Digital marketing agencies are bouncing back

Letʼs face it — 2020 is a year almost no one wants to repeat.Due to the coronavirus pandemic and a nationwide shutdown, we heard from more than one agency that their revenue dropped suddenly in the spring of 2020. However, we are pleased to report that agencies are already making a strong comeback. CallRailʼs research, which is highlighted in this report and is based on a survey of 167 global digital marketing agency leaders who use CallRail services, shows agencies have not only been amazingly resilient, but most will finish 2020 with an increase in revenue from 2019. However, thatʼs not all weʼve uncovered. Our research looked at a wide array of factors involved in successfully operating a digital marketing agency, including: ➔ General processes ➔ Financial stability ➔ Client relationships ➔ Tools and technology usage ➔ Pricing strategies While there are certainly challenges still facing agencies, one clear message weʼve heard from our agency partners is that while the pandemic has been trying in many ways, itʼs also been an opportunity to reassess and reevaluate their businesses. In doing so, agencies have been able to eliminate clients or business practices that held them back from greater success and profitability. 3 Digital marketing agencies are bouncing back Introduction 4 “One clear message weʼve heard from our agency partners is that while the pandemic has been trying in many ways, itʼs also been an opportunity to reassess and reevaluate their businesses.” When asked about their ability to attain key growth metrics — like generating new client leads and closing new business — the majority of agencies exhibit strong confidence that they can. We also saw a lot of certainty from agencies that they deliver value to their clients and are viewed as strategic partners. As you review our findings, we hope youʼll find the results a valuable tool for thinking about your digital marketing agency and how you want to position your agency for greater success in 2021. Executive summary 5 Challenges remain, but agencies are back to work The 2020 pandemic has caused economic hardship across many industries, including the marketing and advertising industry. According to our call tracking data, call volume in the advertising and marketing industry fell by 29%, with call durations down by 12% from pre-covid levels as the country spent most of the spring in lockdown. Consequently, 66% of marketing agencies said they experienced a decrease in overall revenue. (1) However, CallRail data also highlights a significant shift in digital marketing agenciesʼ fortunes from the start of COVID-19 until now. According to our call data, post-lockdown call volume growth in the advertising and marketing industry has increased by 79%. Our call data also aligns with what we see in this research report — agencies are rebounding and feeling good about their prospects for the future. (1) “An inside look at the impact of COVID-19 on digital agencies,” Marketing Week, June 10, 2020. Other key takeaways from our research include: ➔ Finding clients and growing revenue with existing clients are top challenges, as is finding the right employee fit. ➔ Agencies are maintaining long-term relationships with clients and proving their value as strategic partners. ➔ Agencies remain confident in their ability to generate new leads and close new business. ➔ Retainers remain king when it comes to how agencies price their services. ➔ Technology plays an important role in agenciesʼ day-to-day operations and is critical to helping them provide results to their clients. Findings in this report will provide you with a better understanding of what agencies are facing today and for the foreseeable future. It will also highlight various trends across the agency landscape that can help inform your agencyʼs strategy and execution as you plan for 2021. 6 Executive summary Agency composition 7 Number of clients managed by agencies varies considerably Based on the number of clients managed, agency size was split evenly across all categories — from small agencies with less than 10 clients to larger agencies that manage 100-200 clients annually. 8 Agencies primarily work with small to medium-size firms One reason digital agencies may be attracting mostly smaller-sized clients may be the recent trend for larger organizations to bring the digital advertising function in-house. As of 2018, 78% of U.S. members of the Association of National Advertisers had some kind of in-house agency, a 20% increase from five years earlier in 2013. (2) How many clients does your agency manage in total? What makes up the majority of your current book of business? (2) Lucy Handley, “Firms are taking more marketing functions in-house. Here’s why,” CNBC, March 4, 2019. Agency composition Most agencies remain lean on full-time staff One-third of the agencies represented in this survey are relatively small in regards to the number of full-time employees. Over half (61%) of the agencies surveyed operate with less than 10 employees. This finding indicates that agencies are likely fully maximizing the staff they have — and maybe even leveraging freelance resources to help get the job done. Because small teams typically work closely together, getting the right employee fit for an agency becomes all the more critical. Paid advertising and SEO are the most common services agencies offer Paid advertising is the most common service offering, with SEO a close second. While we are curious about whether these service offerings rank highest because they are most in-demand by clients or because they offer the best path for marketing agencies to grow their profitability, we donʼt have a clear answer. However, both are likely factors in the decision of what services agencies choose to offer. 9 How many full-time employees does your agency employ? What are your agency’s top three service offerings? 52% SEM/Paid advertising 43% Website design and development 51% SEO 38% Full service digital 19% Social media marketing 10 “We focus on SEO, PPC, and marketing automation. We havenʼt added any additional services, but we are seeing more clients coming in and clients that had event budgets that they are moving to online marketing activities instead.” Kyle Shurtz, VP of Performance Marketing Avalaunch Media 10 Agency pain points and processes 11 Finding clients is the top challenge for agencies Most agencies are continually trying to grow — their revenue, their client list, and their staff. Itʼs not surprising that the top three challenges are all related to these types of agency growing pains. 12 Finding new clients and retaining current ones is getting harder In alignment with what agencies felt were their biggest challenges, we also saw agencies saying these types of growth activities — finding clients, retaining clients, and growing revenue with existing clients — have beco
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