March 2020, Shanghai – According to the eighth wave of R3 and SCOPEN’s AGENCY SCOPE Study, China’s marketers remain generally satisfied with their agencies and would like to work in an integrated agency model, but without effective options available, more than 68% will continue to seek expertise from multiple agencies. This has resulted in a higher number of agency partners with shorter tenures; a reversal of findings in 2018. Other insights from the study include the changing role of procurement, value of in-housing, and agency remuneration.
“The move away from consolidation toward specialization says a lot about the strength and importance of digital across media, retail, social, experiential, and entertainment,” said Sabrina Lee, Managing Director of R3 China. “Holding companies who are not able to meet the wide-ranging demands of China’s marketing ecosystem lose out to independents.”
“2020 marks a maturation in China’s marketing industry,” said Cesar Vacchiano, Founding Partner and CEO of SCOPEN. “What we’re seeing is that China’s marketers have not been well supported by integrated offerings available and this is driving them to look elsewhere for capability.”
As part of the AGENCY SCOPE Study, R3 met with more than 500 senior marketers in China in 2019/2020 to understand the process, perception, and performance of the agencies they work with. This wave’s report covers more than 240 multinational and local companies, with over 600 client-agency relationships analyzed.
More Agency Engagements, But Shorter Partnerships
Chinese marketers work with 6.6 agencies on average, the highest number in our benchmark across eight countries. This increase of 13.7% (2018) is largely attributed to increased engagement with BTL and digital agencies as the number of netizens continue to grow in China. Though the country’s dynamic marketing environment has led to more opportunities for agencies, it has resulted in a decrease in duration of client-agency relationships. Chinese marketers work with agencies for an average of 3 years, significantly below the global benchmark of 4.6 years.
“In previous studies, we had observed a trend towards stabilization of marketer-agency relationships, with marketers consolidating their accounts with fewer agency partners in 2018. But as the media landscape becomes more fragmented, and integrated capability is still lacking, it is inevitable that marketers will be seeking more expertise,” says Lee.
Marketers Turn to Specialization In Lieu of Integration
More marketers are working with integrated solutions provided by holding companies, but the majority still prefer to seek out expert vendors. 31.3% of survey participants said they would prefer to work with integrated agencies, compared to 68.7% who voiced a preference to have specialist capability operating within each discipline.
“Aside from brand communication, media and events are two areas where Chinese marketers are looking for agencies with deep understanding of trends and consumer behavior and a record of performance,” says Lee. “Given the unique ecosystem in China, holding companies without strong regional and local presence will not be able to deliver as well as localized agencies.”
The Popularity of Pitch, Procurement & In-Housing
The relationship between marketing and procurement is improving with 60.7% of professionals surveyed saying that both departments are equal partners on the agency selection process. Pitch remains the most popular selection method, with 91.5% of marketers opting to use this approach, and increase in use of workshops and chemistry sessions.
Marketers are still of bringing certain functions in-house as they feel that such teams have better knowledge about market, consumers, and the brand (35.2%), and that in-housing delivers cost savings and increased efficiency (33%).
Increased Acceptance on Paying for Performance
Incentive payments are becoming more accepted in China as marketers look to find ways to motivate agencies and reward performance. 14.3% of marketers have an incentive payment as part of their remuneration system, up from 8.1% in 2018, though the number is still below the global average of 24.5%. More than 50% of marketers would agree to negotiating higher fees for improved quality of agency services.
Huawei Ranked in the Top 3 for Brand Respect and Best Campaigns
Apple and Huawei are the top two companies most respected in China for their marketing. Huawei has made strides in growing loyalty and favor with Chinese consumers over the past two years thanks to its increased visibility and symbolism as a national brand. Huawei’s position as the company with the “Best Campaigns” over the past two years has jumped from 21st position to 3rd. Nike was the only other company besides Huawei to rank in the top three, jumping to 1st place as the brand with the “Best Campaigns” and ranking 3rd for “Most Respected” in their marketing.
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About the Study
AGENCY SCOPE is an in-depth, face to face study, covering over 500 senior marketers and 600 agency relationships.
The China AGENCY SCOPE is now in its eighth wave, conducted for the first time in China in 2006. The study’s aim is to understand the latest marketer-agency engagement trends, and perception and performance of creative, media and marketing services agencies in China.
In-depth face-to-face interviews were conducted with senior Chinese marketing decision-makers from China’s top marketing companies, providing comprehensive data and insights to help agency networks and marketers forecast and benchmark their businesses. The study is conducted every two years in China, making it the most robust independent tracking measure of Chinese agencies and their client relationships.
