Keith Johnston is a rare breed – a long-time creative director turned agency innovation executive turned leading industry analyst. Today, Keith is a VP and Group Director at Forrester in charge of a broad research agenda exploring the most pressing issues for today’s executives including leadership, business innovation, branding and advertising, technology strategy, employee experience, consumer behavior, and the future workforce.  SoDA’s Executive Director, Tom Beck, recently caught up with Keith to chat about the 2020 digital outlook and the unfolding impact of the Pandemic Recession on marketing spend, digital technology and the creative agency landscape.

TB        SoDA’s 2020 Digital Outlook Study (in partnership with your team at Forrester) was initially fielded in Q4 2019. At that time, both agency leaders and client-side executives were very optimistic about the year ahead– 77% of client-side leaders were increasing their digital spend in 2020 (35% “significantly” so), and 82% of agency leaders said they expected 2020 to be better than 2019 in terms of profitable growth. Just weeks later, a global pandemic and economic slowdown had dampened, for many, this initially rosy outlook. From what you’re seeing, particularly on the client-side, how do you think the year will shake out in terms of digital spend? Will CMOs and digital marketing executives make cuts across the board or look for smart ways to re-allocate? Are their particular areas within digital spend that are less at risk for budget cuts or, perhaps, may even accelerate in light of the current environment?

KJ        Already, 81% of large advertisers are deferring or cutting campaigns because of the COVID-19 pandemic. We translate this into a 23% decline in media spend in 2020, reflecting the rapid drop in GDP that is expected. Even with more people at home (and likely consuming more media), brands won’t commit to advanced advertising buys when consumer demand and supply chains are so volatile. Retailers alone will cut upwards of 50% of their marketing spend due to the decline.i With the budget that is left, you are likely to see a much smaller hit to social media and TV as those CMOs resilient enough to keep actively marketing will redirect budgets into brand campaigns to either gain share of mind or earn goodwill from the values-influenced consumer environment.

A big question will be around the lasting effects on offline media spend after months of no commuters, stunted foot traffic and empty airplanes. A recovery in offline media spend is likely to be very and drag on through 2021. Meanwhile, search, social, banner advertising and display video will likely continue to take an increased share of overall ad spend well into 2022. In the end, flexibility will win the battle for dollars — buys that have performance guarantees, favorable cancellation policies and that are exclusively for digital will be the most desirable.

The last point I’ll make is that spend on marketing technology will increase slightly – specifically marketing automation platforms and tools that enable new forms of human + machine creative capabilities.

TB        On several of the bigger industry trends that you’ve been tracking over the past few years (paraphrased below), I’m curious if or how you think the current crisis will impact each of them. Do you see these trends staying the course? Accelerating? Or shifting into new directions?

Marketing Technology vs. Creativity and the need for brands to re-balance their outsized investments in tech with what has been a steady decline of investments in differentiated creative and ideas. 

KJ        A sea of sameness, perpetuated by standardized implementations on marketing technology platforms, continues to be a point of concern for CMOs. This is especially true as marketing leaders seek to balance their spending priorities between the technologies they need to keep up with competitive pressures and customer expectations with the creative resources and innovative ideas necessary to distinguish their brand executions. This issue is only accelerating in the COVID-19 crisis because of the speed at which marketers have to react. From a CX standpoint, many CMO’s are shifting marketing dollars into digital experience and transformation initiatives at rapid rates. What normally takes a year is being done in 2 weeks. But to get to minimally viable products (MVPs) quickly, they are having to cut corners creatively. For example, Vista Print impressively retooled its operation to sell protective masks and created a somewhat generic looking web experience to sell the masks. This is even more acute in the advertising world where COVID-19 television commercials look, feel and communicate the same messages. From the same somber piano music, to the same copy (“In these uncertain times…”), to the same claims of the brand standing by its customers in times of crisis. CMOs should be applauded for their nimble executions during COVID-19, but they must not lose site of the fact that creative differentiation (and not marketing technology alone) will make or break the brand.

The in-sourcing of digital capabilities by client-side teams

KJ        According to Forrester’s research, approximately 72% of client-side organizations have some form of in-house creative agency.ii A majority of that capacity is in creative services and production and is inclusive of some digital marketing capabilities for social, search, digital strategy and digital creative. More specialized capabilities such as e-commerce, programmatic advertising and data sciences are less prevalent in-house because they require specialized, high-demand talent and substantial technology investments. This year, many CMOs will be reluctant to make capital and talent investments during the immediate economic fallout of the pandemic. Consequently, the trend towards in-sourcing digital capabilities will temporarily slow down while outsourcing work to external partners is likely to see a short-term lift. In the longer-term, marketers will continue to view some level of in-house digital marketing and media capabilities as a strategic advantage and will pursue a multi-year plan to bring them inside.

