in a better position to anticipate and respond to customer needs.

And the brands that can react quickly to evolving trends with the rise of the experience economy are the ones that will prosper.

Top 100 Digital Agencies 2018: The state of the industry

first published on econsultancy.com

READ THE FULL PIECE HERE

Hitting the top spot in Econsultancy’s Top 100 Digital Agencies 2018 report is Accenture Interactive, the company’s second consecutive year at number one. IBMiX comes in second place and Atos Digital Services in third.

In this article, I’ll look at some trends seen in the 2018 rankings, and discuss key themes and talking points in the industry.

Growth consolidated in Top 10

2018 financial data shows that the Top 100 digital agencies have grown on average 20% year-on-year from £2.3bn in 2017 to over £2.8bn. The Top 5 agencies hold 40% of the entire fee income of the Top 100 whilst over half of the entire fee income is held by the Top 8 agencies alone.

Historical data demonstrates that the dominance of the Top 10 agencies in the ranking is a trend that continues to persist. Over a five-year period, the average net fee income of the Top 10 agencies has steadily increased, whilst the average fee income of the remaining agencies in the ranking has been more or less stagnant.

UX grows as proportion of income; social, SEO and ecommerce decline

Agencies are asked each year to select a primary function. This year, Full Service/ Marketing agencies dominate, with 65% of the total fee income, followed by Design & Build (18%), Technical (15%) and Creative (2%).

The presence of agencies primarily categorised as technical has grown over the last five years. The demand for technical agencies is further evidenced by the fact that technical development, on average, accounts for 24% of fee income from digital work. Creative work commanded the greater share of fee income five years ago, but technical development has outstripped creative since then.

An area of work that has grown in recent years is user experience, which now accounts for an average of 14% of fee income from digital activities. This development goes hand in hand with evolving consumer expectations for personalised experiences.

The proportion of net fee income derived from social media, SEO and ecommerce, on the other hand, has declined. This trend can perhaps be understood within the broader context of increasing consolidation of marketing activity in-house.

Industry highlights and key themes

The following analysis and commentary looks back on some of adland’s defining moments and key themes in 2018.

The disruption of media buying

Transparency issues and changes to programmatic buying practices are radically changing the role of agencies. Based on a 2017 study, the Association of National Advertisers (ANA) reported that 60% of agencies are taking steps to address media transparency within the client-agency relationship.

Concerns about non-transparent practices such as rebates and hidden fees have subsequently fuelled growth in client demand for auditing services. While some clients are taking control of programmatic work, with an ANA report showing that over a third of advertisers are moving programmatic work in-house and away from agencies, this year’s number one agency on the ranking is attempting to capitalise on the market trend by getting into the media buying space itself.

Accenture Interactive launched a programmatic services unit, encompassing media planning, buying and management. Accenture Interactive also offers media auditing and pitch management services in addition to media buying. Issues related to this have not gone unnoticed, with some observers remarking on a conflict of interest at play. Martin Vinter, Head of Media at specialist media consultancy Ebiquity, says:

Whatever firewalls and segregation of media buying and auditing will be in place, it won’t appease anyone. This is clear conflict – operationally and philosophically. In the age of ‘transparency’ – and all that this encompasses – savvy marketers will see that this as a significant issue. Impartiality, whether agency side or consultancy/audit side is crucial for the industry to weed out the issues that have existed in the past. This development unfortunately goes against the grain of recent positive developments.

Agency holding groups refine their propositions as their business models come under attack

2018 was certainly a tough year for some agencies, with Top 100 entrants noting the loss of some clients or the end of contracts. The industry is being disrupted by different forces but are the shifts occurring somewhat sensationalised?

It seems that the industry is riddled with contradictions. On the one hand, there has never been as much money spent on advertising, yet the rise of ad blocking and the challenge for brand cut-through suggest that advertising is now less effective. Fee income of the Top 100 is growing yet the existential threat of agencies is much talked about and lamented.

Are agencies really struggling for survival?

The threat of consultancy disruptors, of course, has received much attention in the last couple of years. However, there are other competing forces at play, most notably the rise of in-housing, the formation of independent collectives as well as the emergence of new sources of competition.

Let us take a closer look at some of the main issues impacting existing agency groups.

1. The third phase of strategic development

Michael Farmer, author of Madison Avenue Manslaughter: an inside view of fee-cutting clients, profit-hungry owners and declining ad agencies, contends that holding groups are in their third stage of strategic development. According to Farmer, this third phase refers to centralising and downgrading silos. He puts forward a view that agencies are short of talent and insufficiently integrated or creative, so holding companies are taking over as super-agencies.

