Birmingham Forum
The Drum recently invited a number of Birmingham agency heads to get around a table and share some thoughts on how they can all survive the recession.
Mercifully, this gathering of agency bosses in Birmingham was a much more civilised affair. There was, however, still room for thought provoking debate on subjects ranging from how those agencies present were dealing with testing financial conditions, how to keep staff on side when you can’t afford to increase their pay and what the future holds for a region weathered by the recession.
To help the discussion flow, the meeting was held under The Chatham House Rule - i.e. everyone was encouraged to express themselves freely, in the confidence that their comments would not be attributed to them in this article, leaving them free of reprisal.
The result was a frank discussion that was illuminating and at turns, alarming; an honest, open portrait of life for agencies in the Midlands now, and their hopes and concerns for the future. This is just a snapshot of the topics covered - you can read the full transcript on the Marketing Industry Network website.
RECESSION OR DEPRESSION?
We started the discussion with the unavoidable topic that’s proving to be a monkey on everybody’s back: the recession. “This isn’t a recession, it’s a depression,” came one reply. “This is far worse than anything I’ve ever seen in my lifetime.”
There was no attempt to cloak the impact of the economic downturn. One advertising agency boss even suggested that the best way to deal with it is to imagine that you’re going out of business, “in order to make the right decisions about people, structures and what you’re doing”.
The room largely agreed that cuts in clients’ spending had made them more introspective. One MD admitted it had made him assess every element of his business, “right down to the minutia”.
He said: “Have we got the best people here? Are they working to their potential? Can we get them doing other things? I mean, people performing one role, that’s history. We look for people who actively want to get involved in other parts of the business; people who want to learn; and people who are capable across multiple disciplines. But you’ve got to push those people really hard.
“We’re coming round to the end of the financial year and people are going to want payrises and they’re not going to get them.”
WAGE RISES
Across the table, heads were nodding. “That’s a big challenge for us. There’s no end in sight, so you’re saying to the team, ‘look guys, work harder, let’s do more for the same for a fixed period’. We were having meetings at the end of last year with big corporate clients who were saying, ‘if it’s not essential next year, we won’t pursue it’. We were being told that in doing our forecasting for 2009, not to expect any positive news, essentially.”
A managing director said they’d had to get “tough” with their team: “We had an incident last week where the team came with all the ideas on the Wednesday, we were pitching on the Thursday, and we said ‘we don’t like them’, internally. They were really upset.
“They came back from the pitch and said, ‘we’re so glad we were tested first and changed those ideas because they wouldn’t have worked’. We would probably have let that go about a year ago, but we’re being really critical now.”
There was virtually unanimous agreement from all present that the best way to avoid staff unrest during tumultuous times economically is to be open and honest with them: “We have got a small team, but as we get bigger I think they’ll be a key part of a bigger team, so it’s important they understand the shit we’re in.”
But some staff remain “completely oblivious”, according to one agency head: “It’s amazing, you can do great communication, show all the figures, be transparent, and yet they can be quite oblivious to the real world and what’s really going on.
“There’s a lot of denial. They just bury their head a bit, which is natural when people are in a bit of stress or fear about what’s going on. I hear different stories from different people about parents being made redundant - it’s affecting so many people outside of work that there’s a little bit of denial in work.”
Much more from the discussion about how agencies are dealing with the financial climate is available on the MIN website, including handling clients and “trained procurement negotiators” who are squeezing budgets, adding specialist new divisions to your team to make up revenue shortfall and balancing edgier creative work with the increasing necessity to illustrate ROI.
But we moved on by asking the participants to think about the future for the region’s agency scene. One boss thought the state of the economy would present opportunities for well-managed agencies: “We will actively this year be looking for, not take-overs, but mergers; we will look for businesses that don’t need the overheads.”
This prompted scepticism from the room about how such deals could be funded, at a time when the lending of finance has dried up. “But you won’t be buying agencies, because these agencies won’t be making any money,” was his reply to their concerns. “What you’re doing is giving them an opportunity to make money going forward.” Someone else agreed: “The companies that want to sell out are the ones that are in trouble anyway, so you’re not going to be buying anything.”
ROLLER COASTER
There was a definite consensus around the table that if you do these sorts of deals, you have to be careful about who you take into your agency. “Running a business is a roller coaster ride and there’s two ways of getting off that - one is at the end, and the other is falling off halfway through. You’ve got to be careful that the people you take in don’t feel like they’re stepping off the ride, and aren’t going to contribute anything, when they’re part of your agency.”
Other predictions for the future of the agency landscape in the Midlands included:
“A big shake up this year” - this was the thinking of one boss who cited the launch of new Birmingham-based start-up Chapter as a sign of what may be to come - people leaving agencies with their own ideas about how to “formulate a business model for the future”.
More businesses coming together – “A small PR operation with a small digital agency, for instance. That way, you’re all sharing the overheads at a time when you all need to be - why do you all need a receptionist? Why do you need to have your own building? That, a collective, makes more sense.”
And, perhaps most starkly - one boss predicted that we could see one Midland’s agency a month go bust. But you could say that what’s happening in the Midlands, and what we might yet see in the Midlands, is the industry in microcosm: redundancies and agency closures are happening everywhere, even London. Around the table there remained a sense of hope, not just for the Midlands, but for the marketing scene as a whole.
TREMENDOUS DISCOUNTS
So what are the reasons to be cheerful given some of the darker predictions for the future? Well, although clients are increasingly looking to digital, we were told that tremendous value exists in buying traditional media: 1995 prices are available in TV; discounts of up to 70% are available on ‘premium’ outdoor sites. It is in agencies’ own interests, particularly those which offer full service, to guide clients to what one participant called ‘best value’.
And we’ll leave you with this anecdote: “I think the optimism, dare I use that term, is that you can’t look at these things in a homogenous fashion. You can’t look at retail and say all retail is down the pan because that’s patently not the case.
“Look at consumers and look at what’s happened in the mortgage marketplace, and if you were actually in employment on a tracker mortgage, like one of our financial division directors... he said, ‘I’ve never had so much disposable income’. He’s probably saved £600 or £700 a month.
“So I think that’s the trick, actually, because there are people out there with money. It’s how companies, brands, the economy, start to build confidence to actually get that money spent. There are undoubtedly grounds for optimism there. I do share the view of ‘prepare for the worst’; but there is a sector of the UK population that is in a position to ignite some form of consumer demand-led scenario.”
To read the full 8,000 word transcript of this feature you must be a member of the Marketing Industry Network. Join today by simply visiting www.marketingindustrynetwork.com and enjoy the many MIN membership benefits.
The Drum would like to thank the following people for coming along and taking part in the roundtable discussion:
Dean Lovett, chief executive, McCann Erickson Birmingham Paul Bramwell, managing director, Brilliant Media Birmingham Steve Price, partner, Unsuitable/One Black Bear Ollie Purdom, director, Pitch Consultants Julia Willoughby, chief executive, Willoughby PR Jacqui Lennon, managing director, WAA Andy Walton, managing director, Golley Slater John White, managing director, Madison Soho