Are You on Track or Are You Lagging Behind?
Digital Agencies 2016
WEB
Introduction
Kentico’s Digital Marketing Trends Survey 02
There has been a lot of noise about digital marketing in the last few years, and almost every company around the world feels the need to deal with this. In order to satisfy their clients, digital agencies must o�en decide between the client’s expectations and the limitations of their own business. What are their plans for 2016? What tools and solutions will they mainly be o�ering their clients? What are their struggles? Do their clients understand digital marketing well, and to what extent are they cooperative? And how much are the agencies paid for digital services? Is your agency on track or is it lagging behind?
Highlights• The vast majority of digital agencies plan to hire new people and invest more money in so�ware in 2016.
• At this moment, it is primarily the agencies that are deciding about the brands and products their clients use.
• Web development, analytics, email, social media, and content marketing are still the core businesses of most agencies.
• As for the solutions and tools, content management systems and social media management solutions are the most recommended, though the bigger agencies are also suggesting e-commerce, CRMs, and automation platforms to their clients.
• Although the majority of agencies feel that there are lots of competitors in the market, it seems that it is mostly the clients that concern them. Clients want to use digital marketing but don’t understand it properly and usually expect lots of work for little money.
• The representatives of digital agencies believe that success lies in a better understanding of digital marketing from the client’s side. Nevertheless, employees are also expected to understand tasks better.
• The average price of one project varies a lot. Regarding the better- performing agencies, a project costs twice as much when compared to the rest. Relative to the others, agencies in Australia and New Zealand charge less while those in the US charge more.
We surveyed a random sample of more than 300 senior managers and directors of digital agencies in ten countries across three continents. These decision-makers are no freshmen. With an average age of 39 years and responsibility for 30+ employees, they o�er a strategic view of their needs, their clients’ needs, and the industry’s trends.
Plans for 2016 —Strategies forSuccess
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So, Who Are the Agencies? Throughout this report, we are comparing above- and below-average agencies. This definition is based on self-evaluation, where managers described their agencies as performing better or worse than the industry, taking into account the region in which they mainly operate. Although self-evaluated, the definition also reflects their turnover in 2015. While revenue was approximately $4.5 million in above-average agencies, it was “just” $1.9 million in below-average agencies.
Which Activities Does Your Agency Plan to Do Next Year?
Australia, together with New Zealand, seems to be the most progressive region. Agencies there are planning to outsource work more and will change their CMS/digital marketing platform more o�en than agencies in other regions. Other agencies, especially in the UK and Czech Republic, do not plan such significant changes this year.
US
United Kingdom
AustraliaNew Zealand
Benelux
Czech Republic
Degree of Likelihood (%) > more likelyless likely <
Invest more money in so�ware
Invest more money in hardware
Outsource work more
Acquire another company
Change CMS/digital marketing platform
Merge with another company
50 40 30 20 10 0 10 30 40 5020
Hire more people
The Growing Season
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The majority of business representatives across all regions believe that all of these changes will increase the e�iciency of their work significantly. Those that plan to hire more people, invest more money in both so�ware and hardware, and change their CMS/digital marketing platform have especially high hopes.
Hire morepeople
Invest moremoney inso�ware
Invest moremoney inhardware
Outsourceworkmore
Acquireanother
company
ChangeCMS/digitalmarketingplatform
Merge withanother
company
Plans for 2016Expected increased e�iciency
Above-average agenciesBelow-average agencies
The vast majority of digital agencies plan to hire new people and invest more money in so�ware in 2016. The growing and more profitable agencies plan to make even more significant changes. They are more likely to hire new people and invest in both so�ware and hardware, as well.
81% Hire more people
71% Invest more money in so�ware
63% Invest more money in hardware
52% Outsource work more
45% Acquire another company
44% Change CMS/digital marketing platform
36% Merge with another company
The orange columns show the percentage of agencies that plan to do these activities in 2016, and the yellow columns refer to the percentage of managers from these agencies that believe that such changes will increase the e�iciency of their agency‘s work.
90%66%
76%62%
68%55%
50%34%
50%33%
55%46%
42%26%
81%
71%63%
52%45% 44%
36%
91% 89% 86%82% 79%
86%80%
The Landscapeof Digital Agencies:Tools and Solutions
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Web development, analytics, email marketing, social media marketing, and content marketing are still the core businesses of most agencies. Loyalty programs, customer communities, remarketing, and gamification are the least demanded and, therefore, the least provided services.
