Marketing Agency/Client Service-For-Service Provision in an Age of Digital Transformation

ABSTRACT

Purpose: To explore changes in agency/client value co-creation, at a time when digital transformation is having a major impact on the marketing communications process. The theoretical framework of the research relates to value co-creation in the service-for-service provision, a fundamental aspect of Service-Dominant Logic (S-D Logic) theory.

Methodology/approach: The research was exploratory, primarily using qualitative methods. In addition, some quantitative survey data have also been included to demonstrate greater generalizability on certain key questions. Building on dyadic research with clients and their agencies, the current research includes a survey of agencies; interviews with clients and a follow up survey with clients.

Findings: The nature of service-for-service provision between clients and agencies is outlined. Many aspects of service are equally likely to be internally or externally provided. This high crossover particularly relates to supporting aspects of digital marketing. While much digital marketing appears to have initially been provided externally there seems to be a trend to bring these aspects of service in-house. The views of clients and agencies on their relationship, as being either transactional or a partnership, appears to be related to the degree of service required and provided.

Research implications: A service-for-service perspective is instructive in considering how changes in the external environment are impacting on what is done by agencies and what is done by clients. This new approach has the potential to enhance existing relationship based research in this context. The services required by clients depend on the resources that they already possess. Therefore, it is the absence of an operant resource that leads to the need for external service provision and in turn requires co-creation.

Practical implications: There are no hard and fast rules on what is provided by the agency and what is provided in-house. This relates particularly to digital aspects of marketing and suggests that the level of crossover is higher than historically. With digital media becoming such an important aspect of communicating with customers, this is particularly significant in considering the nature of the relationship between agency and client and whether it is seen as a partnership or transactional.

Originality/value/contribution: Historically, the dominant approach to analyzing agency/clients has been to focus on relationships. Taking a service-for-service approach is novel and relevant in analyzing a context in which digitization and media fragmentation has caused significant changes and where the perspectives of S-D Logic have the potential to provide new insights, explaining aspects that are not covered by taking purely a relationship approach. The contribution to S-D Logic is at the level of midrange theory development, through applying ideas from S-D – Logic in the context of the application, helping to refine and add to the credibility of the theory. This exploration of the co-creation of value between clients and their agencies demonstrates the applicability of a framework from S-D Logic in a context that is an important part of marketing management.

KEYWORDS:

• Co-creation of value
• service-dominant logic
• client/agency relationships

Implications for Business Marketing Practice

Introduction

Organizations often develop their advertising, promotions, digital and other communications through collaborating with marketing agencies. This is an important part of marketing communications management and is not confined to large organizations. With the emergence of digital communications, small businesses and a range of types of organizations often have to deal with marketing agencies. This research looks at what services are typically provided by the agency and what are provided in-house. It also considers the relationship between the services provided externally and the relationship between client and agency.

The findings

Table 3 shows the main areas of service, while Table 4 shows that most of these can be provided by the client if they have sufficient resources. The emergence of digital communications has created a large area of crossover, where clients may choose to provide resources in-house or may choose for a high level of the external provision or somewhere in between these two extremes. The emergence of digital has implications for the way clients work with agencies with a move away from the historical position when a larger proportion of budget was spent on traditional media in which the agency took the main role. This is particularly significant in considering the nature of the relationship between agency and client and whether it is seen as a partnership or transactional. The level and type of service required from the agency will impact on the nature of the relationship. An agency supplying a one-off service, such as building a website is more likely to have a transactional relationship with the client, whereas an agency involved in interacting with the client’s customers on an ongoing basis is likely to have a far closer relationship with the client.

