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Economists are divided over whether the dreaded “R” word, a recession, is imminent—but what is clear is that times of economic uncertainty are ahead. There are some factors that are out of our control, and without a proper strategy, these uncontrollable elements can cripple even the most successful agencies.
The key is to start preparing now to weather the storm if a downturn does occur in the next six to 12 months.
Resiliency is the best currency for agencies during this time. Focusing on talent, business growth and development and operations is imperative to ensuring they survive and ultimately thrive.
Talent is the greatest asset
Economic downturns often bring reductions in areas like training and development. While it’s too early to tell what might transpire, agencies should not hold back on investing in talent at any time, regardless of the circumstances.
Agencies already operate in a lean capacity, especially as more work becomes project-based, so in the event of an economic downturn, there is likely to be added workloads and stress to current employees if hiring freezes are needed. To combat this, leaders need to ensure they continue to nurture a supportive and inclusive culture while evaluating if salary and benefits for their current employees is fair and competitive.
Employees want to know that leadership actively supports and listens to them. And the reality is that people leave managers, not companies.
Leaders set the tone for their teams. Investing in leaders reaps the reward in the form of loyal and dedicated employees that want to stay with agencies long after weathering any storm together.
The lifeblood of an agency is business growth and development
Next, strive for and maintain a diversified client roster. Think of it as an investment portfolio, balanced and not saturated in any one sector.
During this time, vet opportunities carefully as you assess where the team can win. This may mean deep category experience, a truly unique business-building idea, a strong relationship with a decision-maker or other factors that can help tip the balance in the agency’s favor. If agencies don’t have one already, develop a screening model to help carefully determine the right opportunities to invest scarce resources.
Agencies should mirror the behaviors of the clients they serve. Just as brands are told, at minimum, to maintain a strong presence during a downturn, agencies should heed the same counsel and strive to maintain their share of voice and share of mind.
During a downturn, marketers should not “go dark,” as they risk losing market share and eroding their brand equity which could negatively impact them, especially once the economy improves. This is an agency’s moment to dig deep into creativity, because creativity that connects with consumers and drives commerce always wins.
Continue to leverage creativity in all forms as the vehicle for solving challenging business problems. Agencies need to take a closer look at how their creativity supports business transformation through talent, automation and sustainability. New and disruptive automation tactics can address potential talent gaps, increase accuracy and provide focus on areas of greater strategic value.
Operations is for simplifying complexity
In the face of an economic downturn, arriving at a place of operational efficiency is even more important. No agency lasts long or thrives—despite brilliant insight, planning and award-winning work—without strong financial acumen and operational leadership. A resilient agency runs a tight ship.
Specifically, eliminate discretionary expenses and focus on those related to client retention and satisfaction, employee retention and motivation and focused business development. Also, avoid long-term financial commitments, keep a close eye on accounts receivable and push back against extended payment terms.
Agencies need to also stay savvy with new business. Historically, during challenging economic times, pitch activity has slowed significantly.
Pitches also take an exorbitant amount of money, time and resources. Reconsider the amount of new business pitches—instead, agencies should “love the one they’re with” during this time, addressing organic growth areas by investing in emerging opportunities.
While it might seem counterintuitive to stick to what agencies know, don’t play it safe, as this is a time to go big with current clients. Bring them unsolicited new business-building ideas and offer to help with areas in which they may be struggling.
Financial acumen is one piece to the puzzle, but product and service offerings should also be reevaluated by identifying areas that should not be scaled back or eliminated. Capabilities and skills that are in current demand ideally support strong margins and likely will remain in demand due to the societal and economic changes taking place.
While agencies cannot control the ebbs and flows of the market, leaders can begin to take these steps to implement practical solutions now to lessen the effects of an economic downturn. Agencies showed they were resilient at the height of Covid-19, ensuring that when the going got tough, they were there to help brands through the most challenging business period of our lifetime.
This next chapter presents another opportunity for agencies to shine and show how valuable advertising and marketing can be, despite uncertainty.