Personalization and Automation?Agencies Aren’t There YetOn average, 38% of agencies o�er digital marketing personalization, and 31% provide marketing automation (lead nurturing) to their clients.
Solution that is more typicalfor above-average agencies
Solution that is more typicalfor below-average agencies
20%
30%
40%
50%
60%
% o
f abo
ve-a
vera
ge a
genc
ies
that
o�e
r the
ser
vice
20% 30% 40% 50%10%Loyalty Programs (online)
Gamification
Remarketing
Customer Reviews and Community
Gathering and Analyzing Online Customer Data
Video Advertising (online)
Mobile-specific Marketing
Search Ads
Marketing Automation
Online Display Advertising
Web Analytics
Social Media Marketing
Web Development
Email Marketing
Graphic Design
Content Marketing
CoreBusiness
SEO
Application Development
Personalization of Online Content and O�ering
% of below-average agencies that o�er the service
The Most RecommendedSolutions
Kentico’s Digital Marketing Trends Survey 06
…though the bigger agencies also suggest e-commerce, CRMs, and automation platforms to their clients.
These are the solutions most recommended, besides the traditional Top 4 — CMS, email, social, and analytics. We expect them to be the future competitive means for agencies. As their prices get lower, smaller clients will be able to a�ord them.
Above-average agenciesBelow-average agencies
63%51%
63%50%
50%49%
50%43%
46%29%
45%30%
40%25%
35%26%
26%16%
25%11%
As for the specific so�ware and solutions, web and mobile analytics, content management systems, social media marketing, and email marketing solutions are the most recommended…
58% Web and Mobile Analytics
58% Web Content Management Platform
50% Social Media Marketing
48% Email Marketing Solution
40% E-commerce Platform
40% Customer Relationship Management So�ware
35% Marketing Automation/Integrated Marketing So�ware
32% Testing and Optimization Tools
23% Lead Scoring
20% Personalization So�ware
The Marketing Landscape:Building Expertise
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Who Knows What’s Best?Clients Listen to Their AgenciesAt this moment, it is primarily the agencies that decide about products. According to managers, less than a quarter of their clients suggest or choose the so�ware and cloud solutions themselves. The rest are driven by the agency providers. This estimate is universal for all agencies, regardless of their size or region.
77% of solutions are based on agency recommendations
Solution Adoption by Agency ClientsOpen source or in-house-developed solutions are not on the decline — in-house solutions seem to be less popular only in the UK — but commercial solutions prevail. They are used more o�en, not surprisingly, by the best performing companies across all regions. However, a significant number of agencies fear that open source so�ware is insecure (20–33%, depending on the solution) or inadequately supported (17–26%). That is more than double the average number for commercial solutions. Interestingly, it is the smaller agencies that are more critical.
49% prefer in-house-developed so�ware
67% prefer commercial so�ware
54% prefer open source so�ware
All-in-one vs. Best-of-breed? According to the agencies, 60% of their clients prefer a more universal, therefore, all-in-one solution across all regions.
60% prefer all-in-one solutions
Struggles?Usually with Clients…
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Although the majority of agencies feel that there are lots of competitors in the market, it seems that it is mostly the clients that concern them.
Clients want to use digital marketing but do not understand it well (78% agree). They also expect a lot of work for little money (78%) and acquire many digital marketing tools but do not use them (73%). It seems that less successful agencies have a tendency to blame their clients for not understanding digital marketing and for wanting a lot for little money.
80% “We have a lot of competitors”
“Our clients want to use digital marketing but don’t understand it well”
78% “Our clients expect lots of work for little money”
“Our clients acquire many digital marketing tools but don’t use them”
58% “Our agency doesn’t have enough clients”
51% “Our agency doesn’t have enough quality employees”
47% “Most of the projects aren’t completed on time”
“Most of the projects aren’t e�ectively managed or executed by employees”
41% “Most of the projects aren’t profitable”
Above-average agenciesBelow-average agencies
82%78%
84%75%
83%75%
75%72%
62%56%
52%51%
47%
45%
47%
43%
42%39%
78%
73%
44%
The Point of ViewDepends on the Region
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Degree of Agreement (%) > agree disagree<
There are interesting di�erences between specific regions regarding specific attitudes. Managers in the Czech Republic complain more about clients that expect lots of work for little money, but are significantly less critical in terms of the number of clients, the timely completion of projects, profitability, and (comparable to the UK) the quality of their employees. On the other hand, managers in Australia and New Zealand complain more about their own employees and the size of their clients’ portfolios.