This idea mirrors Publicis Groupe’s ‘The Power of One’ strategy or WPP’s concept of ‘horizontality’, a term that represents a model put in place by Sir Martin Sorrell to encourage people in different agency units to work collaboratively in order to offer a broader range of services to specific clients. Most of the agency holding companies have been refining their propositions in some way in recent years.

2018 was marked by the ominous departure of Sorrell from WPP in April. Since the departure of the industry magnate, speculation and prediction has been made about the breaking up of WPP or the consolidation of its agency brands.

Controversy aside, Sorrell’s exit from WPP and the arrival of Mark Read as his successor highlights that the marketing and advertising industries are deep in transition. Luke Smith, Co-Founder and CEO of Croud, says:

The holding companies undoubtedly need to seriously evolve to meet fresh industry demands. And, in the case of WPP especially, this has posed some serious questions over whether an agency of that scale should be restructured to reflect market trends and the current climate.

What does this post-Sorrell world mean for agencies? Perhaps the industry will shift more towards people-based marketing and customer centricity to meet current market demands. For example, agencies have recently been investing in their own proprietary tech, a factor driving further consolidation in the market, and building better audience insight tools to help clients with media and creative work. Clients, after all, are seeking more agile, simplified and flexible arrangements with partners in order to create connected customer experiences in a fragmented media landscape.

Luke Smith also reflects on the cultural implications of these shifts within the industry:

“We’re also seeing the somewhat sad demise of the age of the personalities in the agency world, with Sorrell and Vincent Bolloré having departed and surely a couple of the other leaders not far off. This means the holding companies are in danger of becoming incredibly corporate and faceless with grey offices in Zone 2. A far cry from what agencies used to be known for and this isn’t what attracts young talent.”

Whether or not this sentiment is widely shared, future agency models, at any rate, will continue to evolve. In order to drive change for clients, the agency groups need to alter how they do business with them.

2. In-housing digital

Growing pressure on the client-agency relationship has been a consistent theme for some time but it has never been more apparent than now. There are a couple of reasons why this is the case, including mounting concerns about brand safety as well as the dominance of Google, Facebook and Amazon, which has meant that advertisers are buying directly from tech platforms.

Furthermore, in-house teams are under more pressure to prove marketing effectiveness and drive growth. Econsultancy’s Future of Marketing research backs up this theme, with 60% of advertisers surveyed agreeing that proving marketing effectiveness is more important now compared to 2 years ago. Added to this, ‘maximising the ROI on campaigns’ is considered the top objective for 49% of advertisers over the next five years.

With driving growth in a high-volume world of always-on content at the top of the marketer’s agenda, work is migrating in-house or to lower cost countries – another force competing with agency groups.

3. Seeking solutions – a hybrid model in a complex ecosystem

While in-housing is a notable trend, the demand for solutions is high. Clients are seeking partners to help them navigate the mire of technological change.

A lot of work can be done at scale in-house but the extent of in-housing depends on a brand’s budget and what it is prepared to organise.

Speaking at DMEXCO in Cologne this year, Blake Cahill, SVP Global Head of Digital Marketing and Media at Royal Phillips, suggested that a hybrid model of working with partners, depending on a brand’s business maturity, is the way forward.

Cahill spoke about how Royal Phillips manages a lot of processes, testing and ongoing production internally and how it has flipped its model of partnering with agencies by working with them on strategy first and then creative execution. The brand has also changed its remuneration practices by awarding higher remuneration to strategy and consultancy services.

Not all marketing activity will occur in-house at every brand. Clients may also choose different partners for ideas and execution. While it may be an operational challenge to bring the briefing process and flexible teams together, Cahill argues that a blended approach to partnership ensures that brands develop the best of breed partners for each engagement.

Consequently, we see a very mixed landscape, with agencies, consultancies, big tech platforms, adtech and martech companies as well as newer innovative players all trying to reinvent and compete for the same lines of work.

Indies form their own collectives to compete with industry incumbents

While networked agencies are undergoing a period of transformation, independent agencies are not standing still either.

Independent agencies account for 48% of the Top 100, whilst agency groups represent 52% of the agencies in the ranking. Despite the fairly even split in representation, agency groups hold 76% of the total fee income of the Top 100, whilst independents hold just 24%. One independent agency spokesperson comments on this disparity:

The industry is polarising, with one end being driven by the need to automate and drive down costs. On the other, the drive upwards – taking marketing into the boardroom via digital and operational transformation.

