An agency's success hinges on three fundamental principles: attracting top talent, encouraging teamwork, and aligning efforts with overarching goals. These elements pave the way for exceptional client deliverables.
Effective agency management is the backbone of any successful agency—it enables the creativity, accountability, and relentless innovation that differentiates an agency from the competition.
In Part One of the Benchmarks Report: Overcoming Top Barriers To Agency Growth, we examined the biggest challenges faced by marketing agencies in 2023, as well as the client acquisition and retention strategies agencies are using to overcome them.
In this second installment of the 2023 Agency Benchmarks Report, we focus on team distribution, workload management, and the level of AI adoption in digital marketing agencies today.
Part Two of the Agency Benchmarks Report Covers:
Agency Participant Breakdown
The 2023 Agency Benchmarks Report surveyed 121 agencies mainly located in the following regions to offer valuable perspectives on how agency owners manage their workforce:
United States (58%)
The United Kingdom (9%)
Most of the agencies surveyed offer three or more services in PPC, SEO, social media marketing, web design, and email marketing, and nearly half of the agencies surveyed (46%) have 6-20 full-time employees.
Let’s dive in!
AI Adoption Timeline for Marketing Agency Content Creation
To kick off this report, we’re focusing on AI adoption within marketing agencies. Once considered a novelty, artificial intelligence (AI) is now quickly becoming a core tool for transforming the way agencies work, innovate, and provide value.
We asked survey participants when they plan to begin using AI for content creation. The results may surprise you.
The survey results show that 91% of agencies will be using AI for content creation within the next year.
Here’s the breakdown of the timeline for AI adoption for content creation:
78% of agencies surveyed are already using AI tools
10% plan to start using AI in the next 3-6 months
3% will implement AI in the next year
4% of agencies are keeping AI for the distant future
5% of agencies say they’ll never implement AI for content creation
The survey results indicate a broad acceptance of AI tools in the industry, regardless of agency size. The benefits of AI, such as automation of repetitive tasks, data analysis capabilities, and the potential for increased efficiency and productivity, appear to be what is driving this trend.
AI tools will certainly help with the speed and, ultimately, the quality of work that we do every month.
Olu Ajanwachuku, CEO at GVATE
It’s worth noting that large agencies (with 50-100+ clients and 31-50+ employees) have mixed feelings: while most larger agencies are early adopters, a subset of them are hesitant or have no plans to adopt AI for content creation.
Smaller agencies (with 1-5 employees and 6-10 clients) are readily using AI, highlighting the fact that these tools are accessible and beneficial to agencies of all sizes.
Of the agencies surveyed, 78% already utilize AI for content creation. Interestingly, this is regardless of agency size, including both client and employee count.
Agencies Adopting AI in the Near Future
Meanwhile, a subset of agencies is not using AI for content creation yet, but planning on doing so soon. 10% of agencies surveyed said they plan to integrate AI into their workflows within the next 3-6 months.
Of the agencies surveyed, only 3% are waiting until next year to incorporate AI for content creation. They may need more time to include it in their workflows and still guarantee a quality result from this new technology.
Right or wrong, the sentiment among some agency owners is that AI will not provide the same level of creative output their clients have come to expect.
The biggest mistake agencies can make is relying on AI tools for the creative aspect of their work. The creative aspect of any marketing campaign should still be guided by an actual human being and not by a machine.
Olu Ajanwachuku, CEO at GVATE
Why Are Some Agencies Avoiding AI?
On the other end of the spectrum:
9% of agencies aren’t as enthusiastic about the use of AI–or don’t see the need for it anytime soon
4% of agencies expressed their intention to adopt AI technologies in the “distant future”
The remaining 5% said not at all
Interestingly, and despite a broad spectrum of services offered, including areas where AI could potentially be beneficial (such as content marketing, social media marketing, and SEO), these agencies are not yet considering AI adoption for content creation.
AI implementation requires a considerable time investment for larger agencies, who need to subscribe to the software, train employees, integrate it into existing workflows, and ensure quality output.
Also, agencies might adopt a “wait and see” approach, postponing AI implementation for client content until the technology has matured and industry standards on ethical and privacy considerations have been settled.