Implications for clients

The client respondents in the research all confirmed that technology has changed marketing communications significantly and in turn, this has had implications for working with agencies. In the short term, technological change, leading to media fragmentation, has been disruptive to the traditional client/agency model. In particular, there has been a growth of specialist agencies in the digital area. However, the evidence from the research interviews suggests that, as digital matures; more companies are supporting this with in-house resources. The reason for this is that more and more employees are digitally savvy. More expertise exists in-house, and technology has become more user-friendly. Also for some clients, the need to respond quickly to customers digitally means that support for this is better situated in-house. In this rapidly changing environment, an important question for clients is to consider what resources and capabilities they want to have in-house and what they want to bring in from agencies. This also requires clients to consider what kind of relationship they want with their agencies. Agency creativity is highly valued by clients and is one of the main reasons for seeking outside support. Where an agency is providing a high level of marketing services to the client creativity can be paid for within the overall budget. The agency is motivated to provide their creative resources as part of a mutually beneficial partnership. However, in many of the cases of the small to medium companies in the client interviews, the clients complained about the lack of commitment and low level of collaboration from their agencies. This suggests that the business opportunity offered by smaller clients was defining the access to resources offered by their agencies. Clients need to consider the best mix of service provision, and the nature of the overall relationship they want with their agencies. A client needs to understand where the agency can add value and where it is better to use an in-house resource. Therefore, an important client resource is the knowledge and experience to know how to unlock and access the appropriate resources offered by agencies. If the client has an imprecise understanding of their resource needs they are unlikely to benefit fully from the potential value offered by agencies.

Implication for agencies

The current environment is very challenging for marketing agencies. Marketing budgets are scrutinized very carefully, and media fragmentation has meant that a proportion of the expenditure on mainstream media has been diverted to new areas. At the same time, the emergence of new media has created new opportunities. For example, most businesses and organizations now have web presence and social media, but would not necessarily have invested in marketing communications in the past and new agencies have emerged catering specifically for various aspects of digital media. One of the motivating factors for this research was that in workshops, previously run with agencies, the authors discovered that agency executives were particularly interested in finding out how clients perceived the agency/client relationship to be changed and to understand what clients want in the future.

The research reviews aspects of the service supplied by marketing agencies to their clients and highlights many areas where the service may be undertaken by clients in-house, whether through developing their own staff or through employing new staff with relevant capabilities. Clients will only seek external service provision where they do not have their own resources or believe that the service could be provided more effectively by an external agency. It is therefore crucial that agencies recognize the needs of their clients and the scope and types of resources that their agency can offer to win and retain clients. This will vary client by client. Agencies need to be aware of what aspects the client will value. There are particular opportunities relating to the resources that agencies offer that are less likely to be available in-house (creative skills; ability to bring in cross-sector expertise; a new viewpoint, etc.).

Historically, it has been recognized that agencies need to develop strong relationships with their clients to build trust and loyalty. This is undoubtedly still true, but it is not necessarily enough on its own. Agencies need to build a superior understanding of their clients’ needs in order to serve their needs as they emerge. For example, this often means integrating clients’ external and internal data and involves the need for agencies to collaborate more closely with a number of their clients’ internal departments and connecting with their internal systems.

It comes back to agencies planning their own marketing strategies in setting their priorities and using their own resources most effectively. Specialist agencies that have emerged in recent years to serve the digital space may be particularly vulnerable to clients taking more aspects of digital marketing in-house. These agencies may well benefit from reviewing what types of projects and clients they want to target in order to be in a position to add value. This means being very clear about the agency’s proposition and how it fits with the needs of current clients. It also means targeting new clients that have the potential to benefit most from the agency’s proposition and demonstrating to existing and potential target clients how the agency can add value. All this is basic B2B marketing. However, on the basis of the authors’ experience in running workshops with hundreds of agency executives this is often not practiced. Agencies work in a fast moving environment and often the emphasis is on reacting to client needs, rather than being proactive in planning their own business direction.

Once in-place the agency needs to recognize that the client’s resource/service requirements and hence the value offered by the agency will not be static. Attention to understanding the context and closer interaction and communication will help the agency to flexibly adapt its offer.