We, like many mid-sized agencies, are pinioned between these two forces – undercut by AI and cheap Asian resource, on the one hand, and outgunned by the mega global consultancies on the other.

Clients, too, are conflicted. Is marketing a commodity to be bought on a cost basis as procurement believe, or is it a strategic growth driver worthy of significant investment? The challenge for a mid-sized independent is to persuade clients that our prices are worth paying and our talents up to muster.

Sadly, smaller agencies still suffer from the perceptions that, as they are smaller, they should be cheaper, when in fact the value they create is significant.

This independent agency spokesperson suggests an opportunity in this middle ground position:

“As the holding company behemoths increasingly flounder to respond to clients’ needs for more agile and responsive vendors, and the biggest consultancies struggle to produce breakthrough insight and creativity, the independent agency offers a flexible (and affordable) alternative, and one capable of forming enjoyable and lasting relationships.”

Another trend developing is independents combining in owner-led groups to offer an alternative proposition. For example, 10 independent agencies joined forces this year to form an owner-driven collective network called Together Group and combine their capabilities on client briefs. Whilst agency groups are restructuring their businesses to respond to various challenges, indies are seeking collaborative models to scale their own capabilities to meet client demands and compete with industry incumbents.

The Facebook / Cambridge Analytica debacle

The arrival of the General Data Protection Regulation (GDPR)5 in May and the Facebook/Cambridge Analytica (CA) data breach scandal marks a turning point for the industry.

The implications of these events for marketing and advertising are heightened scrutiny over privacy and data security issues and a shift in power from advertisers to consumers.

Croud Co-Founder and CEO Luke Smith says:

Back in the day, no one talked about data privacy at dinner parties. However, this chain of events has got people talking about it in homes across the globe, cementing the issue in mainstream conversation.

The marketing and advertising community had already been taking a more cautious approach towards social media platforms even before news of the Cambridge Analytica scandal emerged. Concerns around brand protection, along with the added complications surrounding GDPR implementation, were already making brands think more carefully about their relationship with data-driven ad platforms.

Michael Hewitt, Content Manager at Stickyeyes, thinks that the Cambridge Analytica scandal will probably go down as a mere footnote in the context of marketing and advertising:

Facebook is clearly going on the charm offensive to win back the trust of both users and advertisers. Whilst Cambridge Analytica demonstrated that the gateway between advertisers and users was woefully unguarded, in many respects, at its base level, Facebook did and will continue to operate very much in the way that it was intended to – to provide advertisers with a means to reach micro-targeted audience segments with highly personalised messaging. The adage of “if you aren’t paying for the product, you are the product” is very much what Facebook relies on.

Hewitt believes that Facebook will more than likely come out of this as a more mature advertising and marketing platform. He says that the company will tighten its policies, it will look to raise the standards it holds advertisers and developers to over time and it will more than likely remove or replace targeting options, but the core business will remain the same. He says that whilst many will point to Facebook’s slowing user growth and slump on Wall Street as a sign that this scandal has hit Facebook hard, he believes that those problems are rooted in issues far bigger than Cambridge Analytica.

It remains to be seen whether the CA incident will result in an appreciable migration away from Facebook. If this scenario unfolds, agencies might capitalise on the opportunity to reach audiences with other media types. If government regulation becomes a likely scenario in the future, this could impact the effectiveness of advertising on the platform and brands may shift their media buying strategies.

Yet heightened interest and concern about privacy can only be a good thing for advertising and data-driven marketing. Luke Smith says:

In the long run, I have no doubt that this will help the industry to move on positively. Increasingly, brands will have to make far more effort to forge valuable, two-way relationships with customers that will make for better engagement for all parties.

Talent pipeline concerns remain

Now a somewhat clichéd theme, talent and skills are, once again, major concerns for the industry. How can the marketing and advertising industries ensure that the talent pipeline meets new digital demands?

Julian Ward, Group Head of Talent Acquisition at Stickyeyes, believes that the industry needs to consider how it is raising awareness and educating the next generations of talent about the opportunities that digital can offer, and to think more laterally about the skills and qualifications that are relevant to what the industry does. He says:

We come across many undergraduates and school leavers who are largely unaware that there is a rewarding career waiting for them in the digital industry. We come across mathematics undergraduates who have relatively little understanding of the opportunities available to them in fields such as paid search and programmatic advertising, or school leavers unaware that a digital apprenticeship could offer them more than a marketing-orientated degree.

