Forrester: CMOs must adjust as agencies shed more than 50K jobs

Dive Brief:

• Chief marketing officers need to adjust to having less support from U.S. advertising agencies as they shed ane expected 52,000 jobs in the next two years. The cuts will “devastate” the agency talent base and spur a migration to in-house and gig economy alternatives, market research firm Forrester said in a report shared with Marketing Dive.
• Ad agencies are cutting an average of 15% of staff, compared with 7% at digital and media agencies, according to Forrester’s analysis of reported layoffs. The economic climate is accelerating a structural change among agencies, removing the lines between specialties such as creative, media and digital, per the report.
• Because agency headcount is unlikely to return to pre-pandemic levels after a 14% decline, CMOs will lose an important source of marketing expertise. That dynamic will force CMOs to be more resourceful in handling more complex challenges while working to restore revenue growth during the economic recovery, per Forrester.

Dive Insight:

CMOs are facing a challenging period ahead during what Forrester describes as the “COVID-19 recession.” With many advertisers suspending or delaying campaigns, ad agencies face greater pressures to cut costs and reduce headcount. However, those pressures will force marketers and their agencies to be more innovative, speeding up a shift toward digital media channels that have become even more vital in reaching homebound consumers, Forrester’s analysis suggests. Savvy CMOs will significantly restructure their agency resources to maintain brand growth.

The firm’s grim outlook for ad agencies is based on an analysis of 2017 census data for the U.S. and news reports of industry layoffs. The analysis led Forrester to estimate that media spending will decline 23% this year, reducing the demand for digital, creative and media buying services from agencies. The effect will be uneven, with ad agencies facing steeper job cuts than their digital and media counterparts. While Forrester warns that CMOs will lose a vital source of industry expertise, it also foresees a migration of talent toward in-house agencies and the gig economy.

The multiyear trend toward in-housing has stirred controversy about its effectiveness, but cost-cutting pressures are likely to compel CMOs to look for ways to improve the efficiency of their marketing efforts for years to come. Forrester doesn’t foresee ad agencies boosting headcount, estimating that U.S. agency employment will be little changed after steep cuts in 2020-21. Agencies will be smaller at a time when CMOs face significant challenges in achieving their marketing goals. Forrester’s outlook suggests that CMOs will be forced to make the best of more limited marketing resources.