China marketers’ rosters are shrinking, and they are moving more business to local agencies, according to the seventh wave of R3 and SCOPEN’s Agency Scope Study. The shift towards local talent and the decreasing number of agencies on client rosters are just two of the trends identified through the study, with changes occurring in several other areas, including a significant increase in digital marketing budgets.
In the 2018 wave of the study, digital accounted for 40 per cent of marketing and communications spends for Chinese marketers. This represents a massive upward shift from the 2016 study, when digital only accounted for 25 per cent of marketing budgets. This continues to pose major challenges to both agencies and marketers, with the former struggling to develop the capabilities that marketers now demand.
The R3 report covers more than 300 multinational and local companies, with over 740 client-agency relationships analysed.
Chinese marketers spend the most on digital when compared to the other countries analysed in this study, and significantly more than the global benchmark of 30.2 per cent. “Chinese consumers are very digitally savvy, and their desire for brands that are equally as savvy is driving digital marketing budgets up every year. This trend is posing unique challenges to both marketers and agencies alike, as they have to quickly adapt and build up the capabilities that will help them to meet the consumer demand,” says Sabrina Lee, Managing Director of R3 China.
Seven out of the top 20 agencies mentioned by marketers in this wave of the study were local firms, in comparison to just four in 2016, as local agencies are growing and building more integrated offerings. Marketers still recognise that there are advantages to working with large, multinational firms, such as global experience, a robust international network and strong strategic planning abilities, the report highlights. However, in the new normal of marketing in China where everything needs to happen at the speed of digital, marketers’ values are shifting away from organisations with a complicated bureaucracy that might slow down response times.
Fifty-eight per cent of marketers cited quick response time as a very important advantage of working with local agencies. Other factors rated as very important include strong execution (54 per cent), simple and flexible structure (52 per cent) and more local insights for strategic planning (46 per cent). This data is in line with reports that global holding companies showed little to no growth in 2017, with the China market playing a key role. Local agencies have been building up their digital capabilities, and coupled with their local expertise and flexible structure, they are becoming more attractive to Chinese marketers looking to cut inefficiencies in their marketing processes.
As Chinese marketers seek out integrated agencies to house all their communications needs under one roof, the number of agencies on their rosters has decreased from 2016. Marketers are currently working with 5.84 communications agencies, down from 6.45 in 2016 and 8.2 in 2014. “The size of the market and complexity of communications in China makes it even harder for agencies to have the best talent in different disciplines under one roof. Agencies that can show a real integrated offering will have a big competitive advantage, as 37 per cent of client companies in China are looking for an integrated agency to solve their needs (compared with only 8 per cent of marketers working with integrated agencies today),” says César Vacchiano, President and CEO of SCOPEN.
China continues to have the shortest agency relationship in the world, at just 2.9 years. This is due in large part to marketers changing their needs and agencies lacking digital capabilities to solve those needs.
The rise and influence of local players is also going beyond just the agencies. When asked which marketers in China are most admired, local firms took four of the top ten positions, led by Alibaba and Huawei who were split by Coca-Cola for the top three positions. “It’s clear that building a marketing career in China is not something that’s the exclusive domain of multinational brands,” Ms Lee added.