A 'dangerous backdrop of instability' - Agencies react to David Cameron's economic warning

By Michael Feeley | Founder and chief exec

Thinking Juice

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The Drum Network article

This content is produced by The Drum Network, a paid-for membership club for CEOs and their agencies who want to share their expertise and grow their business.

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December 8, 2014 | 8 min read

With prime minister David Cameron issuing a stark warning of a “dangerous backdrop of instability” heading our way in the global economy, The Drum Network asked a range of our agency members what advice they are offering to their clients to prepare them for an oncoming storm. What pointers can they provide on marketing through an economic slump?

Gellan Watt, managing director and chief creative officer, Thinking Juice

We’ve been erring on caution for the last two months with the recent stall and slide in consumer confidence and a slowing of the housing market. And as we get ever closer to the election, big purchases will likely be put off post-Christmas. The Christmas bubble will keep positivity flowing in the UK, but I predict a tightening of belts in Q1 and Q2 2015. Our advice to clients is to be ready to capitalise on short-term opportunities created by nervous competitors – tough markets and economic instability are also drivers for some of the bravest marketing decisions and bolder creativity. Also, we advise that clients watch out for the smart, brave and nimble challenger brands. This is their time to shine. Too much marketing caution or held-up spend can create opportunities for competitors to get traction that is hard to slow when the market will surely come back strong post-election.

Jay Cooper, founder and director, Bloom

Do you spend yourself out of a recession? Do you tighten your belts? I’ve always thought that the lazy option is to sit back and hope for growth, because at some point, this option is not going to be available to you when your brand or business is marginalised.

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The smart option is to innovate. So how does that look? Invest in new ideas, things that may seem contrary to what you do.

Look at the great examples of Unilever Foundry and the BBC Labs incubating new ideas. Look at how agencies are moving away from selling you a piece of their time in exchange for money. Look at why brands like Guinness and Marmite continue to survive (and thrive) and look at how they have taken tough changes to their market over time.

The future doesn’t have to be dictated by the past. In days where our models for success are becoming less and less relevant, isn’t it time to disrupt ourselves and try something new? What do you have to lose? Well, in fact, potentially everything...

Rob Shaw, chief executive, Epiphany

We have a wide mix of clients in terms of turnover, market sector and geographic location. They all react differently to changes in the economy both domestically and internationally. One common theme we see in conversations with these clients is to make the most of what you have. When there is uncertainty around consumer spend or consumer growth you need to make sure that those who are coming to you (through whatever online channel) are converting. Conversation rate optimisation (CRO) is always a sure fire way of increasing revenues if it’s done right. Companies are still investing heavily in securing website visitors but not all of them are investing with the same conviction in CRO, meaning much of their online investment is wasted. Any business thinking about the uncertainty of new customers should ensure that those opportunities for new revenues they have aren’t wasted.

Brian Rees, chairman, The If Agency

We can’t claim that we advise clients on global economics but their performance is undeniably connected to international markets. For example, we have a highly successful – but very niche – client that sources high-end items from all over the world and then sells and supplies to luxury buyers internationally. Exchange rates affect both its suppliers and clients from region to region, whilst fluctuations will directly alter price and, ultimately, profit.

Another client, which operates in the global utilities sector, supplies huge capital equipment, particularly to the EMEA. Again, the value of the pound – along with the instability of other economies – overshadows its sales potential. Our focus with those clients that have direct foreign exposure is to emphasise their skills and experience and, in particular, their British excellence in design, innovation and service. ‘Brand Britain’ is still very important and is seen as a competitive proposition.

Richard Simpson, director, Tayburn

This sort of warning is frankly unhelpful. I have experienced a couple of recessions now and the last one was painful for many, calling into question the entire capitalist model. However, the world didn’t end and many businesses experienced significant growth during that period.

I am beginning to feel that these sorts of warnings are just political dogma. Too few politicians have any real business experience and don’t understand that owner managers and entrepreneurs make daily decisions that have consequences – the political world might run on glib soundbites, but businesses don’t. As a result, business people need to be brave as they are immediately accountable to their customers, staff and investors.

By way of example, we have a client, an engineering company, that started spending on marketing for the first time in 2008. Its business has grown from £6m to £11m in the last couple of years. What’s the key to its success? It offers a remarkable service to its customers and it has invested a significant proportion of its turnover on marketing activity, making its brand mentally and physically available to its customers and prospective customers.

One of the key words here is ‘invest’. And we know that investors don’t like uncertainty, which is what Mr Cameron’s remarks create. To offset this uncertainty, we as marketers need to be more accountable for the results that we deliver. Rather than get caught up in high-level and frankly subjective metrics such as brand valuation, or softer, less meaningful scores like followers and page views, we would be better served looking at reducing the cost of customer acquisition and maximising the lifetime value of customers.

Debra Hepburn, managing director, RBH

Cameron’s ‘flashing red lights’ speech at the recent G20 garnered plenty of media coverage about the underlying state of global economy – threats of stagnation, whopping big debt mountains, faltering emerging market growth and talk of a return of the Cold War – it’s all enough to generate a big furrowed brow moment.

However, economic highs and lows have been an ever present feature on the economic landscape and, dare we say it, managing through a recessionary cycle is part of the normal business cycle. As a 19 year-old marketing agency we’ve certainly gained enough experience to really appreciate how companies can shape and adapt their marketing and promotion effectively during economic slump.

At the first sign of a trading slowdown, don’t resort to knee-jerk decisions axing all marketing, advertising and communication budgets. Reduced consumer confidence and spend will undoubtedly result in more competitive and volatile conditions, but arguably that is when brands and businesses most need to maintain an even greater focus on effective, high impact, good quality, well executed marketing and advertising.

And secondly, value customer loyalty as a premium marketing asset – as a general rule the existing customer base of a brand or business will include its most loyal advocates and biggest spenders over time. So be sure to redouble efforts to look after them well – not just in terms of price but also from a service and customer care perspective. We also say invest in good CRM and ensure you use digital, social media and other consumer insights expertly well – it will make all the difference to the way you approach marketing especially if times become a little tougher.

Nader Alaghband, founder and chief executive, Apppli

Never listen to any politician in the run up to an election.

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