Modern Marketing Ad Spend Agency Culture

How top agencies and consultancies are preparing for impending recession

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By Kendra Clark | Senior Reporter

July 25, 2022 | 9 min read

With inflation at record highs in many markets, agencies are poising for an economic downturn. Top advertising, media and communications agencies and consultancies share their predictions, advice for adland and insights for guiding clients through a potentially stressful economic period.

This month, the US market reached the highest annual increase in inflation in over 40 years, at 9.1%, per the latest data from the US Department of Labor. With inflation peaking, the Fed has hiked interest rates, with another increase expected soon. Many economists are predicting an impending recession — which has businesses of all kinds on the edge of their seats.

The advertising sector may be vulnerable, as big brands are wont to slash marketing budgets when times get tough. Here’s how top agencies are thinking about the near economic future — and how they’re helping clients navigate this moment.

Dominos falling on man

The dominos are already falling, according to many economists / Adobe Stock

1. Don’t get caught up in the cost-cutting game again

With the pending recession, I believe that it’s not about cutting costs but creating efficiencies within the agency. The agencies who will succeed are the ones who will provide the best value to their clients — by creating an integrated approach of creative and media together, and by delivering high-quality output at value. We have spent 13 years being a price leader for Fortune 500 companies — I hope more agencies follow so they can keep their employees intact and grow instead of dealing during this time.

-Gary Vaynerchuk, chief executive officer at VaynerMedia

2. Nurture new revenue streams

Given the recent Covid-19 [slowdown], any economic slowdown will be less of a jolt and more of a gradual easing of the gas. That said, it's clear that consumer spending will decrease in some areas, particularly on larger-ticket items. Overall, brands need to find ways to offer consumers more for less in this environment — but that doesn’t mean innovation stops or brands will be left behind.

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Disruptive technologies like Web3, blockchain and AI will continue to create new revenue streams for businesses and that's a place where we have strong expertise and can make the complicated easy to navigate for our clients.

In addition to these technologies, we will continue to help our clients evaluate channels and balance creative excellence and efficiency in production. We are always focused on returns on investment — which clients will have more pressure than ever to demonstrate. It’s essential to evaluate unique datasets and the capabilities and tools to model potential risks and opportunities within our clients’ marketing activities, and this is something we love to do. But fundamentally, the power of creativity to act as an economic multiplier for brands inspiring love and demand won’t change in a recession.

-Audrey Melofchik, chief executive officer at Wunderman Thompson North America

3. Help brands battle the generic options

We're still not assuming a full-fledged recession as a base case. Even if [the latest] US GDP numbers show a decline, there are signs that we may still avoid a prolonged or deep recession. Thus far into earnings season, we've seen revenue growth reported across some of the largest airlines, automotive and technology companies. Not all sectors are seeing growth, but for agencies with diversified clients, there will likely be some spending more with a fuller return to travel, eating out and other service sector-based activity especially.

Overall, we're still seeing a pretty tight labor market in the industry, regardless of many companies, agencies included, taking a more conservative approach to hiring. With a mix of clients pulling back, holding steady and spending incremental budget on media, agencies need to ensure they can staff those accounts and don't want to be caught with too many open roles.

Ultimately, the job of our agencies, and our job as GroupM, is to make advertising work better. For our clients, that might mean helping them think through complex macroeconomic drivers including higher input costs, falling freight and shipping rates as well as rising interest rates. So far, the message from many advertisers is that consumers are bearing the resulting price increases and the job of advertising in those cases can be to help justify a higher price or prevent switching to generic brands while inflation remains high.

-Kate Scott-Dawkins, global director of business intelligence at GroupM

We see our jobs as business partners to always be thinking about the impact of what’s next, including potential downturns. Our current preparation includes locking arms with clients to strategically manage those ups and downs together. We’re passionate about offering fluid strategic insights in a changing landscape, creativity and nimble execution now more than ever to help their brands cut through. In recessions, people don't stop spending, they just spend more on brands they trust and love. As possibility-makers, we double down to help our partners be just that.

-Damaune Journey, global chief growth officer at 72andSunny

4. Focus on results metrics

As our clients prepare for a recession, we are focused on tying the work we — and they — do back to material business results, such as risk management, revenue and shareholder returns. Amid the current societal issues landscape, the communications profession has seen a significant change in its influence on these metrics.

-Jim O’Leary, US chief operating officer, corporate affairs practice chair and global chair of ESG and impact at Edelman

5. Amp up digital transformation efforts

Companies are not only facing the prospect of a recession. There are four forces that are also impacting how businesses operate today: changing customer behaviors; technological advancements such as Web3 and the metaverse; social impact; and new business models.

In the face of these disruptive times, we’re helping clients transform their businesses to become digital at their core to help them protect their margins or deliver savings. There are some fundamentals — what we call ‘SPEED’ capabilities — that companies need to put in place to accelerate their journeys: strategy, or being clear on value pools; product, [which entails] reimagining organizations as products that are constantly evolving; experiences, [meaning] enhancing experiences for customers and employees; engineering, or thinking of technology in terms of value creation and differentiation; and data and AI, or activating data on a real-time basis to create better experiences.

In practical terms that means, for example, using blockchain or decentralized finance to offer banking services, or creating super apps that not only provide banking services but other offerings like food delivery. In retail, [this might look like] leveraging technology to anticipate shortages in products and goods or using digital recognition to find out when a store is going to run out of products. We’re helping companies implement digital business transformation as a competitive advantage.

- Teresa Barreira, chief marketing officer at Publicis Sapient

6. Take advantage of opportunities to innovate and do good

As a company, we’ve been studying the culture of crisis since the start of the pandemic two and a half years ago, and have developed a proprietary crisis tracker methodology, which helps us track how individual countries are advancing through a cycle of behaviors and emotions triggered by a current crisis. We’ve just fielded another global survey to get a temperature check on attitudes towards money and spending as news of recession continues to fill the headlines.

As economic fears begin to impact culture, brands can continue to play a meaningful role in people's lives. While focusing on a value proposition and utility will be important, it's vital not to put aside critical pillars — like sustainability and diversity, equity and inclusion — that are fundamental to building a thriving modern business. Moreover, as the famous adage goes, “never let a good crisis go to waste” — harness innovation and creativity to meet people's changing needs in new ways.

One of our clients, MasterCard, is an example. The company has a focus on financial inclusion, which has been a lightning rod for action, even when the world is in turmoil. Rather than turn inwards, over the past couple years, the brand expanded their services in the spirit of financial inclusion to welcome more people [through new products and services]. It’s an incredible lesson in using crisis to innovate — to not only grow the business, but provide invaluable services to those in the most need. It’s the perfect blend of meaning and growth.

-Nadia Tuma Weldon, executive vice-president of global director of thought leadership at McCann Worldgroup Truth Central

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