Given that the demand for digital talent greatly outweighs the supply, Ward believes that it is incumbent on industry professionals to engage with educational establishments and spark passion in the next generation of digital marketers:

Once we secure talent, it is then up to us as forward- thinking organisations to nurture that talent through training and development, to leverage relationships with technology partners to make sure that their talent continues to keep abreast of the ever- evolving digital landscape, and to keep innovating with new ideas that keep people engaged.

The growth of diversity initiatives

Conversations about diversity came to the fore this year, culminating with developments such as the #MeToo and Time’s Up movements against sexual harassment and the #WomenCannes campaign.

Long listed for the Financial Times and McKinsey Business Book of the Year Award, publications such as Emily Chang’s Brotopia have appeared, highlighting inequalities within the tech industry and how women and minorities are speaking out to address the inequalities that exist.

There is evidence that change is occurring within the media and advertising industries, with growth of initiatives and gradual progress regarding diversity and inclusion issues.

It has certainly been another interesting year for the industry.

Four common misconceptions about the GDPR for marketers

First published on econsultancy.com

Econsultancy’s latest research shows that over half (59%) of client-side marketers still feel unclear about what does and does not constitute compliance with the GDPR.

These findings are based on a survey conducted in January 2018 amongst over 1,000 marketers in the UK.

In this post, I discuss some of the common questions and myths circulating about the GDPR discovered in the research.

1. Obtaining consent

When marketers were asked about their top three priorities ahead of the legislation’s enforcement, 86% of client-side marketers and 77% of agency-side respondents indicated that they are prioritising a review of consent mechanisms for collecting and processing data.

The compliance conversation among marketers has been heavily centred on the notion of obtaining consent but there are, in actual fact, six legal grounds for processing personal data under the GDPR. In addition to consent – legitimate interests, public interest, contractual necessity, legal obligations and vital interests represent other legal grounds.

RedEye Compliance Director Tim Roe notes the confusion and hype around consent:

For marketers, there’s a lot of confusion out there, which is stopping them from moving forward. On one side, they know that consent is not always a viable proposition but on the other side, they are being told by compliance people and they are being told by lots of consultants that they need consent…And people are creating less than ideal situations because they can’t comply in that way.

The regulation was constructed in such a way that allows marketers to use legitimate interests for the majority of their data processing. All of the exciting stuff that we do, all the segmentation, the targeting and the profiling…all of that, in most cases, can be used under legitimate interests. That’s the major thing for marketers to realise.

2. Appointing a Data Protection Officer

While over half (59%) of client-side respondents and 40% of agency respondents say that their organisations have either appointed or are planning to appoint a Data Protection Officer, it is not mandatory to do so unless in certain circumstances such as:

• Where the processing of personal data is done by a public authority, except for courts or independent judicial authorities when acting in their judicial capacity

• Large scale regular monitoring

• Large scale special data categories e.g. health records, criminal offences, mortgage applications

3. The GDPR and Brexit

It is a misconception that Brexit will mean that the GDPR will not have any impact in the UK. The UK will still be a part of the EU when the GDPR is introduced in May 2018 and will remain an EU member state for several months after that. The position for the UK after that is less clear and will depend on negotiations but the UK has already proposed a Data Protection Bill, which intends to modernise data protection laws in the region.

Irrespective of Brexit, if British businesses want to do business in Europe and need to process the personal data of EU citizens, they will need to comply with the GDPR. The regulation has international implications as it concerns any organisation storing or processing EU personal data, regardless of where the organisation is located.

4. The May ‘deadline’

With the enforcement date looming, many businesses are understandably concerned with being ready and prepared in time for 25th May.

Richard Merrygold, Group Data Protection Officer at HomeServe, says that the 25th May is only the start of your compliance journey:

This isn’t about the 25 May. It’s not a deadline. It’s not a hard stop. The 25th May is the beginning. If you do this properly and you approach it in the right way, this is a genuinely beneficial activity that can improve your organisation, improve your customer relationships. But you have to prepare to embrace a cultural change. I think in the short term it might be a little bit painful but in the long term, there will be some real customer benefits.

Compliance with the GDPR needs to be built into the culture of a company, and not just to an individual department or contract with an agency. Marketers therefore need to think about integrating their strategies with the efforts of other parts of a business and plan and execute in a holistic way. In this way, transitioning to a post-GDPR world will require compliance that is both ongoing and iterative.

Top 100 Digital Agencies 2017: The state of the industry

FIRST PUBLISHED ON ECONSULTANCY.COM

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Accenture Interactive has come first in Econsultancy’s Top 100 Digital Agencies Report 2017.