“Our clients want to use digital marketing but don’t understand it well”
“Our clients expect lots of work for little money”
“Our clients acquire many digital marketing tools but don’t use them”
“Our agency doesn’t have enough clients”
“Our agency doesn’t have enough quality employees”
“Most of the projects aren’t completed on time”
50 40 30 20 10 0 10 30 40 5020
“We have a lot of competitors”
“Most of the projects aren’t e�ectively managed or executed by employees”
“Most of the projects aren’t profitable”
Achieving Greater Success?It’s All About People!
Kentico’s Digital Marketing Trends Survey 10
When considering the last significant success and loss, it is clear that the representatives of digital agencies believe that success lies in understanding digital marketing from the client’s side more thoroughly. If clients better understood what they needed, the profitability of their projects would increase significantly. On the other hand, employees are also expected to understand the tasks better. Deeper cooperation would be beneficial.
Above-average agencies have even higher expectations of their employees in terms of understanding their tasks. Below-average agencies believe in cheap labor more.
20%
30%
40%
50%
Whi
ch o
f the
seas
pect
s co
uld
have
real
istic
ally
help
ed y
ou m
inim
ize
loss
? (%
agr
ee)
20% 40% 80%Which of these aspects contributed to success? (% agree)
60%
20%
30%
40%
50%
Fac
tors
hel
ping
to m
inim
ize
loss
,ac
cord
ing
to a
bove
-ave
rage
age
ncie
s (%
agr
ee)
20% 40% 60%10% 30% Factors helping to minimize loss, according to below-average agencies (% agree)
50%
Contributed to greater success significantly more Contributed to greater success significantly less
Our clients knowing what they needOur employees understanding the task wellOur clients being cooperativeThe use of Agile methodologyThe use of cheaper laborHigh range of functionalitiesHigh popularity of tools and digital marketing
Above-average agencies agree significantly more Below-average agenciesagree significantly moreNo significant di�erence
Our clients knowing what they needOur employees understanding the task wellOur clients being cooperativeThe use of Agile methodologyThe use of cheaper laborHigh range of functionalitiesHigh popularity of tools and digital marketing
23
1
2
3
4
5
6
7
1
2
3
4
5
6
7
45 7 6
The path to greater success
21
3
7 46
5
1
Project-oriented WorkFully in Place
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How Many Projects?On average, agencies undertook 42 projects in 2015. There is little di�erence between above-average (44 projects) and below-average agencies (37 projects), but significant di�erences can be seen among specific countries. US, Australian, and New Zealand agencies are at the top, while European companies completed far fewer projects.
US
United Kingdom
Australia New Zealand
Benelux
Czech Republic
How Long Does It Take?The average length of a project also varies slightly according to the country. While one project usually takes four months, the average in Benelux is seven months.
US
United Kingdom
Australia New Zealand
Benelux
Czech Republic
51 projects
45 projects
34 projects
35 projects
24 projects
5 months
7 months
4 months
4 months
2 months
Projects Usually TakeLonger than Estimated
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A third of the agencies admit that projects usually take longer than estimated. This applies more to above-average agencies (39%). Comparatively, US agencies are doing much better — a quarter of their managers declare that their projects usually take longer.
US
United Kingdom
Australia New Zealand
Benelux
Czech Republic
Based on open questions, the managers suggest that the reasons for project delays can usually be found on the client’s side — specifically, by not being sure of what they really want, a low awareness and understanding of digital marketing tools, and changing requirements.
“The client does not provide the necessary materials in a timely fashion, and the client changes their mind and dramatically alters the project halfway through.”
Above-average Agencies Are More Likelyto Use Agile MethodologiesUsing Agile methodologies might be one of the reasons for success, since above-average agencies are more likely to use them. This especially applies to the Australian and New Zealand region.
