Light at the End of the Tunnel? (Or Are Those the Lights of the Train?)
As published in MadCoUK
Correction. Recession. Downturn. Train wreck. Everyone has a different name for it, but whatever it is that's going on in the U.S. economy, it's pretty nasty. Getting nastier. And wreaking considerable havoc on the advertising/marketing industry.
Some agencies -- the i-agencies and other agencies deep into technology and the
Internet -- are imploding. (Witness the MarchFirst debacle and the stock values of literally all the major and minor players.)
Of course, this is not "new" news. What's becoming increasingly apparent, though, is that most agencies are either barely holding their own or seeing the first significant reductions in revenue in many years.
Big agencies are scrambling for scraps of business they would have sniffed their noses at a year ago. Layoffs and office closings are being announced daily. Many other "downsizings" are occurring quietly, under the radar.
What's exacerbating all this is a dynamic that has been building over time, and that is having a profound impact on the U.S. agency business.
The day of enduring client/agency relationships is waning. This has been the case for some time. It's even more the case now. Why? The gradual eroding of the client mindset that agency relationships ideally are long-term. Accelerated by the susceptibility of advertising and marketing budgets to the severe economic chill we are now experiencing.
These days, agencies are hired and fired based on a bad quarter. Or a campaign perceived to be off the mark. Or simply, an opportunity clients see to conserve cash paid to agencies in fees and commissions during periods with less marketing activity (because it's easy enough to hire another agency as soon as the need again arises).
This shouldn't be construed as whining. Ad agencies are at the bleeding edge of capitalism incarnate. And so, if we are buffeted and bruised by its storm forces, that seems only right.
Here's the conundrum, though. For agencies to be optimally effective, there needs to be some level combination of consistency (key people, culture, infrastructure, process, senior talent). Yet, when this becomes untenable due to industry trends, the economic climate and so on, our effectiveness and viability diminishes. It's a bit of a viscous circle.
What's the answer? I can't say for certain, but here are a few thoughts:
- Select clients more rigorously. Exercise greater discipline in weeding our prospective clients that aren't true and willing partners.
- Sign longer contracts. No more 60 day or 90 "out" provisions. Year-long contracts. It takes time to work magic. It sometimes takes time to make relationships work optimally.
- Apply "tough love" more quickly and aggressively.
Easier said than done? Of course. And especially when revenue is under siege and new business is at a premium.
But consider what's going on in the States. Right now, the train wreck is leaving a lot of carnage. We're laying off talented people, who don't have great near term prospects and will likely flee the business. We're getting demoralized; people are once again asking why they ever got into this business in the first place. We're also reinforcing to the next generation of young people about to come into the industry that other industries are far better choices.
So is there light at the end of the tunnel? From an economic standpoint, I'm not qualified to comment. We see glimmers that this might be the case. We also see evidence that a turnaround may not be around the corner.
Where I do see light is in terms of claiming full and equal partnership in client relationships -- so long as we live up to the claim. Will we as an industry do this, and in so doing, slow the erosion of our client bonds? Probably not. Which is the true cause for concern.
As published in MadCoUK
Correction. Recession. Downturn. Train wreck. Everyone has a different name for it, but whatever it is that's going on in the U.S. economy, it's pretty nasty. Getting nastier. And wreaking considerable havoc on the advertising/marketing industry.
Some agencies -- the i-agencies and other agencies deep into technology and the
Internet -- are imploding. (Witness the MarchFirst debacle and the stock values of literally all the major and minor players.)
Of course, this is not "new" news. What's becoming increasingly apparent, though, is that most agencies are either barely holding their own or seeing the first significant reductions in revenue in many years.
Big agencies are scrambling for scraps of business they would have sniffed their noses at a year ago. Layoffs and office closings are being announced daily. Many other "downsizings" are occurring quietly, under the radar.
What's exacerbating all this is a dynamic that has been building over time, and that is having a profound impact on the U.S. agency business.
The day of enduring client/agency relationships is waning. This has been the case for some time. It's even more the case now. Why? The gradual eroding of the client mindset that agency relationships ideally are long-term. Accelerated by the susceptibility of advertising and marketing budgets to the severe economic chill we are now experiencing.
These days, agencies are hired and fired based on a bad quarter. Or a campaign perceived to be off the mark. Or simply, an opportunity clients see to conserve cash paid to agencies in fees and commissions during periods with less marketing activity (because it's easy enough to hire another agency as soon as the need again arises).
This shouldn't be construed as whining. Ad agencies are at the bleeding edge of capitalism incarnate. And so, if we are buffeted and bruised by its storm forces, that seems only right.
Here's the conundrum, though. For agencies to be optimally effective, there needs to be some level combination of consistency (key people, culture, infrastructure, process, senior talent). Yet, when this becomes untenable due to industry trends, the economic climate and so on, our effectiveness and viability diminishes. It's a bit of a viscous circle.
What's the answer? I can't say for certain, but here are a few thoughts:
- Select clients more rigorously. Exercise greater discipline in weeding our prospective clients that aren't true and willing partners.
- Sign longer contracts. No more 60 day or 90 "out" provisions. Year-long contracts. It takes time to work magic. It sometimes takes time to make relationships work optimally.
- Apply "tough love" more quickly and aggressively.
Easier said than done? Of course. And especially when revenue is under siege and new business is at a premium.
But consider what's going on in the States. Right now, the train wreck is leaving a lot of carnage. We're laying off talented people, who don't have great near term prospects and will likely flee the business. We're getting demoralized; people are once again asking why they ever got into this business in the first place. We're also reinforcing to the next generation of young people about to come into the industry that other industries are far better choices.
So is there light at the end of the tunnel? From an economic standpoint, I'm not qualified to comment. We see glimmers that this might be the case. We also see evidence that a turnaround may not be around the corner.
Where I do see light is in terms of claiming full and equal partnership in client relationships -- so long as we live up to the claim. Will we as an industry do this, and in so doing, slow the erosion of our client bonds? Probably not. Which is the true cause for concern.