The digital consultancy claimed top spot this year with UK fee income of £284 million, a whopping increase of 61% year-on-year. IBM iX, which came top in 2016, dropped to third with SapientRazorfish in second.

In this post, I’ll look at which agencies rounded out the top 10, as well as examining the keys trends that emerged from the report. For example, this year’s Top 100 Digital Agencies Report notes the evolution of agency structures as brand marketers’ sophistication grows and competition heats up in the market.

The Top 10

This year sees the total fee income of the Top 100 digital agencies surpass £2.3 billion. 2017 was undoubtedly a period of success, with agencies reporting on average a 20% growth in total fee income.

A large part of this growth, of course, is accounted for by the agencies at the top of the ranking. The top five agencies now account for 39% of the entire fee income of the Top 100. Half of the total fee income is accounted for by nine agencies alone.

Another flurry of mergers and acquisitions occurred in line with previous years as the industry consolidates further and agencies widen capabilities in an endeavour to become full service. Examples include Capita’s acquisition of Orange Bus, Code Computer Love’s merger with MediaCom and Ayima Group’s acquisition of Quick Think Media.

IBM iX slipped this year from the number one spot to make room for Accenture Interactive. 2017 marks a tremendous year of growth for Accenture, with the company further dominating the marketing and advertising sector as it continues its ambitious acquisition trail.

The acquisition of marketing agency Wire Stone in August marks the company’s 15th acquisition since 2013. Accenture announced earlier in the year that it would spend $1.8 billion on acquisitions to strengthen its global outfit. The company now stands as the largest digital network in the industry, with revenues exceeding $4.4 billion, further elucidating the dominance of this new breed of agency.

2017 challenges

Three challenges in particular were mentioned by agencies entering this year’s Top 100:

1. Brexit and the US presidential election

The political and economic ramifications of the past year’s events have resulted in companies focusing on healthy growth in each quarter. There are concerns among agencies and brand marketers about the impact of Brexit on retaining a very European workforce as well as its impact on general trade conditions.

Some agencies fear that the reduced appetite for commercial risk, investment and marketing experimentation might pose a threat and that reduced budgets and a drop in the pound will continue to bite in 2018.

2. The General Data Protection Regulation (GDPR)

Understanding the impact of GDPR and upcoming data privacy law changes due to come into effect in May 2018 are a cause for concern this year. While some agencies consider these changes as potentially hampering the targeting and reach of customers, others believe they are an opportunity to improve customer interaction and engagement, enabling their clients to succeed.

3. Transparency and viewability

Agencies referred to the growing scepticism in programmatic and display advertising, noting clients’ viewability, click fraud and ad blocker intervention concerns. Brand safety and ad viewability are top concerns in the industry.

But it’s not all doom and gloom…

Opportunities highlighted by agencies include:

1. Acting as sense maker

As the marketing technology onslaught continues, adding further layers of complexity to the marketing ecosystem, agencies have the opportunity to act as trusted partners in advising on the applications of new waves of tech. Tech utilisation and data analytics are highly valued areas of counsel by brand marketers.

2. The shift to guiding transformations 

Many agencies entering the Top 100 this year noted their adoption of a consulting mindset and the changing skillset required of agencies. Agencies are now shifting from being vertical specialists to being high level, broader T-shaped people. Agencies are no longer simply responding to client briefs but are instead focusing on helping clients find problems to solve, offering diagnostic capabilities and solutions.

3. Capabilities development and training

The trend of skills being developed and improved in-house on the client side as well as the continuous supply of new technologies means that agency engagement with clients is shifting to capabilities development and knowledge transfer as well as training in-house teams.

Game of Agencies – battling it out for market penetration

Consultancies and systems integrators have continued to muscle in on agencies’ territory in 2016/17 in what has been a Darwinian period for the industry. It’s a tough and competitive environment, with some agencies battling for survival and losing out to consultancies in winning large digital and marketing transformation work.

What complicates things further is that the digital agencies landscape is no longer comprised of consultancies and traditional holding companies. E-tail giants, tech players, media companies, publishers and even mobile carriers are now also competing for the same lines of business. So this begs the question: who will prevail in this Game of Agencies? The winners in the future could very well be something entirely new.

Traditional shops are beginning to fight back and adjust to this new normal by building their own business transformation units to better compete. Take the media arm of French ad holding company Publicis Groupe, for example, which launched its own global business transformation practice in 2016.

