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February 2008 - Strategy Magazine
Editorial

Survival or demisal?

by Mary Maddever
page 4

Amid rising concern over consumer confidence, four ad vets told strategy what to expect from a potential downturn

When Target Marketing president Noel O'Dea sent me a pithy little email from St. John's recently advising: "Buy Kimberly-Clark," I laughed out loud. Now, as the U.S. market continues to spiral downward, no one's laughing. And this particular economic rollercoaster's been brewing for a while - PricewaterhouseCoopers' 11th Annual Global CEO Survey just revealed that confidence in business declined for the first time since 2003, and fear of a global recession emerged as the major threat to growth.

Brunico Communications was barely a year old when Black Monday hit in 1987, and we saw the ad biz suffer more during the late '80s and early '90s than other sectors. Large swaths of the industry were dependent on traditional advertising, so there was significant downsizing and fallout.

But things have changed. A lot. Marketing budgets have undergone decades of close scrutiny with sophisticated metrics to nail maximum ROI, providing advertisers with proof of cost-effectiveness. And remits have branched out from traditional advertising to encompass social media and more robust CRM and CSR efforts in a shift to longer-term communications programs.

But since marketers' careers are still at stake if they don't deliver results, the research that advises against cutting ad spend during an economic downturn meets with hairy eyeballs. However, there's a compelling case to be made for activity in areas like retail promos, lower-cost digital efforts, CSR and loyalty when confidence or disposable income is low. In a recession, this diversification will likely shield some of the impact of any ad spend downturn.

But that's just my take on what might happen if a recession hits, so I asked the folks out in the trenches - who have been through it before - for theirs.

DDB Canada chair and CEO Frank Palmer is unfazed: "It's time for people who have some guts to take a stand and do better than they have before. Strong brands will do well, like McDonald's and Tim Hortons and Wal-Mart." He does, however, acknowledge that for mass luxury categories - and smaller agencies with less cash and fewer clients - it will be tough. Palmer says multinationals and strong local agencies will do OK, noting that there aren't many in the latter camp, but he expects a feathering out of smaller shops, as there's not enough work to go around.

Does he predict a market adjustment? "Yes. We'll see some smaller agencies disappear and merge."

When asked if companies would be less prone to chop ad budgets in this environment, Palmer responds, "Clients that believe in advertising are the last to cut spending, and often don't." He's been talking to his, and reports that no one says they're going to cut. In fact, Palmer says DDB had its best year last year, and will maintain that growth. As to whether the diversification of marcom services will lessen the effects of an ad spend downturn, Palmer says "it will make a difference," adding that 50% of DDB's business is now outside traditional advertising. For 2008 his appetite is optimistic: "I want the whole pie."

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