My conversations as an agency President often involve AI and will occasionally lead to comments like, I bet it's making your life easier. And those same people are shocked when I tell them that actually, in some ways AI is making agencies’ jobs more difficult.  

People assume that the efficiency that AI provides is a net positive. That is the narrative being sold. But what they forget is that clients are expecting that efficiency as well, and it’s forcing agencies to rethink how they operate. 

The Challenge With AI

Especially for agencies who are delivering technical solutions and focus on platform and software expertise, that development work can be tedious. I’ve been in the ecommerce space for two decades now. I don’t want to undersell the skills needed, but some of the steps in an implementation or integration are more tedious than challenging. 

Now, AI can accelerate that work, and clients are starting to learn and expect AI to create efficiencies there. The issue for agencies is that AI efficiency eats into their bottom line. If a project that would normally take, say, 200 hours can now be done in 150, that’s a healthy chunk or revenue agencies are losing out on. Then the question becomes, how do you make up for it? It has to either be replaced with more projects (increasing sales in a crowded market) or more IP (differentiating yourself in a crowded market). 

Or, as is becoming the case, agencies have to change their approaches and business models. 

Outcome-Based Approaches

One strategy some agencies have taken to combat AI eating into their margins is to move away from a fixed-fee or time-and-material-based model and move to fees based more on results. 

This is a strategy we’ve seen already in the advertising and demand generation space. Agencies get paid when pre-defined goals are hit. In advertising and demand gen, it may be when a certain number of leads are acquired or an engagement threshold is met. Apply that to ecommerce and it could look like tying agency fees to a new site’s increased average order value or number of purchases. 

In this case, the value of agencies moves from delivering an output to generating outcomes that prove why they are the right choice. It’s putting reputation and expertise on the line. 

The Expert Vs. AI

Agencies’ bottom lines aren't the only place where AI is causing issues. It’s also opening up larger questions, both for developers and creatives. For instance, how much of what is delivered comes from your team’s brains and how much is from AI? I’ve done sit-downs with clients where the entire purpose was to show what we were building and how we were doing it to prove that it wasn’t all being outsourced to AI. AI has become such a mainstream phenomenon that it’s now assumed to be everywhere. 

That being said, most companies aren’t ready to put all of their faith in AI. And more importantly, what are companies paying agencies for if AI is doing all of the work anyway? And for me as an agency owner, I want to know that my team has the actual chops to deliver what’s needed and isn’t getting by relying on AI to do the heavy lifting. Human knowledge and value have to shine through both in the pre-sales process and in the interview process at agencies to trust that the people they’re bringing on and associating with their reputation can do the work themselves. 

Where Agencies Go From Here

It’s a fine line to walk. Agencies are wasting their time if they aren’t using AI in some capacity to work smarter and more efficiently. That being said, an overreliance on AI by agency teams – where they’re turning off that part of their brain and deferring to AI – won’t lead to success. And clients are beginning to call them on it. 

The answer is nuanced and still a little muddy. But what’s clear is that agencies are going to have to evolve and adapt. The good news is this is what agencies have been doing for decades. The TV explosion. The shift to digital-first marketing. The rise of social media and video content. All have threatened to weed out the ones slow to innovate and caused business models and organizational structures to be reevaluated. 

The latest challenge is how to maintain credibility and discover new white space in the age of AI. B2B buyers are smart, and agencies are going to have to get creative once again to prove their worth.