While traditional agencies and independents have been making strides in consulting and offer the creativity, agility and cost-effectiveness that consultancies sometimes lack, there is no real threat to the consulting giants just yet. The consultancies’ access to the C-suite, deep vertical industry expertise, global offices and manpower are certainly advantages. Furthermore, the rationalisation of agency relationships where brand preferences are towards fewer and deeper supplier relationships is a trend that favours the big consultancies over agencies.

One thing is certain: with consulting firms acquiring digital, creative and design expertise and traditional agencies developing consulting, data and technology capabilities, agency value propositions are indeed changing. Left brain is meeting right brain in the industry and it is this ‘systems/empathy convergence’ that will shape the future of agency capability.

Talent wars

To survive in this competitive environment, skills need to be smart and deep and teams of specialists are required.

Attracting and retaining the right talent, however, is one area that agencies continue to struggle with. The talent problem was the most cited challenge among agencies in entry submissions this year and is, without doubt, one of the main barriers to digital progress.

As one agency noted:

Retaining and attracting talent in a market where demand for digital capabilities is ever-increasing will be paramount to agencies’ success. Clients are also now expecting analytics to prove success and challenging agencies to tell a complete story across multiple touchpoints.

Diverse teams of people with the right skills is important for agencies seeking to differentiate themselves through strategy, specialisation and digital expertise but this very often requires staff who are expensive and nomadic. A large part of the challenge is due to the pressures of short-termism; in developing talent and resourcing to keep up with client demand for services as well as international expansion.

The skills shortage is manifesting itself in areas such as data science but also in digital design. One agency highlighted the opportunity that this brings for people with in-demand skillsets:

The market is exploding for digital design again, and technology is available to everyone and every agency in a way that has never been seen before. The choices for young designers who are comfortable and experienced in bringing tech and design together are exponential. Allowing people to flex their creative muscle whilst constantly working in beta and black and white is sometimes difficult.

Agencies also noted the challenges in attracting diverse talent. The media furore surrounding the controversial anti-diversity memo written by ex-Google employee James Damore, in which he presented contentious views about women being less skilled than men in tech, is perhaps an illustrative example of the wider concerns about gender diversity in the industry.

So what are agencies doing to tackle the skills gap? Some noted the establishment of collaborative and agile working practices, organising graduate and apprenticeship training schemes as well as nurturing talent through continuous learning. One agency said:

We believe in a company culture that encourages continuous learning, and so strengthening the learning and development opportunities we provide will be key to attracting the best talent.

Agencies on the latter half of the Top 100 ranking, as they continue to grow and surpass teams of 50+ and 100+ people, have highlighted their need to balance expansion and growth with maintaining their unique culture and attracting talented employees. These agencies are finding that organisational purpose and culture are just as important as remuneration and location in the search to recruit and retain the best talent.

In-house agency vs. on-site agency

The client-agency relationship is changing. One factor contributing to these changing dynamics is clients increasingly moving more agency functions in-house. More brands are bringing their digital strategy and production in-house, creating digital centres of excellence at client office locations.

Transparency issues and a tighter rein on spending are at play here but other reasons for moving in-house and consolidating agency rosters relate to efficiency, agility and speed. Brand marketers often have a better understanding of their brand and audience than external agencies and so the move in-house is increasingly resulting in better work, particularly in the creative space, as well as better bottom-line results.

The most obvious benefits of in-house agencies are that talent is owned and not rented and total integration is possible, with brands having the opportunity to align the capabilities of the agency to its needs in a way that is not possible with an external agency.

However, there are some downsides. While the decision to create in-house agencies is often taken with the aim to improve efficiency, in-house teams can sometimes lack perspective and a wider sense of context. This year’s Pepsi Kendall Jenner ad, which was heavily criticised for appearing to trivialise the Black Lives Matter movement, exemplified some of the pitfalls of the in-house agency. The insularity of the in-house agency model can sometimes result in losing touch with the realities of customers.

The Jenner ad therefore reignited the in-house agency vs. on-site agency discussion. An alternative to the in-house model is the on-site agency in which agency employees work on site at a client’s office but are integrated into the culture and operations of the brand. This rise in shared workplaces and co-location has many advantages including greater flexibility, higher productivity and the ability to quickly scale up or scale down depending on client needs. On-site agencies offer a middle ground between an external agency and an in-house agency and can therefore be seen to offer the best of both worlds.

Nevertheless, the model is not perfect and may not always be considered as the superior option. For example, an on-site agency is rented and not owned and external vendor risk still exists in the sense that a client is dependent on the agency’s financial health and ability to recruit talented staff. The model that brands should choose if they forgo the traditional external agency model will largely depend on its capabilities and its ability to work well with each type of agency, whether that means investing in the right talent for an in-house agency or working towards true integration if taking the on-site approach.