Those agencies who are waiting to adopt AI shouldn’t wait too long. The speed at which AI advances has vast implications for marketing agencies' operations.
One interesting observation is that most agencies that don't intend to adopt AI also tend to handle their work in-house instead of outsourcing it. This implies a more traditional organizational approach in their agency structure, which necessitates more time for planning and training their teams. By contrast, agencies operating with a hybrid model, known for their agility, can quickly adapt and change their efforts to lean into the AI evolution.
How Agencies Balance Workloads Between In-House Expertise and Outsourcing
Along with using AI to craft content, agencies are also continuing to outsource work as a strategic move to manage workloads and meet client expectations. AI is making waves with tools that automate and make things smoother, but outsourcing hasn’t lost its charm.
Digital marketing tasks are as diverse as they are intricate. From content creation, search engine optimization, and social media management, to data analysis and beyond, the work in a marketing agency is multifaceted and often requires specialized skills. Given the breadth and depth of these operations, it's not uncommon for agencies to feel the pinch of resource constraints.
Outsourcing provides agencies with access to niche expertise, around-the-clock service, cost savings, and the flexibility to scale operations up or down according to demand.
While some agencies might be hesitant about outsourcing, fearing a loss of control or quality, others find it to be an invaluable tool for managing workloads and optimizing resources. With the digital marketing landscape constantly evolving, outsourcing offers agencies the ability to stay agile and competitive while also allowing them to focus on their core competencies and business growth.
Now, as we dive deeper into our survey, we aim to explore how agencies are leveraging outsourcing, its prevalence in their operations, and how it is being balanced with in-house services.
The results indicate a preference towards strategic and conservative outsourcing of workloads, keeping most of the work in-house:
5% of agencies outsource more than half of their tasks
8% of agencies outsource 31-50% of their workload
27% of agencies outsource 11-30% of their workload
41% outsource less than 10% of their work
19% of agencies do not outsource at all, handling all of their work in-house
While the majority of agencies (81%) outsource at least some portion of their workload, it's typically only for a small fraction of the work. The findings suggest that while outsourcing is a tool many agencies employ, it is generally used sparingly or for specific tasks.
The reason why most agencies do the bulk of their work in-house may speak to the value they place on having direct control and oversight of their projects.
While outsourcing is a handy tool for managing peak workloads, accessing specialized skills, and meeting client demand–most agencies do not rely on outsourcing as a primary operational strategy. These agencies believe it to be a beneficial option to leverage if and when needed since most agencies surveyed stated they outsource less than 10% of their workload.
5% of the agencies surveyed outsource more than half of their workload. And there’s a twist–it looks like the smaller agencies (both in terms of clients and the number of folks on the team) are more likely to outsource the lion’s share of their workload than the other agencies surveyed.
These agencies are keeping a lean, mean core team focused on client management or executing the campaigns they know best and then bringing in outside pros to take on a big chunk of the other work.
Interestingly, the agencies that are big on outsourcing are also providing a greater breadth of services than the rest, offering:
These services might need some special skills or resources that the agencies are pulling in through their freelancers or white label service partners.
Alex Faiers, Founding Director of Addictivity, for instance, hires freelancers for “specialist tasks within the digital marketing space” they don’t offer in-house:
Examples would be video editing, Lottie animations, content and copywriters. These tasks don't warrant an in-house specialist for us, so short-term freelancers fill that gap perfectly.
Alex Faiers, Founding Director of Addictivity
The data reveals that 8% of agencies are really leaning toward outsourcing, handing off a hefty 31% to 50% of their work.
When agencies outsource at this scale, it’s often about more than just getting extra hands on deck. There could be many reasons driving this, like cutting costs, gaining access to niche talent, or scaling operations up or down to deal with fluctuating client demands.
We learned to diversify our client base and ensured no one client provided more than 10% of our monthly revenue. This year it’s about diversifying our team when it comes to execution and relying on several outsourcing teams to scale up (and down) when we need it.
