As the government begins releasing white papers on the likely impact of a no-deal Brexit on different sectors of the economy, I was inspired to produce one for the marketing sector and specifically for promotions – where operating across Europe is already complicated by differing legislation.
While the situation remains mired in confusion and controversy on a political and diplomatic standpoint, and could drag on for longer than the next six months, marketers cannot allow this to let them succumb to inaction – instead, armed with the facts as they know them, they need to take action rather than do nothing.
Some of the implications of Brexit for the marketing industry
The obvious impact for the marketing and advertising sector will be on talent. London alone received three times more migrant marketing and advertising professionals between 2016 and 2017 than New York, Paris or Amsterdam and more than a third come from EU countries.
Looking at the country as a whole, 15% of the UK's talent in the design and creative industry comes from outside the UK. And when you look at WPP, the agency group that Mando sits within, 15% of our 17,000 UK staff are from the other 27 member states of the EU. The uncertainty of the status of these 2,550 workers is already leading many to move, and as more time passes without a deal this trend will only increase.
It’s not just talent that will be impacted. We don’t think of marketing as being particularly reliant on raw materials but speaking on a panel earlier this year, James Wildman, chief executive of Hearst, shared that the company's biggest cost after people is paper. With 70% of the paper imported from other EU companies, a cost increase was always foreseen with Brexit, but a no-deal Brexit with the UK resorting to World Trade Organisation rules will add an unexpected cost alongside potential delays with supply.
It’s almost certain that while discussion continues, a no-deal Brexit will lead to a fall in the value of the pound, which means that sourcing international promotional products used in pan-European promotions, such as the recent Powerade bottle personalisation, could come increasingly more expensive. This will be compounded by the potential of Brexit sending the country into recession. As consumers have less disposable income, promotions become riskier, creating a real need to fix budgets; as consumers are more likely to engage in promotions, the chance to win becomes even more attractive.
Another potential impact for prize promoters is that “win a dream holiday” style prizes may become far less desirable to consumers as new passport regulations and a lower value pound mean that they are harder to give away and redeem.
Brexit may also change the openness of how Germany, one of our biggest markets, chooses to trade with us. A natural assumption from the break-up is tighter regulations, increased tax restrictions, fewer benefits for UK businesses and smaller budgets for brands. Legally, the world of promotions is already complex, as it isn’t guided by EU law but instead by the laws of each individual country. This often catches out brands looking to carry out EU-wide promotions, as some countries for instance, Italy, have differing rules. In Italy all prizes need to be given away or donated to charity, which deters using scratch cards.
How best to address the impact of Brexit
We’ve already seen the impact of the Brexit vote on marketers. Uncertainty means that marketers are stalling on their decisions and are reluctant to commit budget in uncertain circumstances.
The impact on budgets isn’t limited to marketers, as currency fluctuations and uncertainty also impacts consumers. Therefore brands can win by focusing on value-driven promotions such as loyalty rewards programmes, money back guarantees, cashbacks and free product coupons. With budgets squeezed, brands should craft incentives and promotions focussed on retention as well as the acquisition of customers.
For brands working on Europe-wide promotional activity, consultation will be more necessary than ever with an evolving legal minefield. GDPR will remain in effect but in addition, it will be important to review client, business partner and intra-group agreements with EEA counterparts and consider incorporating EU standard contractual clauses covering data flows from the EEA into the UK.
Some agencies and marketers are taking active measures to respond to the known effects of Brexit, but this is not the case across the board. Research from econsultancy shows that 58% of marketers were making no changes to their strategy in light of Brexit. While a lot is up in the air and there is a temptation towards decision paralysis due to the fear of the unknown, there are some clear steps that can be taken.
Becky Munday is chief executive of WPP loyalty agency Mando