The rise of modular agency structures

The move in-house and the rise in co-location reflects shifting agency models more generally. Disintermediation is another shift that continues to impact traditional agency structures with more brands going direct to influencers, tech vendors and media companies, essentially cutting out the middleman.

Furthermore, as integrating marketing efforts continues to be a challenge, brands are seeking a more simplified agency model, one where there are fewer agencies or one lead agency to guide multiple agencies in an integrated fashion.

This type of solution has already manifested itself in something like Omnicom Group’s multidisciplinary on-site offering for McDonalds. This model is an example of a holding group solution for the future where one core agency has several partners such as media companies or tech platforms, for instance.

Related to this is the growing trend of modular agency networks such as the agency structure of Publicis Groupe, for example. In this type of model, there are fewer of the same types of agencies, resulting in a reduction in overhead but allowing agencies to rebundle capabilities to serve a client’s specific needs and making cross-functionality and integration more effective.

Agencies are therefore becoming smaller, less siloed and more specialised. In the coming years, we may also see a rise in revenue-based compensation models to meet the demands for more accountability and tracking agency work to sales.

Heading into the future, it is likely that agencies will also be more distributed, working with talent all over the world via virtual collaboration, utilising remote working practices and rented office spaces as well as taking full advantage of what the gig economy has to offer.

Minding the digital skills gap: top tips for aspiring modern marketers

First published on econsultancy.com

At Marketing Week Live I listened to panellists speak about the skills required for today’s modern marketer and their advice for career progression. 

In today’s business landscape we are witnessing a transforming job market. How are marketing roles and responsibilities going to change and develop in the future? How does the human element of brand building evolve in a world of emerging technology?

These are some of the questions that concern us as modern marketers grappling with a fast-moving and uncertain environment.

Data from The Marketing Society shows that the average tenure of CMOs in the UK stands at just 18 months. All this means that marketers are having to work even harder to prove their worth to the board. With zero-based budgeting and increasing pressure to prove ROI on marketing spend now commonplace, the onus is on marketers to show how marketing affects the business bottom line and how it ultimately drives a business forward.

A shift in how marketing operates means that finding and nurturing the right talent is often difficult.

Panellists Julia Porter (Origin Housing), Liz Curry (Comic Relief) and Luis Navarrete Gomez (Lego) reflected on this issue at Marketing Week Live and spoke about the challenges and opportunities of the skills gap for the modern marketer.

Here are some of their top tips for aspiring marketers.

Data is your friend

Data is now a central part of marketing for the future, which means that marketers need to be comfortable utilizing it. Creativity is no longer enough; understanding data is essential if a marketer wants to develop their career.

Don’t lose focus on what’s important

Functional skills such as ecommerce and CRM as well as channels skills such as programmatic and social were cited as examples of the type of know-how now in demand.

That being said, while data literacy and a basic knowledge of technology is important, the tech revolution has perhaps resulted in marketers losing sight of what’s really important: the customer.

Porter (Origin Housing) admitted that marketing to people has become a bit frenetic. Instead, marketers must focus on how data can be used to add value and provide a better customer experience.

A hybrid mix of skills

The expectation for marketers to embrace both innovation and data analysis reflects a new reality: marketers need both left and right brains; a competency with numbers but also a creative mindset. In actuality, a combination of skills is essential for marketers to truly progress in their careers.

This notion can be extended to the need for marketers to possess both functional and soft skills. Proactivity, adaptability and leadership are increasingly valued. As professionals with more technical backgrounds continue to join the ranks of marketing and the requirement of proving ROI to the board continues to increase, stakeholder management, aligning people with business goals and team building are important capabilities for the modern marketer.

Curiosity never killed the cat

So while recruiting for attitude and behaviour is considered just as important as hiring for skills and qualifications, panellists were in agreement that curiosity is one sought-after characteristic in the search for marketing talent.

With rapid technological advancements demanding more continuous links between education and employment, lifelong learning is an imperative. Reading to keep abreast of the industry, the rising popularity of MOOCs and online classrooms and joining the gig economy are some of the ways in which marketers are taking ownership of their learning and shaping their own career and personal development.

Finally…

Panellists offered some other practical tips on staying ahead in the era of modern marketing and how to improve knowledge and skills.

Curry spoke of the benefits of making contacts with people who are at the same level as you in their career and mentioned the data council forum of which she is a member. Networking with peers in such forums is a valuable means of exchanging information and learning from one another.