Ryan Kelly, CEO, Pear Analytics
These agencies might also be using outsourcing as a safety net, making their operations more resilient to economic ups and downs and giving them the flexibility to scale up or down on the fly.
We tend to keep going back to Upwork to find freelancers. The quality of creative talent you can find on there keeps improving, so for short-term projects, it's ideal for a quick and easy search to get someone in.
Alex Faiers, Founding Director, Addictivity
Among those surveyed, 27% indicated that they outsource 11% to 30% of their agency work.
These agencies may employ outsourcing as a strategic tool to augment their internal capabilities. By doing so, they tap into a reservoir of specialized skills that might not be present in-house.
Additionally, outsourcing serves as a buffer, allowing these agencies to effectively manage fluctuations in workload without overburdening their internal teams. This approach is particularly beneficial in scaling operations, optimizing resources, and ensuring timely delivery of services to clients.
We’ve transitioned more of our execution into numerous outsource teams to reduce costs, but also to allow us to spool down (and up) when we need to. This helps maintain margins through a recession.
Ryan Kelly, CEO, Pear Analytics
The data reveals that most agencies surveyed (41%) outsource less than 10% of their work. Within this group, there is no discernible correlation between the size of the agency and the extent of outsourcing.
These agencies predominantly rely on their internal workforce to manage their tasks. This suggests a strategic preference to retain control, capitalize on specialized internal expertise, or minimize dependence on external resources.
Furthermore, it reflects an industry trend towards a more self-contained approach, where hiring outside the organization is reserved for closing temporary labor gaps rather than completing the bulk of the work.
The data identifies that 19% of agencies opt to keep all their work in-house, with zero outsourcing. These agencies are counting on their team's resources and skills to get the job done for clients–regardless of the variety of services they provide.
Either these agencies have a tight grip on every aspect of their services, or it’s a calculated move that aligns with their business model, especially if they’re offering something unique or a wide range of services. Further, the lack of consistency might deter outsourcing work, as the search for high-quality talent is time-consuming.
The biggest challenge is finding freelancers that are 100% reliable–that show up and work at the level we're looking for from our whole team. Once you find one–you keep going back for more.
Alex Faiers, Founding Director, Addictivity
It’s also worth noting that outsourcing isn’t just about handing off work; it usually means having an onboarding process and a tech setup to keep the remote team on the same page and make collaboration smooth.
I have created a training video for any new freelancer, staff member, or intern that joins the agency.
Guy Hudson, Founder, Bespoke Marketing Plans
Even though outsourcing is a key strategy for many agencies, in most cases, the home team still completes the work's heart and soul. This shows how crucial it is for agencies to have a solid squad in-house to keep the engine running and hit those success markers.
Agencies' Predictions for Team Size Expansion in the Next Year
Having delved into the outsourcing strategies, it is now pertinent to shift our focus to another critical aspect of agency operations–team expansion. As we transition to agency team growth, the significance of a well-rounded and competent team becomes increasingly apparent, especially in ensuring the quality of client deliverables.
According to recent survey data, it is evident that agency leaders are not only relying on their existing teams but are also poised to make investments in hiring new team members.
According to the survey, agency owners are looking towards 2024 with optimism regarding the growth of their teams in the coming year.
The majority of respondents expressed confidence in expanding their agency's team size, with a significant proportion expecting moderate growth in the coming year. Meanwhile, a small percentage remained uncertain about future team size changes, while a negligible fraction anticipated a reduction in the next year:
26% of agencies will expand their teams by 25% or more
41% of agencies expect a modest team size expansion of less than 25%
26% of agencies anticipate no change in their team size
7% of agencies are uncertain about their future growth
1% predict their teams will shrink by less than 25%
The survey findings reveal a positive outlook among agency owners, indicating their readiness to invest in expanding their workforce to meet the demands of their clients and capitalize on emerging opportunities.
26% of survey respondents harbor aspirations for expansion. These agencies are poised to aggressively scale their operations by augmenting their team size by a quarter or more in the upcoming year.
This trend could be indicative of a few underlying factors:
Experiencing a surge in marketing service demand necessitates a larger workforce to meet client expectations.
