Why Agencies Struggle — and How AI Could Save Them
For agency leaders, there’s a persistent, maddening reality we don’t talk about enough: new business is hard. Really hard. Despite all our creativity, strategic brains, smart teams, and deep client experience, the pipeline still feels more like a trickle than a torrent.
And yet — here’s the kicker — most agency clients are looking for more help, not less.
Our latest national research reveals a striking disconnect: while many agency leaders fear clients will cut us out or slash budgets because of AI, clients are actually looking for our guidance. They don’t want to replace us — they want us to help them navigate AI safely and strategically.
Agencies See Uncertainty Ahead, a 2025 study released at the Build a Better Agency Conference in Denver, was conducted by Agency Core, a new non-profit research organization founded by myself and Brian Gerstner of White Label IQ, providing free research with and for agency leaders. It offers a deep dive into the attitudes and challenges of marketing agencies, and reveals the tremendous challenge for most agencies of maintaining a robust pipeline of right-fit clients.
Leading Through the AI Revolution: The New Competitive Edge for Agencies is the latest in the 12-year Agency Edge research series we conduct with Drew McLellan at Agency Management Institute, and explores the opinions of agency clients around their agencies’ use of AI
Fielded just months apart, these two studies reveal a paradox most agencies haven’t yet recognized. While many are cautiously adopting AI, worried about how clients will react, they’re also struggling to stand out and win new business. Meanwhile, those same clients are overwhelmed by AI and actively looking for strategic agency partners they can trust — not just to “use AI,” but to help them leverage it wisely, protect their brand, and gain a competitive edge.
Let’s unpack what’s going on — and see how savvy agencies can flip their fortunes from frustrating to flourishing.
AGENCIES IN THE TRENCHES: THE CORE STRUGGLE
The Agency Core 2025 study gives us a data-backed look into the internal landscape of small to mid-sized agencies. Spoiler: the new business challenge is real — and it’s not just a temporary dry spell.
The research includes an attitudinal segmentation that reveals five different “mindsets” of agency leaders. Two say their agencies are doing far better than those of their colleagues:
- Thought Leaders are agencies with a clearly defined niche, strong positioning, and a commitment to thought leadership. They’re not just surviving — they’re thriving. They’re not worried about the pipeline because they’ve built a brand that attracts the right kind of attention from the right kind of prospects, and those prospects come to them based on their expert reputation. These agencies struggle less with challenges, including new business, than any others in the survey.
- Loyalty Builders have robust, long-term relationships with their clients. They prioritize maintaining an expert reputation while deeply understanding what makes clients leave and ensuring their client communication and reporting underscores their value.
The other three segments revealed have critical issues that make new business efforts (and agency survival) much more difficult.
- Staffing Strugglers wrestle with talent shortages that make it difficult to even pursue new business opportunities. They can’t afford the employees they really need, and are losing current members to agencies that pay more. They’re in a tailspin of less-experienced, overworked employees and price-focused clients.
- Change Seekers feel pressure to evolve in the face of a changing marketplace and new technologies, but are handicapped by their focus on tactical work over strategy, which they believe clients won’t pay for. 89% of these respondents strongly agree that finding new clients is harder than ever.
- Cobblers’ Kids know the importance of agency marketing, but never seem to get around to doing it. Their clients love them and stay loyal, but few prospects are aware of their strong track record so they’re limited to word of mouth from their existing client base. Without more exposure to ideal prospects, their pool of new sales is severely limited.
While other respondents don’t match the Change Seekers’ extreme struggles with new business, about one-third strongly agree that finding new clients is harder than ever, and 61% cite maintaining a robust prospect pipeline as a severe challenge. This makes pipeline the #1 challenge for agency leaders by a significant margin.
For many agency leaders I know, this issue has led to a disheartening loss of optimism about their agencies’ prospects in the coming years. Again, the research confirms what many of us are feeling. In our 2022 Agency Core survey, 73% of agency leaders felt strongly optimistic about opportunities for their agency. In 2025, only 47% do — a shocking drop.