US
United Kingdom
Australia New Zealand
Benelux
Czech Republic
66% Above-average agencies41% Below-average agencies
53% projects
39% projects
26% projects
40% projects
7% projects
76% projects
38% projects
54% projects
64% projects
57% projects
Clients Pay for Expertise
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Services are charged most commonly according to the project’s costs (75%), but half of the agencies also charge according to an hourly rate. Charging for projects based on Agile development is a practice yet to be used widely. The numbers suggest that there are some discrepancies in how agencies charge their clients.
50% according to an hourly rate
75% according to project cost
12% according to an Agile approach
Above-average agencies use an hourly rate more o�en. This way of charging is used significantly less in Benelux and the Czech Republic.
Hourly rate55% Above-average agencies41% Below-average agencies
Project cost76% Above-average agencies74% Below-average agencies
Agile development14% Above-average agencies8% Below-average agencies
The average hourly rate is $190. While above-average agencies charge $225 per hour on average, below-average agencies charge $105.
Project cost
Agile development
0 10 20 30 40 50 60 80 90 10070
Hourly rate
$225$190$105
Who Gets the Most?
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UX and Graphic Designers Are Paid BestIn general, UX and graphic designers are paid better per hour than developers and marketers. This di�erence is even more evident in outperforming agencies.
$31 Developer
$30 Marketer
$35 UX Designer
$35 Graphic Designer
Average Wage per Hour (USD)
Developer$31 Above-average agencies $32 Below-average agencies
Marketer$31 Above-average agencies $27 Below-average agencies
UX Designer$37 Above-average agencies $30 Below-average agencies
Graphic Designer$37 Above-average agencies $31 Below-average agencies
Hourly wages are almost equally distributed among all specializations in the US, while there are significant di�erences in other regions. You would be lucky if you were a UX designer in Australia or a graphic designer in Benelux!
Marketer
UX Designer
Graphic Designer
10 15 20 25 30 40 35
Developer
How Do Average Prices forProjects Vary?
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With better-performing agencies, the price for a project is twice as much, compared to the rest. Agencies charge the most in Australia and New Zealand, but charge surprisingly less in the US, considering the higher wages of their specialists.
$135,000 project price for above-average agencies
$65,000 project price for below-average agencies
According to managers, the majority (76%) of projects are profitable, regardless of the performance and region.
76% profitable projects
US
United Kingdom
Australia New Zealand
Benelux
Czech Republic
$190,000
$140,000
$105,000
$125,000
$29,000
The FactorsThat Lead to More Projects
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You now know that the below-average agencies have a higher tendency to blame their clients for not understanding digital marketing and for wanting a lot for little money. But the problem is likely due to weaker cooperation between agencies and clients, especially in terms of knowledge sharing. Agencies have to be able to clarify all issues and explain all uncertainties before the project starts. Maybe that is why the above-average agencies have even higher expectations of their employees in terms of understanding the tasks. This could also explain why the majority of the agencies plan to hire new people.
As for the solutions, web and mobile analytics as well as content management systems will be recommended the most to clients this year, especially by the above-average agencies. This suggests that these solutions will be crucial for greater success — one of the reasons why the majority of agencies plan to invest more money in so�ware. Those that plan to change their CMS/digital marketing platform have especially high hopes in terms of work e�iciency.
If you are one of those agencies that are looking for a better CMS/digital marketing platform, the time is now.
And remember — the majority of clients ask for an all-in-one solution!
How Do We Know This?
© 2016 Kentico So�ware
About the Research Millward Brown surveyed more than 300 senior managers and directors of digital agencies across three continents. Responses were collected from an invitation-only online B2B research panel in December 2015.
Millward Brown is a worldwide marketing research and consultancy agency that adheres to the ESOMAR rules on data collection and publication. For more information, please visit www.millwardbrown.com.
About Kentico So�ware Kentico So�ware provides an all-in-one CMS, E-commerce, and Online Marketing platform that drives business results for companies of all sizes, both on-premise or in the cloud. Founded in 2004, Kentico is a Microso� Gold Certified Partner headquartered in the Czech Republic with o�ices in the US, UK, Netherlands, and Australia. Kentico has 1,000 digital agency partners and powers more than 25,000 websites across 100 countries. Customers include Gibson, Twinings, Ingram Micro, Mazda, Kingspan, Hunter Fan, Starbucks, and Allergan.