4 Things I Learnt About The Creative Industry In 2015
In many ways the creative industry has been a double edged sword in 2015. On one hand, income is up and there are a lot more commercial opportunities on offer. However, on the other, profits are down meaning that despite potentially working harder, agencies are not increasing their bottom line. In fact, more often than not, making the most of the new business opportunities on offer requires investment which results in additional cost and outlay. It’s a juggling act to balance it out and one I am not sure the industry as a whole has mastered yet.
So, based on what we have seen in the industry and the experiences people have shared with me, here is what I have learnt this year.
1. Growth hinges on charging for creativity and value
According to Marketing Monitor, the “traditional models of hourly rates, retainers and project-based work aren't cutting it when it comes to fostering commercial creativity". Rather, the billing models need to be reviewed because more often than not, generating enough revenue is based on an agency’s ability to charge for creative input and the value of an idea.
With this in mind, it will be more important than ever to ensure clear project outlines and try to put a price on value. Something that is easier said than done but charging for creativity will be fundamental to getting paid for the services provided – and ensuring agencies receive the revenue they deserve.
2. Cutting employee costs is intrinsically linked to profitability
In 2015, staff costs only went one way – straight through the ceiling. This is a worrying trend for any agency that relies on bagging the best talent as a way of staying competitive.
However, there are ways to halt the rise of staff costs, or even reduce them. Agencies can use their business information system to monitor market salary rates and then offset these rates against their financial data. That way they will have the information needed to set attractive, yet sustainable salaries that will please employees and turn a profit.
As the latest Kingston Smith report notes “clearly, there is a correlation between maintaining a degree of control over staff costs and delivering reasonable profit margins” – it is just amount finding the sweet spot in the middle.
3. It takes more than creative flair to make a good business
According to PR Week, “it is not enough to have a swashbuckling new business record and dazzling creativity. If you want to make money in PR then someone has to count the beans." It’s not just in PR though, this rings true for any creative agency, and the proof is in the research.
In 2014, group owned agencies experienced less revenue growth than independent firms. Yet they managed to leverage more profitability out of their income. This was because they were more likely to have the tools in place to optimise their back office processes.
Providing staff with the tools to accurately capture time or investing in a system that will streamline administration can make all the difference to an agencies bottom line. Once that revenue has been transformed into profit it gives agencies more time to focus on creating that winning campaign – it’s a winning formula.
4. It pays to be positive on technology
Technology use within creative agencies has been gaining momentum for a number of years and whether planning to deploy it for their own operational success or invest in it as a means of diversifying into emerging sectors, more and more business leaders are considering technology and the role it can play in their long-term growth.
As the recent ClickZ report references, “technology is the biggest challenge – all agencies need to keep up or we will be left behind”. Agencies need to plan their own digital revolution for the year ahead in order to approach 2016 with a sense of optimism rather than trepidation.
So there you have it – some of the key learnings I picked up in 2015. If you’re interested in finding out more about the role of digital in 2016 keep an eye out for the predictions in our next blog. In the meantime, you can take a deeper look at what is going on in the creative industry in our Marketing Industry Snapshot Report.