Strategically positioning themselves for capturing a larger market share, possibly by diversifying their services or entering new markets.
A reflection of the agency owners' confidence in the economic outlook and their target market’s growth potential.
A substantial increase in team size is likely to have ripple effects on the agencies' operational dynamics, including the need for enhanced management systems, investment in talent development, and possibly a reevaluation of their business models.
This proactive approach to scaling could yield competitive advantages and fosters long-term sustainability for these agencies–if done correctly.
The majority of agency owners (41%) are planning for moderate growth in their team size by 25% or less in the coming year. This emphasis on incremental expansion suggests a balanced approach to resource allocation and maintaining operational efficiency to meet evolving client needs and handle increased workloads.
26% of agency owners surveyed plan on maintaining their current team size without any significant alterations in the next year. These results imply satisfaction with their current team size or a more cautious approach to growth, suggesting a focus on optimizing existing resources to increase delivery margins while keeping an eye on market trends.
For these agencies, it’s time to maximize the productivity of their current workforce to meet client demands and achieve business objectives.
There is also the possibility that the AI opportunities outlined above, and other streamlined processes such as automated client reporting, will allow agencies to do more with the same staffing levels.
A modest 7% of agency owners convey ambiguity regarding the future expansion of their teams. Intriguingly, the data reveals that agencies anticipating either stagnation or marginal growth in team size are the same ones expressing uncertainty or a gloomy outlook on the industry's growth prospects over the next couple of years.
This cohort of agencies adopts a more guarded or skeptical stance. Such hesitance could be attributed to various factors, including target market fluctuations, economic climate, or shifting client demands in their niche. It underscores agency leaders' need to monitor industry movements and tailor their approaches responsively.
Only 1% of agency owners surveyed reported an expectation of shrinking by less than 25%. This group is "neither pessimistic nor optimistic" about the next two years for marketing agencies as a whole.
Reasons for Downsizing an Agency
A marketing agency may decide to shrink its team due to various factors such as an economic downturn, technological advancements that allow automation, or a strategic shift to specialize in a niche sector. Other reasons could include a change in client needs, increased competition, mergers or acquisitions, efficiency measures, declining profit margins, regulatory changes, or changes in the business lifecycle.
Having delved into the dynamics of team size and growth prospects, let’s now pivot to another facet that is increasingly shaping the modus operandi of marketing agencies: remote work.
The Remote Work Outlook in Marketing Agencies
The digital revolution has transformed not only how agencies work, but also where they work.
Remote work is no longer an anomaly, but a standard practice that has gained considerable traction in the marketing world. As the COVID-19 pandemic has proven, flexibility and adaptability are no longer merely desirable traits but essential attributes for businesses to thrive in a dynamic environment.
The shift to remote work in marketing agencies opens up a plethora of opportunities, such as the ability to tap into a broader talent pool, increased productivity, cost savings, and enhanced work-life balance for employees. However, this new frontier also brings unique challenges, such as the need for effective communication and collaboration tools, security concerns, and managing a dispersed team.
In a world where burnout is becoming more common, and people wear 60-hour weeks on their sleeves like a medal of honor, to attract top talent you need to offer something different. We're seeing Gen Z employees prioritize self-care and work-life balance as we recruit.
Steve Andrews, CEO, She Reigns Creative
The transition towards remote work has profound implications for the future of marketing agencies. To understand these implications and the extent of this shift, we asked agencies to disclose the proportion of their staff that works remotely at least part of the time. The data provides vital insights into how agencies are adapting to this evolving landscape and what this means for the future of the industry.
The results show widespread adoption of remote work across the entire agency workforce, with the following distribution:
70% of agency staff work remotely all the time
12.5% of the staff are engaged in remote work half of the time
15% of the staff work remotely for a third of their time
2.5% of agency staff do not engage in remote work at all
It is clear that the flexibility offered by remote work is highly valued, especially in a field like marketing where tasks such as content creation, strategy planning, and client communication can easily be conducted remotely. As technology evolves, it’s likely that agencies will develop even more efficient processes for remote work.
