Ad Agencies Register Concern on Economy

While not in panic mode, CEOs, national buyers closely monitor economy

Perhaps the lack of immediate panic stems from frontline fatigue. Agencies have been battle tested by the last recession, so, in some ways, a double dip would be a continuation of life as they’ve known it since 2008.

“We live in a VUCA world—volatile, uncertain, complex, ambiguous,” said Saatchi & Saatchi worldwide CEO Kevin Roberts, who declined to rank his concern. “We and clients must adjust. Speed, flexibility, and the ability to surf the waves will define success.”

During the past recession, many companies shifted to working with agencies primarily on a project basis—the equivalent of a spot buy in the media world. The thinking was, why pay up front for something you can buy a la carte when and if you need it? Also, some marketers got used to shooting ads outside the U.S. to avoid the cost of paying union wages to actors. In all likelihood, such cost-control practices will continue—with or without a double dip.

Saatchi clients like Procter & Gamble, Toyota, and General Mills are “driving for share growth, upping innovation, eliminating nonvalue, adding complexity, and focusing on [the] new consumer,” Roberts wrote in an email. “The mantra is 'better faster scalable ideas (cheaper!).'” 

Still, for agencies, it’s a juggling act. They must adapt to the economic realities that marketers face but also need to make sure brands remain true to their core brand strategies. Easier said than done.

In the meantime, agency leaders track macro-economic indicators like the unemployment rate, consumer price index, and interest rates.

“If I look at the economy versus the market, we are still bouncing along, however unspectacularly, but we haven’t fallen off the cliff like in 2009," said Andrew Robertson, CEO of BBDO Worldwide, who also declined to rank his concern. "The U.S. jobs numbers were better last week, but they still have to get a lot better. [For the ad industry], consumer confidence and expenditures are more important than Wall Street. Am I nervous? Yes. Am I terrified? No. This is not the same as 2008 when you had a huge liquidity and credit crunch between banks and nations, and people were not able to get credit, and you had a 20-40 percent collapse in certain categories like autos.”

As for projected client ad spends, he said, "We can see one or two quarters ahead with some clarity and no one is panicking.”

But with a few more stock market plunges like we saw last week, that could change—fast.
Certainly, volatility among investors and the unwillingness of political parties to work together to grow the economy are enough to keep any agency CEO awake at night.

“What worries me is the same thing that worries the market: uncertainty,” said Arnold global CEO Andrew Benett, who puts his nervousness at a 6. “What if clients get spooked again and they decide that, you know what, they’re going to enter the first half of next year much more conservatively?”

Also, just as the recession changed how marketers and agencies behave, it also changed consumer behavior. Hyper-consumerism has generally given way to more mindful, meaningful consumption. Benett, for one, believes that change will endure.

“That behavior has been in place for the last two years now," he said. "So, I don’t think we’re going to see a dramatic change. The economy is definitely contracting, it’s slowing, but at the end of the day, are Americans going to still take a vacation? Yes. But they’re going to be more [choosy], and they’re going to do more research.”

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