THE DISCONNECT BETWEEN STRUGGLE AND OPPORTUNITY
This is where the Agency Edge 2025 study flips the script. It gives us the client perspective — and reveals a giant opportunity for agencies willing to claim it.
Despite the fears of many agency leaders, most clients aren’t looking to cut agencies out. They’re not trying to replace us with AI or squeeze our margins. In fact, they want better ideas, better strategies, and more guidance from agencies they trust who are experts in AI.
Across the board, clients say they value agencies that lead — that offer clarity, expertise, and partnership. Not just deliverables. Not just billable hours. Leadership.
And when it comes to AI — the big, scary disruptor everyone’s whispering about — most clients don’t want to go it alone. They’re not looking to become prompt engineers. They’re worried about the potential for the use of AI to create issues for their brand or fall behind competitors using it well. They’re looking for partners who can help them understand what’s possible, what’s risky, and how to use AI to make smart marketing decisions.
AI: THE TRUST ACCELERATOR AGENCIES DIDN’T SEE COMING
Let’s talk about the three client mindsets that emerged in the AI-focused Agency Edge study:
- AI Embracers: These clients already trust their agencies and want them to take the lead on AI strategy. They see AI as a tool to elevate agency work — not replace it.
- AI Skeptics: These folks are anxious but not unreachable. They’re worried about risks, but they know AI is here to stay and they’re open to education. If your agency can demystify AI, you can build trust that leads to bigger strategic roles.
- AI Opportunists: They think AI might let them cut agency spend. But their unrealistic expectations about what out-of-the-box AI can do means they’re likely to learn the hard way that DIY marketing powered by generic AI tools is just going to make their marketing more generic as well — and in the meantime, they want to learn everything they can from an agency that’s an AI expert (who might actually convince them to change course).
The opportunity here is massive. Agencies that show up as expert guides — with clarity, confidence, and understanding — can build relationships rooted in trust and expertise. And those are the relationships that lead to more work, more referrals, and a robust prospect pipeline.
WHAT WINNING AGENCIES ARE DOING DIFFERENTLY
If there’s one theme that ties both studies together, it’s this: agencies that have built a reputation for expertise by investing in their own positioning, perspective, and thought leadership are the ones winning at new business.
We’ve increasingly seen the importance of such a reputation over studies for the last ten years of Agency Edge research. In an environment of collapsing trust in virtually everything, clients and prospects rely more and more on the twin guideposts of niche and reputation. Agencies that stand out today aren’t hiding behind “we do everything for everyone.” They’re not afraid to plant a flag and say, “This is what we believe. Here’s the data. Here’s how we can help.” They’re using research to differentiate themselves, develop content that gets shared, and build reputations that clients trust.
Agencies have long taken the pole position when it comes to adapting new technologies for marketing. And now, AI represents a new opportunity to stand out for agencies that know what they’re doing. Clients want to see agencies share not just how they’re using AI, but when, and why — and how their clients should be using AI too.
If you’re not doing that yet, now’s the time to start.
THE FUTURE BELONGS TO THE BRAVE
Here’s the bottom line: your agency doesn’t have to stay stuck in the “change seeker” or “staffing struggler” zone. You can be a thought leader. You can build trust. And the research shows that few clients say their current agencies are AI experts.
This is a blue ocean opportunity for smart, nimble, strategic agencies. An entirely new opportunity to stand apart for the expertise both current clients and your ideal prospects are desperately seeking.
Smart agency leaders have a window of opportunity to step forward now and build a reputation that draws clients to them and keeps them loyal. Plenty of others will jump on the bandwagon later, but those who lead early will have a head start. Reputation doesn’t happen overnight — it takes time, consistency, and endorsement from other trusted experts. Agencies that wait until AI feels “safe” to talk about will find themselves bringing up the rear.
But realizing this opportunity means stepping into a leadership role your prospects and clients are already hoping you’ll claim. It means sharing your point of view. Talking openly about the changes in the industry. Offering clarity where others offer confusion. And providing advice, guidance, and examples that show you’re the best partner to help them navigate this new world.
Because while the AI revolution might feel like a threat, it’s actually your best shot at showing up differently — and better — for the clients you want most.
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