To guarantee success, it’s important for agencies to continually assess the effectiveness of their remote work policies, and make adjustments as needed to ensure productivity and employee well-being.
Of the agencies surveyed, a total of 97.5% reported remote work for some portion of their staff. The shift towards remote and hybrid work models necessitates changes in agency management practices.
Conscious leaders must adopt tools and strategies for effective communication, collaboration, and project management in a remote setting. Additionally, they must be adept at building a company culture that transcends physical boundaries and keeps remote employees engaged and motivated.
High-quality operations at scale are truly one of the most difficult puzzles we face. From attracting and retaining top talent to providing continuous training to help people improve their skills & capabilities so that we can always improve our client impact–and doing it all remotely.
Ryan Redding, CEO, DP Marketing Services
Now, let’s take a closer look at the individual percentage breakdowns for marketing agency remote work.
70% of agencies surveyed say their entire staff works remotely “at least some of the time.” This could be attributed to the digital nature of marketing agencies, where much of the work can be done online. The adoption of remote work might also be a response to the global shift towards remote work (and even a shift towards a 4-day workweek), which was accelerated by the COVID-19 pandemic.
Covid changed a lot in terms of remote working and allowing some flexibility. To allow this to continue, which can benefit mental health and reduce burnout, employers will need to trust their employees, and employees will need to earn their employer’s trust.
Kevin Lucca, Founder, LuccaAM
From the analysis, it is evident that remote work has established a permanent foothold within the industry.
Larger agencies in particular are predisposed to embrace this model, owing to their more streamlined and structured processes that facilitate task execution irrespective of physical presence. When agencies have more resources, they can support remote work for a larger number of employees.
These resources, like advanced tools and technologies, make working outside the office more viable and efficient. The trend may also signal the presence of a geographically diverse workforce within these organizations.
15% of agencies surveyed have embraced a thoughtfully calibrated hybrid work model, where one-third of their staff are empowered to work remotely.
These agencies are likely employing a discerning lens in determining which roles or functions are best suited for remote work. For instance, creative teams might benefit from the unbridled collaboration that a physical workspace fosters, while content writers or analysts might find remote work more conducive to concentration and productivity.
Interestingly, mid-size agencies appear most likely to adopt a hybrid approach, designating a third to half of their staff to remote work, balancing the benefits of in-person collaboration with the flexibility of remote work.
There is a noteworthy segment comprising 12.5% of agencies that have half of their staff working remotely. A closer look reveals that these are typically smaller agencies. This firmographic is likely leveraging remote work as a strategic tool for cost optimization, particularly in terms of office space and utilities.
As these agencies scale, those leveraging remote work may reinvest savings from office space and utilities into core business functions like client servicing, creative production, strategic planning, sales and business development, technology and infrastructure, and staff training.
This reinvestment can enhance agency service offerings, attract new clients, and ultimately drive growth and profitability.
A small fraction of agencies (2.5%) reported that none of their staff works remotely. Either these agencies have not adopted remote work as part of their operational model or have specific reasons for maintaining a strictly office-based work environment. This could be due to factors such as the nature of their work, industry regulations, the need for face-to-face client interactions, or organizational culture that prioritizes in-person collaboration.
Shifting focus from the internal structure of agencies leveraging remote work and outsourcing, let's now turn our attention to the relationships between these agencies and their clients.
Short-Term vs. Long-Term Contract Types
Clients sit at the core of any agency's operations. From their needs spring the various strategies, campaigns, and initiatives that agencies develop and execute.
In many instances, the nature of these relationships is defined and regulated by client contracts, which serve as a tangible commitment between the two parties. These contracts not only outline the scope of work and expectations on both sides, but they also reflect the dynamics of trust, longevity, and stability in the relationship.
The approach to client contracts greatly varies from agency to agency. Some agencies might favor long-term contracts that provide a sense of security and allow for deep, sustained collaboration.
On the other hand, some might prefer short-term contracts to maintain flexibility and adapt to changing market conditions or client needs. And there are those that choose to operate without any formal contracts, possibly to foster a sense of ease and mutual trust with clients.
