Why Clients End Their Agency Relationships + Why Agencies Think They Do
Setup’s fifth Marketing Relationship Survey featured in Ad Age revealed that Agencies are bringing a strong strategic approach to the table, yet are charging Clients too much for their efforts.
Dissatisfaction with an Agency’s value is the number one reason why a Client ends an Agency relationship. But do Agencies know this?
After surveying over 300 marketers on both the Agency and Client side, we were able to determine that there is a disconnect between why Clients fire Agencies, and why Agencies think they are fired. By pointing out this misunderstanding, both parties may be able to communicate better to salvage relationships or grow from the feedback.
Many Client responders were Director level marketers representing companies with 500-10,000+ employees like Intuit Mailchimp, Sam’s Club, Central Garden & Pet, MGM Studios, Rolex, DC Shoes, Invesco, and Great Clips. The Agency representatives were also Agency leaders representing Agencies with 100-5,000 employees.
Like the visual below points out, these are the reasons Clients end their Agency relationships, in order of importance.
Dissatisfaction with value.
Dissatisfaction with delivery.
Change in the agency’s personnel.
The Client’s team had budget cuts.
Dissatisfaction with strategic approach.
Dissatisfaction with the relationship.
Agency did not understand the business.
Change in the Client’s leadership.
Agency did not challenge enough.
Unfortunately, Agencies are misaligned with this and believe their Agency-Client relationship comes to an end for entirely different reasons.
Agencies believe Clients end their relationships due to:
Client budget cuts.
Change in the Client’s leadership.
Dissatisfaction with the relationship.
The Agency did not challenge the Client enough.
Dissatisfaction with the strategic approach.
Change in the agency’s personnel.
Agency did not understand the Client’s business.
Dissatisfaction with value.
Dissatisfaction with delivery.
Most things the Agency thinks are the problems in the relationship have nothing to do with the Agency, but with the Client - the Agencies think the problem is the Client’s budget, and the Client’s leadership - when, in reality, it is the Agency’s value and the Agency’s delivery that leads to ending the relationship.
What the Clients listed as their top two reasons for ending a partnership, the Agencies listed as the least important reasons. There is such a disconnect between the two in this “he said, she said” situation. At the end of the day, business is all about people and relationships, and it seems like there is a lot of ego, lack of reflection, and lack of communication in these Client-Agency relationships.
From 2022 to 2023, dissatisfaction with value went from 39% to 53%, making value the most important element of the Agency-Client relationship to Clients in recent years. Because marketing is often on the chopping block, and CMOs need to prove their value to the C-Suite, Agencies need to work just as hard to demonstrate their value. As a part of this vicious cycle, because budget cuts have increased in 2023, Clients are expecting better value from their Agencies this year for less money.
Read the full breakdown of the 2023 Marketing Relationship Survey results here.
Do Marketing Agencies have time to improve the Agency-Client relationship?
The biggest takeaway from 2023’s Marketing Relationship Survey may be that 55% of Clients are likely to switch from their primary agency in the next 6 months, especially if things like value and delivery do not improve. That likelihood is a 17% increase since just last year. If Agencies are wondering why their Client partners are shopping around or considering making a change, these survey points reveal insight into the reasons, giving Agencies a chance to focus on improving relationships!
What can Agencies do to prove their value and improve the Agency-Client relationship?
Clients are prioritizing strategy recently more than ever, meaning Agencies who deliver a strong strategic approach backed by data and scoped correctly are in a better position than those who neglect timelines and strategy.
Agencies can also use their unique position in the industry to educate and inform their Clients about how to approach the C-Suite. If Clients are feeling pressure to deliver to their C-Suite, then that pressure will be reflected on the Client’s relationship with the Agency. Clients and Agencies can work together to prove marketing’s value. These articles with insights from active CMOs and marketing leaders provide steps on how to start and what information to collect: 5 Ways to Prove Marketing’s Value to the C-Suite and 5 Ways Marketers Get C-Suite Buy-In.
What can Clients do to improve the Agency-Client relationship?
Communicate your problems to the Agency, and listen to their thoughts and insights! Have tough conversations, and be open to a healthy back-and-forth. Sometimes providing feedback and growing together is a better solution than firing an Agency and going through the procurement process again. Plus, sometimes people don’t know what they are doing wrong unless explicitly told.
Evaluate your Agency using an Agency Scorecard. Pinpoint the problem points and communicate them to your Agency partners. If after some time things don’t improve, then consider ending the relationship.
If ending the relationship is the right call, however, we have resources to make the next search process easier on you. Check out The Guide to Finding the Right Agency, our Custom Search offering, and our In-Network Search offering.
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Setup CEO + Founder, Joe Koufman, spoke with Ben Boyd, the Chief Communications Officer at Chobani, about designing your own career path, the importance of empathy and understanding as a leader, and more.