Agencies should see challenges and opportunities in latest IPA Bellwether
Yesterday, the latest IPA Bellwether dropped. Jody Osman, group director of growth at Propeller Group, tells us that the report shows plenty of new business opportunities for agencies taking the right steps.
Agencies must ensure growth despite the oncoming recession / micheile dot com via Unsplash
There are some alarming headlines about the headwinds facing brands, and by extension the agencies that service them.
But it’s important to realize marketing budgets are not being reined in across the board. Agency new business heads have reasons to be confident that there are opportunities if they position and market their services correctly.
The recent quarterly Bellwether Report from the IPA suggests marketers forecast tough times ahead. At the same time, the AAR reports a slowdown in agency appointments in the first six months of 2022 compared to the same period last year. It predicts a “threadbare” pitch market ahead.
Drilling down into reports like this and looking further afield at other data sources reveals a more nuanced picture of the new business landscape.
Businesses are starting off in a good place, with the Bellwether showing total marketing budgets revised up in Q2. Agency networks have enjoyed strong growth up to now. Omnicom has just reported 11.3% increase in its Q2 organic revenue, and Publicis Groupe a 10.3% growth.
There is some bullishness among clients and agencies. Periods of strong growth mean they have been able to invest in talent, innovation and digital tools that can help build resilience to ride out tougher times.
These challenges are well-documented. The cost of living and inflation continue to rise on both sides of the Atlantic; war in Europe is affecting energy supply and raw materials; it’s getting hard to predict consumer behavior. This uncertainty is discomfiting for businesses.
Why continued marketing investment makes sense
The R-word (recession) has been mentioned.
But it’s not the first time businesses have faced a recession in recent decades. Smart brands and marketers will have retained the knowledge that cutting marketing spend can have a disastrous impact when the rebound comes. If your brand no longer has saliency in the customer’s mind when it comes to consideration and purchase, then it’s a hard job to build it back up again. The case studies and proof points exist for marketers to make the argument in the C-suite.
As chief executive officer of WPP Group Mark Read said at Cannes Lions: “I do think clients learned during the pandemic that the best course of action is to invest in marketing when they can and to try and sustain that investment. I certainly don’t think we’re back in the situation we were at in 2020 where clients pulled spending in significant amounts as the pandemic unfolded.”
And Paul Bainsfair, director general of the IPA, points out in relation to the Bellwether data: “Cutting ad budgets – relative to competitors’ spend – in a recession undermines companies’ ability to grow future market share and profits.”
Where are the opportunities?
Look at the categories, the consumer and the client’s needs, and then where your own services match or you can develop new ones to meet any trends.
Categories and sectors experience an economic downturn at different degrees and speeds. The latest Adbeat data, monitoring digital display spend month by month, shows which clients are investing in the medium. Tech companies are all upping spend, with YouTube +113%, Apple +425%, Experian +39% and eBay +750%.
But there are a host of other brands also increasing digital ad spend: The Perfume Shop +290%, Trustpilot +173%, designer fashion brand Flannels +175% and hair loss brand Numan +119%. Meanwhile, Paramount Plus has invested $3.1m in digitally pushing its new launch.
Category-wise it makes sense to follow the consumer and see where they are spending. Value retailers are building up a head of steam as households tighten their budgets. Poundland owner Pepco enjoyed a revenue rise of 17.1%, with sales up 4.9% for its Q3 ending in June, and wants to continue positive momentum with plans for store expansions and an increased focus on digital.
Businesses that help customers find better deals are enjoying a surge and boosting marketing. Comparison websites are seeing higher traffic and are upping their spend; for instance, Confused.com increased its digital display investment over the last 30 days to £33.8k, up from £5.8k for the same period last year (source: Pathmatics). And it’s not just putting spend into digital – it recently announced it is sponsoring ITV soap Emmerdale.
Assessing client needs should take into account how they are streamlining operations. They may be reducing headcount or just finding it tricky to recruit the right talent. Maintaining or building marketing operations in-house, whether it’s a full martech stack or in-house creative team, can be expensive. Businesses will be looking to their agencies for experience, advice and talent.
In terms of the services and solutions clients are prioritizing, many businesses are accelerating their digital transformation plans. Why? Because they know that the customer experience (CX) is vital for differentiation and can help avoid competing solely on price – definitely not a long-term strategy.
As Gideon Spanier, UK editor-in-chief of Campaign, said recently: “The agency sector isn’t wholly reliant on ad spend. Digital transformation, CX retail media, connected TV, gaming and pharmaceutical marketing are all in structural growth.”
What can you do to prepare?
Just as brands need to maintain awareness of their goods and services, so too do agencies. Now is not the time to go ‘dark.’ You need to shine like a lighthouse for clients looking for help in choppy waters.
Reassess your new business and marketing strategies and how you optimize your efforts. Are you creating the right content that will engage a client’s interest? Are you using digital tools to track your outbound marketing efforts? Do you understand what is working and what is failing?
Agile is an overused word, but agencies will need to be able to dial up or scale down resources quickly depending on client opportunities. But be careful not to overload and burn out teams, and anticipate early when extra resources are likely.
Look where you can automate processes to save time. Use technology to be more accurate in tracking prospects and forecasting ‘cost to serve’ and revenues. Review the channels and platforms you are using for marketing to make sure they are providing optimum return.
While formal pitches may be in decline, clients will be looking for imaginative, different solutions from the norm and expert advice to navigate the coming months. While the sun is still shining (literally), it’s a good time to get the new business house in order.
If you would like some further insight on which sectors and brands you should be reaching out to and how best to approach them, then get in touch with the team at Propeller. We’ve also produced a BD playbook – click here to download your copy now.