The choice of contract type is not arbitrary and is often closely aligned with the agency's business model, operational strategies, and workforce setup. It's an aspect that can offer deep insights into how agencies balance stability and agility in a fast-paced industry.
In this next section of our survey analysis, we will explore the current trends in client contracts within marketing agencies. We aim to understand which types of contracts are most prevalent and how they correlate with different agency setups and strategies.
A total of 67% of agencies surveyed use client contracts. Looking closer, we notice a fairly even distribution between the three options:
36% of agencies rely on long-term contracts
33% of agencies do not use contracts, operating on a month-to-month basis
31% of agencies use short-term contracts for their services
The relatively even spread across the three categories indicates that agencies are adopting a balanced approach to client contracts, reflective of the varied nature of projects and client preferences. Some agencies value flexibility and adaptability, while others prioritize stability with their clients.
Let’s explore this further.
36% of the contracts maintained by agencies are long-term in nature. This implies that a substantial portion of agencies have established stable and ongoing relationships with their clients, fostering trust and a commitment to long-term collaboration.
We aren't in the business of "locking people in," and if people want to cancel for legitimate purposes, we don't want to box them in. That said, we are upfront and walk people through the long-term thought process of working with us. If you aren't entering the relationship with a long-term vision, it isn't a fit.
Joshua Kimmes, Owner of Bear North Digital
Long-term contracts provide agencies with consistent revenue streams and the opportunity to deepen their understanding of client needs.
The survey results reveal that 33% of agencies operate without formal contracts in place. This suggests that these agencies may engage in more informal or ad-hoc arrangements with their clients. Operating without contracts may introduce higher levels of flexibility but could also potentially involve higher risk or challenges in terms of client expectations and dispute resolution.
We don't have contracts as we retain clients with good results instead, which makes it easy to terminate a client relationship if needed.
Daniel Noakes, Founder, UClimb Ltd
Approximately 31% of the contracts held by agencies are short-term in nature. It’s important to note that among agencies where all staff work remotely, there seems to be a slight preference for short-term contracts. This could be indicative of the flexibility that remote work offers and agencies might be leveraging this flexibility in their client engagements as well.
In closing, client contracts in the marketing agency landscape exhibit a broad spectrum, with no single preference dominating. The near-equal split between short-term contracts, long-term contracts, and no contracts at all underscores a multiplicity of operational strategies among agencies. In essence, this speaks to the diversity of agency-client relationship models across the industry.
The type of contracts agencies choose to use seemingly correlates with their work models and client engagement strategies. Agencies with a substantial remote workforce appear to incline towards both short and long-term contracts, while agencies with traditional in-office models seem to favor long-term contracts.
Meanwhile, the absence of contracts is distributed across different agency work models, suggesting that this approach could be more aligned with an agency's client management philosophy than its work setup.
KPIs allow us, as the agency, to demonstrate our value to the client. Ultimately, what is their ROI from our efforts? When you can clearly demonstrate this month over month, it increases your retention rate and keeps clients paying you month after month.
Jacob Hicks, Owner, Magnyfi
As the marketing landscape continues to evolve and the dynamics of remote work persist, it will be intriguing to see how the trends in client contracts unfold.
Will there be a swing towards a particular contract type, or will the diversity persist? Only time will tell. For now, the choice of contract type remains a key decision for agencies, helping shape their relationships with clients and impact their operational strategies and workforce setups.
Part Two of the 2023 Annual Marketing Agency Benchmarks survey has delved into the crucial aspect of agency management, providing valuable insights and shedding light on how agencies organize their teams, workloads, and client agreements.
From remote work practices and client contracts to outsourcing trends and the adoption of artificial intelligence, the survey offers a comprehensive overview of the strategies and practices employed by successful agencies.
The findings highlight the importance of effective team management in driving agency success. By ensuring smooth operations, streamlined processes, and fostering a culture of creativity, accountability, and continuous improvement, well-managed agencies are better equipped to deliver exceptional results to their clients and scale their operations with outsourcing, flexible workforces, and the adoption of new technologies.
Thanks to the agencies who participated in this anonymous survey–we’ve planted a tree in their name through our partnership with Evertreen.
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