Pressure for the CMO role to evolve (or even disappear) in light of the demands around the enterprise’s embrace of Digital Technology and Customer Experience… two domains that many marketing orgs are ill-equipped to lead. 

KJ        As you know, I’ve been following this trend closely. I address it in our annual predictions and in dozens of interviews every year. For 2020, the pandemic recession will force CMOs to focus on the basics of marketing because they have too…  especially those in businesses that may literally perish because of the economic meltdown, bad balance sheets or consumer and business behaviors that could dramatically change. Most CMOs have been blowing their opportunity for expanded responsibilities for far too long now and 2020 will further expose these weaknesses. The talented CMOs who are left should (and will likely) seize the opportunity to fuse CX, BX and even EX into a total experience in which customers and employees become beacons of the brand.

Distributed In-house Model For Adaptive CMOs. Image credit Forrester, “Focus Your In-House Agency Strategy To Expand Marketing’s Influence.”

TB        You recently assumed leadership for the “Future of Work” practice at Forrester. Do you think the current crisis will accelerate or jumpstart some of the trends you’ve been tracking? Where are companies most and least prepared to adapt to the future of work… especially one that might arrive more quickly than we imagined?

KJ         In December 2019, I was asked to establish Forrester’s official position on The Future of Work (beyond headlines and hype) by exploring trends in employee experience, automation, the changing workforce and leadership. A month later I was editing our first report, “The Four Forces Driving The Future Of Work.” In this inaugural report– before the world was being swept into its battle with the novel coronavirus – I identified “systemic risk” as one of the four key forces heavily shaping the future of work. All of a sudden, we have a pandemic and a dramatic recession in a US election year less than a month later… the impact of “systemic risk” writ large. I momentarily held back on releasing the report in order to write in the reality of COVID-19 and change the title to, “The Future of Work Starts Now” as businesses worldwide began deploying work-from-home strategies.iii

There is no doubt that our workplaces, organizational mandates, employee policies, the types of leaders we choose to run our organizations and the behaviors of the consumers we serve have forever changed in a matter of weeks, not years. The directional trends There is no doubt that our workplaces, organizational mandates, employee policies, the types of leaders we choose to run our organizations and the behaviors of the consumers we serve have forever changed in a matter of weeks, not years. The directional trends were predictable, but the speed and severity of this pandemic and economic slowdown (accelerated by the interconnectivity of the global economy) was unimaginable. Going forward, business risk and continuity planning will have to be real plans and we’ll see new executive positions in the C-suite in charge of planning for and navigating systemic risk.

Forrester’s Frameworks Guide Your Decisions From The Customers To The Robots.
Image credit Forrester, “The Future of Work Starts Now”.

TB        The competitive landscape for creative agencies has continued to intensify and, in many cases, we see digital agencies, integrated agencies and consultancies all competing for the same kind of work. In our outlooks study this year, respondents even pointed out that in-house teams are also a common source of competition for the work they that do. How do you think the year will shape this competitive landscape and do you see new kinds of operating models emerging on the other side?

KJ         It’s difficult to answer this question without recognizing the devastation that the advertising industry will face because of this Pandemic Recession… a level of pressure that I believe will finally force a complete transformation of the agency business.  At a best case, Forrester has agency, strategy, and marketing operations services tumbling 12% by the end of 2021, with the digital, creative and media agencies responsible for creating and activating advertising campaigns bearing the brunt of this stunted media activity.iv The holding companies and their competitors are shedding thousands of jobs — of which a double-digit percentage we expect might not return when the economy recovers. In contrast, database marketing, customer insights and campaign management service providers will grow as the CMO focuses on measuring marketing efficiency and an ongoing analysis of their drastically changed customers who will be going though different stages of recovery, region by region and country to country.

Technology will augment agency talent losses and accelerate the emergence of the “Human + Machine Creative Team” as a new kind of agency workforce. In fact, my dedicated agency analyst, Jay Pattisall, is intensely exploring what a new kind of agency, enabled by human + machine creative capabilities, will look like. We’re undoubtedly headed towards a very different agency landscape and an economic model that shifts from paying for people to paying for performance and technology.

About the Global Digital Outlook Study

The Global Digital Outlook Study, a collaboration between SoDA and Forrester, is an annual survey of spending trends, adoption of emerging technology, perspectives on the digital landscape and evolving priorities for agency leaders and brand marketers. The 2020 study was fielded in late Q4 of 2019 with supplemental data collected in March 2020. You can download the research highlights and access additional commentary and perspectives at The SoDA Report.

Research Sources (subscription required)

i Source: See the Forrester report “The 2020 COVID-19 Crisis Will Sun US Marketing.” 

ii Source: See the Forrester report “Focus Your In-House Agency Strategy To Expand Marketing’s Influence.

iii Source: See the Forrester report “The Future Of Work Starts Now.”

iv Source: See the Forrester report “The 2020 COVID-19 Crisis Will Sun US Marketing.”