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How smaller agencies can compete with the big boys / Lorraine Ruckstuhl , Corporate Director of Barclays TMT division.

by on October 16, 2012 in Apps, FaceBook, Google, iPhone, Lead story, LinkedIn, Media, Metrics, Mobile Marketing, Pinterest, Small Business, Social Media, Startups, Twitter

Exclusive from Lorraine Ruckstuhl , Corporate Director of Barclays TMT division .

There is a David and Goliath battle taking place in the marketing agency space. As agency rankings show, there is client demand for the integration of traditional and digital campaigns.

The big agencies are responding with acquisition strategies and smaller agencies wanting to keep pace need to consider how they can fill the digital skills gap and capitalise on the opportunities on offer in the changing landscape.

In response to the increasing client requirement for multi-channel campaigns that include digital as well as more traditional elements, big agencies are buying in the skills to strengthen their offering. WPP’s acquisition of AKQA – one of the world’s best known and well respected digital agencies – to boost its own offerings, was undoubtedly one of the biggest and most significant deals in digital advertising in recent years. Other major acquisitions such as Publicis Groupe’s recommended offer for LBi, and Aegis’ earlier purchase of US firm Roundarch, demonstrates that these deals are being made across the board.

In this fast paced industry, smaller agencies need to consider how they can compete with these big agency offerings. An acquisition strategy is unlikely to be an option, but the advantage smaller agencies have is their size which enables them to be agile and more creative in their approach to growth. The least risky route for smaller agencies is to build their presence in the digital sector by enhancing their skillset and offerings through long term investment, either through training existing employees in new skills, or more commonly, taking-on new employees, freelancers or contractors with specialist expertise. The upfront investment in organic growth is something that will benefit agencies in the long run as digital increasingly becomes an essential campaign requirement.

There is another opportunity facing smaller agencies in the current landscape. Clients are increasingly looking to maximise budgets and be smarter with their money and it is becoming more common for agencies to be assigned project work rather than committing to retainers. This is a chance for smaller agencies to become involved in a wide range of campaigns and to win business from retained agencies. By offering the right value proposition, smaller agencies can potentially win business from their global competitors.

However, in order to be able to fund a project-based business plan it is essential agencies have a flexible finance plan in place with available cash flow to alleviate any unforeseen expenses occurred along the way.  Without this, it can be difficult for smaller agencies to fund the overheads that are required to fulfil the brief.

Nimble smaller agencies

The current environment also presents another opportunity. While smaller agencies are not able to make acquisitions, they may well find themselves in a position to be acquired. Niche agency Adam & Eve was acquired by Omnicom’s DDB Worldwide at a relatively early stage in the company’s growth. This is a trend we are likely to see more of.

There are certainly opportunities out there for nimble smaller agencies who up-skill successfully but they must ensure their route forward makes business sense. Having the right financial partner in place is key to this. This partner can provide financial acumen and a flexible bespoke financial plan, as well as market knowledge in order to fully support agencies in successfully growing their business. As smaller agencies become more capable to compete with the larger players, identifying the right financing gives them the ability to mature with the market and take on new challenges.

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