Forrester predictions: CMOs will relax their grip on agencies, and agencies to get even smaller

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Unlike any other year, 2020 has probably been the most transformational one for many of us. We’ve had to learn to be more agile, risk taking and essentially do more with less given the scrutiny on ad spend.

While major brands such as Coca-Cola, PepsiCo and Airbnb were among the list of brands that evaluated their ad spend and slashed non-essential spend, others such as Kraft Heinz said are starting to feel confident in increasing its marketing and advertising spending as they adopt new strategies, operating models and key initiatives. According to Forrester, as we start thinking about 2021

There will be an industry-wide reset, which will spur some marketers to adopt smarter and more automated forms of measurement that can save money and time.

Forrester also predicted that next year, companies that have already adopted unified measurement will see the results of their ability to forecast the profitability of alternative media plans. However, those still adopting traditional practices will "experience turmoil in their marketing staff" as poor performance will result in firings within the top ranks.

Agency relationships have also come under scrutiny, with more marketers reevaluating their partnerships with external agencies during this period.

Moving forward, CMOs are predicted to be relaxing their grip on agency relationships largely because progressive CMOs will have more than marketing on their minds.

CMOs will be focused more on improving the company's customer experiences, business strategies, diversity and inclusion initiatives, as well as eCommerce. Hence, working with the agency will become a shared enterprise and agencies will be forced to diversify their digital experience, eCommerce, media and tech offerings to answer the needs beyond the CMO and marketing teams’. Agencies will need to start creating opportunities with the other employee experience teams, and tech and business leaders that require their creative thinking.

Agencies and consultancies that support the broader C-suite are expected to grow 10% on average. Those that only serve marketing leaders will shrink or remain flat.

Additionally, Forrester predicts that empowered general managers and digital leaders will take charge of the redesigning of internal processes, or the reimagining of a business in a post-pandemic world. Meanwhile, other executives will require new technology and implementations to support redesigned customer and employee workflows. Both parties will turn to external partners with design-centric skillsets.

Join us on a three-week journey at Digital Marketing Asia 2020 as we delve into the realm of digital transformation, data and analytics, and mobile and eCommerce from 10 to 26 November. Sign up here!

Agencies become smarter with AI and automation

Marketers are not the only ones which will rely on automation to improve cost and efficiency.

Agencies will become smaller yet smarter as machine learning and robotic processing automation assist in planning and media buying.

According to Forrester, 11% of digital or creative and media agency tasks in the US is predicted to be automated by 2023 and 23% of overall agencies will be automated by 2032. This will alter nearly all agency functions and departments, including creative, design, strategy, data and analytics.

In 2021, CMOs and agency executives will be required to create a strategy to co-manage technology platforms, restructure scope, and adjust agency teams to make room for AI and intelligent software, resulting in changes to agency compensation.

On the topic of agency compensation, it is predicted to shift from paying individuals to paying for platforms and performance.

The technology behind smaller and smarter agencies will offer CMOs, procurement leaders as well as agency executives the chance to realign compensation structures. Both CMOs and agencies are expected to explore software as a service, managed service models and more performance-based compensation next year.

Publicis Groupe, for example, introduced The Pact earlier this year, a 100% money-back guarantee for digital media campaigns powered by Epsilon and Publicis Media tech platforms. According to Forrester, this reimagining of the way agencies are compenstated will be the first meaningful evolution of the agency economic model since moving from 15% commission of media spend to a fixed service fee.

Renewed agency entrepreneurialism will revive creativity

When employees leave, they bring their ideas and energy along with them. This year has seen many layoffs at networks such as WPP, Publicis Groupe, Omnicom Group, IPG and Havas.

This exodus of creative talent, however, will benefit in-house agencies and the gig economy, Forrester said.

This group will propel a new wave of entrepreneurs as many establish their own business concepts to deliver agency and marketing services. It is predicted that there will be at least a 5% increase in small or mid-sized start-ups that offer marketing, adtech and martech solutions. At the core of their offerings will be creative problem-solving skills, unhindered by legacy structures, and this group of creative talent will have the freedom to seek solutions in a nimble, cost-effective manner.

To succeed against these rising tides of change, agencies must evolve their organisational culture and put together a brand or client "dream team" comprising creative, media, data, design and technology. Regardless of the size or specialisation of the agency, Forrester said chief people officers will be the most important role in 2021. Agencies must evaluate the strategic profile of HR to lead culture transformation, attract and keep the best talent; train employees for a digital and AI-laden future. Chief people officers will also partner with their C-suite peers to build a modern workplace that is safe, digitally sophisticated, creative and diverse.

Advertising trends to look out for

While the pandemic has been largely credited to pushing brands to think out of the box and innovate in advertising, other factors such as Facebook ad boycott earlier this year, which witnessed several renowned brands such as Diageo, Coca-Cola, Ben & Jerry's, The North Face, Unilever and Verizon halt spending on the platform to stand up against racial justice and hate speech, for example, also shifted the advertising landscape.

While most brands eventually resumed advertising on Facebook when the month-long boycott ended, next year, Forrester predicts that the tides will shift and, brands known for its reticence on values-based messaging will put values at the heart of its media buys. In 2021, brands will be forced to commit to specific values through its media buys, from social ads to TV, as a result of employee and consumer pressure. As such, more companies should prepare themselves for this change by evaluating their values approach.

Besides the ad boycott, the pandemic also prompted companies to slash their budgets and headcounts, while producing relevant, high-quality advertising. This included remote filming like what Grab embarked on for Ramadan in Southeast Asia, or RHB Bank stringing together stock images for Hari Raya.

While the ad industry has caught glimpses of AI-generated advertising, in 2021, Forrester predicts that virtual ad creation will become even more popular and explode in variety and volume.

To offset resources gaps, brands and creative agencies will shift and channel more investment into adtech in tools such as Adobe's Sensei AI, Autodesk, virtual studios, creative adtech and CGI production capacity

Similarly, investment in brand-owned virtual influencers will double as brands want to control their messaging and go viral at the same time. The list of brands popular for actively banking on virtual influencers currently include Puma, SK-II, AirAsia and KFC. Soon, we can only predict, more will follow suit.

So with virtual being the rage, and social content consumption sky rocketing, where does that leave traditional mediums such as TV?

For the past five decades, Forrester said advertisers have been previewing year-end TV programming and promising networks a year's worth of ad spend. However, consumers' TV consumption patterns have evolved and shifted to streaming and binge-watching. Nowadays, content is produced year-round, leading programmers to all but abandon the old seasonal release schedule.

Additionally, Forrester said that major advertisers such as P&G seek more audience-driven, flexible, measureable approaches to TV investment and are pressing for change. As a result of this trend, at least one major network, such as NBCUniversal, is predicted to do away with the archaic upfront process next year. Instead, it will opt for a narrow holiday season pilot with a small group of retailers.

With a vaccine yet to be found, the ongoing pandemic and its effects is expected to last longer. Pandemic advertising initially involved somber music and messages praising essential workers and rallying society together.

Next year, pandemic advertising is predicted to become more mass market, with sponsored safety signage in physical stores.

For example, there could probably be a sign that says "Stand six feet apart - this sign is brought to you by Pepsi", branded face masks for sports teams, pre-roll and banner ads appearing in freemium versions of videoconferencing tools. While some companies will seize the opportunity to sponsor safety, there might still be some initiatives that fall flat. Online clothing company ASOS, for example, copped flak when it promoted its chain-mail face masks and was forced to remove the product and ads.

As such, marketers should proceed cautiously and only pursue "safety" sponsorships that clearly align with their brand promise.

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Photo courtesy: 123RF