I entered the advertising business in 1965. During my career, I lived through five recessions (or “economic slowdowns,” as we say in polite society). Let’s see, there was the 1974 energy crisis; then 1981, 1991 and 2001; and the now-called Great Recession of 2008-2009. Now the market prognosticators are warning of a possible new downturn coming our way.
With a fair amount of experience in these matters, I have discovered similarities in recessionary periods. Many economic slowdowns are fed by the media looking for a story, especially in the run-up to a presidential election. Others result from attempts to manage the economy… which never result in the desired outcome in a free market—the market will do what’s it wants to do. The new recession may be due to current government trade and fiscal policy, or simply be an overdue “correction,” as the stock analysts like to call them. Regardless of the causes of a downturn, most last about one year, and offer great opportunities for contrarians.
With this in mind, here is some advice that may help your ad agency or marketing consultancy weather the next “whatever it is that seems to have gotten into the economy” situation.
Sell Like Hell.
Wherever there is trouble, there is opportunity. Now is the perfect time to increase your new business activity, especially in selling your ability to help companies increase their sales, fill their pipelines, or (the magic words that clients want to hear in downturns), “use limited marketing dollars more effectively.”
Following are some key new business intros to test:
- Are your marketing efforts directly tied to your sales efforts?
- We can analyze your competitive position and show you how to improve brand positioning to market more effectively across all channels.
- We can help your company generate more leads and close more sales once the leads are in your hands.
See what I mean? In down economic times, you have to help clients with programs that drive sales, above and beyond simply advertising. We can talk ’til the cows come home about the absolute validity of “awareness” and “recall,” but if sales aren’t humming, clients won’t listen. Job number one in a soft economy is to help your clients and prospects to survive.
Get your new business engines revving. Now is the time to be proactive!
Marketing Counts This Time Around.
During economic downturns, advertisers have a tendency to cut their budgets, tighten their belts and ride it out. The present era calls for a different approach. Most companies realize that today’s customer is very bright and very well informed. Customers are not looking to be sold to, they are looking to buy, to have a relationship with their chosen brands. In this customer-empowered economy, most companies realize that they need to continue marketing to stay close to their most valuable customers… and get those customers to send new customers to the client. The “buy for less now!” type of promotional marketing used during previous downturns just results in reducing your perceived value in customers’ eyes. Agencies need to help clients find strategies that don’t involve cutting prices, but focus on adding customer value and retaining and growing customer loyalty. If your agency can help clients achieve these marketing goals, then your agency will stay busy even during downturns.
Cut Expenses Now. Don’t Wait.
Most agency consultants will confirm that agencies don’t cut their expenses soon enough when economic downturns begin. The most important cuts revolve around payroll, associated costs related to payroll, and rent/overhead. But there are other places to look as well; cars, travel, interest to banks, etc.
Please do yourselves a favor. Sit down tonight with a cup of whatever you drink and review your agency’s metrics. Total agency payroll compared to agency adjusted gross income (AGI, or billings minus direct vendor costs) should be in the 50-55% range. If yours is much higher, you must consider how to make it lower. Rent should be no more than 5% of AGI. If you look at Second Wind’s Annual Agency Survey Report, (available free for download to all Second Wind), you can make a spread sheet and compare your agency’s expense metrics to other similar agencies.
Also, check all of your agency ratios, and start pulling these monthly financial reports. Get a good handle on where you stand now, and develop a business plan so you can react with greater confidence based on your plan, not just to survive the current economic blip. Now is the time to get your agency’s expenses and goals in order and in line!
Know Your Clients’ Customers.
Agencies need to become experts in helping their clients understand and connect more effectively with their customers; This knowledge will potentially save your bacon during any downturn. Customer data is a spectacular marketing tool. Companies are becoming great at collecting customer data, but really need help figuring out what data is valuable for marketing. If you cannot offer clients assistance with marketing customization and personalization, they will find another partner. Become your clients’ go-to customer knowledge resource.
More Billings from Current Clients.
There’s no better place to get more new business than from your current clients. You are already in the door and have the relationships. Activate your efforts; roam the halls, turn projects into programs, help with in-house communications and inward marketing, put forth extra brand development and brand activation tactics, and you will keep your billings strong. Keep in mind that increased billings from current accounts are worth four times more in profits than the first year of billing a new account.