Finding a mentor was also referred to as a useful step towards boosting professional development. Mentoring schemes are provided by professional bodies such as the Chartered Institute of Marketing, for example. The Marketing Academy also provides one-to-one mentoring and executive coaching from CMOs through its UK Scholarship Programme.

But Curry also emphasised the importance of being clear about what it is that you enjoy doing. There’s no point trying to make yourself a data scientist if you hate maths or statistics. It’s important to understand what an organisation needs as well as what you need.

Deciding what you are interested in and building a portfolio of skills around that is a sensible approach to maximising opportunities and getting the most out of your career.

How can companies attract and retain talent in the digital age?

FIRST PUBLISHED ON ECONSULTANCY.COM

The competition for talent has intensified, while the digital skills gap is widening.

In the UK, the digital sector has created an incredible demand for (and limited supply of) skilled digital candidates.

The House of Commons Science and Technology Committee published a report earlier this year highlighting the ‘digital skills crisis’.

It is estimated that this skills gap costs the UK economy £63bn a year in lost additional GDP. Urgent action is now required to tackle this skills shortage.

So how can organisations respond?

Econsultancy’s Organisational Structures and Resourcing Best Practice Guide illustrates that finding staff with suitable digital skills is considered to be the most significant challenge or barrier to digital progress within organisations.

And recruiting staff with the right mix of digital skills is difficult, particularly for SMEs or companies that aren’t based in large urban centres.

This report also highlights that data/analytics, content marketing and website design and build are some of the most challenging areas for which to recruit. A lot of organisations are finding that they don’t have the analysts to make sense of data.

There is now a trend towards recruiting top-of-the-funnel marketers and towards hiring for behaviour and attitudes rather than qualifications.

Another Econsultancy report, Skills of the Modern Marketer, illustrates the growing importance of softer interpersonal skills in the modern marketing organisation, alongside more vertically-focused expertise.

As a result, recruiters are increasingly looking for candidates who are curious, flexible as well as data-driven.

In terms of what companies are doing to tackle the recruitment challenge, there are a number of initiatives and trends that we are seeing.

1. Creating a company culture to attract talent

In order to become the employer of choice for millennials, companies are introducing initiatives such as:

• Empowering and incentivising employees through stock-option plans, project leadership responsibilities and training and development opportunities.

• Building creative and comfortable workspaces that attract digital talent (Facebook and Google are great examples).

• Flexible and remote work options.

• Collaboration and knowledge sharing tools e.g. Slack and Yammer, as well as hardware preferences such as bring your own device.

Since millennials align themselves with technology and demonstrate different behaviours and preferences, it makes sense for organisations to introduce initiatives such as these to improve recruitment, staff retention and employee satisfaction.

2. Education outreach

Some companies have begun developing apprenticeships and school leaver programmes to attract young people who are developing technology skills at school or independently.

For example, Lockheed Martin, an American aerospace, defence and advanced technologies company, supports STEM education outreach activities.

Working with universities, colleges and schools to create a workforce with the right digital skills is a smart move towards finding and creating the digital workforce of the future.

3. Mining your own organisation for hidden talent

Many organisations are accepting that workers will come and go, and developing procedures to identify staff to upskill or move laterally within the company into new roles is a means of dealing with the challenge of recruiting and retaining staff.

Regularly assessing employee’s competencies and matching these with in-demand skills can help with this.

There is also a trend towards running employee exchange schemes with other digital organisations and employee rotation schemes, such as those run by P&G, Google and Amazon, help with the sharing and development of new skills.

And when talent has left the organisation, a forward-looking strategy of creating alumni groups can be used to bring back talent and utilise former employee networks.

4. Social recruitment

Social can be used to create a digital referral scheme whereby employee discussions are monitored on social platforms in order to source high-calibre talent. Social can be used as a positive recruitment tool.

You can read more about brands that are leading the way in terms of attracting the best digital talent in an article by Tiffany St James, a digital transformation strategist and speaker who has written about the social recruitment trend.

5. Online gig economy

Another trend we are seeing is organisations benefitting from the online gig economy or on-demand workforce.

For example, Upwork is an on-demand freelance talent marketplace, which speeds up talent recruitment. Unilever, Panasonic, Pinterest, Microsoft and Amazon have all used its services.

In summary…

The above examples highlight the significance of innovation and the fundamental role that employers can play in preparing the workforce for the future.

The pace of digital transformation is showing no signs of abating.

In order to combat the growing digital skills deficit, it is important now more than ever for organisations to experiment with recruitment strategies and to educate and provide employees with the advanced skills needed to shape the digital economy.