How 2020 Prepared Agencies for 2021

2020 proved to be a challenging year for most — the onset of the pandemic, coupled with economic uncertainty and a decline in business, left many agencies hopeless and unprepared. Although digital marketing agencies faced a sudden challenge of lower revenues in early 2020, the end of 2020 painted a different picture — one of resilience, success, and optimism for the future.

We conducted a survey with 167 digital marketing agencies at the onset of the pandemic. Here's what we learned.

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Pain Points

The biggest problem facing agencies is finding new clients. Clients provide a way for agencies to grow their revenue, so it's not surprising that this is directly correlated to their growth. In fact, 48% of agencies stated that finding new clients is their most significant pain point, followed by increasing revenue and finding employees. In addition, these issues have become more challenging to accomplish.

biggest pain points State of agencies

However, agencies remain hopeful. Despite these issues, agencies are confident that they can overcome their challenges and stay successful. Kyle Shurtz, VP of Performance at Avalaunch Media, stated, "We’re confident that we can grow and sustain our business. We have a strong partnership referral program that gives us really good business. We also have a strong employee referral program where they get a lifetime commission on any referrals, so we get a lot of deals from internal employees."

Profitability

The pandemic forced agencies to take a step back to reassess and reevaluate their business. Despite hardships, 88% of agencies said that they're financially healthy. Also, agencies are experiencing Y-O-Y revenue growth, as well. According to VP and Director of Client Services Molly Randolph of The Barbauld Agency, "We became more profitable because our overhead shrunk so much. But, we would have never gotten rid of our offices or our subscriptions; we would have let them linger, without COVID."

Client Relationships

Client relationships provide a lot of growth for agencies. In general, most agencies (48%) have an average customer lifespan of over 36 months, solidifying their confidence in the value they provide. A crucial part of the value they provide is reporting. The key is to balance how much time is spent on reporting, and overall, most agencies (79%) spend less than five hours per week on reporting.

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On the flip slide, most agencies are not satisfied with how they're positioned in the market, with only 13% extremely satisfied in their positioning. The great news is that it leaves more room for improvement for agencies.

Tools and Technology

Agencies are responsible for conducting marketing activities on behalf of their clients, but it doesn't stop there. To secure their value, agencies must also show the results of their marketing efforts. Through call tracking, form tracking, project management, analytics software, and marketing/campaign tools, agencies can show the value they provide to clients.

  • 95% of agencies say that call tracking and form tracking are very important or important.
  • Project management software is most used (79%), followed by reporting and analytics software (77%).
  • WordPress (85%) and MailChimp (62%) are the most popular marketing and campaign tools that agencies use.
  • Google Ads and Facebook remain the top advertising platforms for agencies.

Pricing Strategies

As we move into 2021, pricing strategies will most likely stay the same. Retainers will remain as the top agency pricing model, followed by fixed-rate pricing. Somewhat surprisingly, we found that a large majority of agencies (69%) will customize their pricing model based on each business opportunity. Diving deeper into this, agencies stated that their pricing models are streamlined, having different monthly retainers that clients can choose from.

"We have a performance pay model on the advertising side. On the membership side, they can buy a bucket of hours based on an hourly rate pricing model. So we look at the potential client and what they need to be successful, and then customize what type of retainer they choose."

~Kyle Shurtz, VP of Performance Marketing | Avalaunch Media

Moving into 2021

Venturing into 2021, we expect that digital marketing agencies will have a successful year ahead of them. Despite the different challenges they face with finding new clients and growing revenue from existing clients, agencies possess strong confidence in their ability to persevere.

Through mainly retainer-based pricing models, agencies will continue to strengthen their long-term relationships. Also, agencies will highlight their value using different tools and technologies such as Call Tracking, Form Tracking, project management software, and other marketing and advertising platforms.

Although the pandemic will continue to create a sense of uncertainty in 2021, agencies will remain positive and optimistic, even more than they were in 2020. We look forward to seeing how agencies will overcome obstacles and thrive in 2021.

For more insight into our survey, download our full 45-page report, 2021 Digital Marketing Agency Outlook.

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