Client-Agency Relationships of Advertising Industry in China

For long, short term relationship between agencies and clients was the norm in China. This scenario is changing with clients moving away from retainer pricing model and project based pricing model to performance based pricing model. Apart from this trend the contract tenure of the engagement between agency and client is also on the rise. These changes are owing to the increasing competition in the market. It is expected that moving forward; due to high consolidations, the agency roster size will reduce paying way for better and longer term strategic relationships between agencies and clients. Introduction: The demand for creative advertising services is increasing in China as clients continue to view China as a major business destination. ��The overall Chinese advertising market has been growing at a CAGR of 11%. This is more in line with increasing demand for digital advertising by clients to capitalize on the increasing internet penetration in the Chinese market. To keep pace with this demand global agencies have flocked into China to set-up base, leading to a fragmented market and high competition between the agencies. These dynamics in the market have increased the need for more accountability from the business partners, which has encouraged the marketers and client to invest in long term strategic relationships. This article focuses on how the client - agency relationships have evolved in China and where the industry is heading.� Industry Outlook: The creative industry 3-5 years ago A few years back, China had client-agency relationship tenure of about 2.5 years which was the lowest in the world. Creative agencies were considered the same as any other commodity in the market .This non-differentiation led the clients engaging with agencies on a project to project basis each time with a different agency. Also a key driver for high agency switching is the adoption of project based remuneration and not a yearly contract.   Author: Fince Anna Philip