Clubber Lang's prediction about the communications agency business
As the eloquent Clubber Lang (Mr. T) said in Rocky III when asked for his prediction for his upcoming fight with Rocky Balboa, his response was "Pain".
Pain is what many agencies (and businesses in general) are experiencing right now and, alas, continued pain is ahead for many agencies at least for the balance of 2009. Despite the overly optimistic predictions of agency heads in this publication in the April 2009 issue ("Bullish about Advertising in Philadelphia"), the reality is that many agencies are struggling. I know agency heads are eternal optimists and I used to be one (that's an agency head, not an eternal optimist), but a dose of realism is warranted. Advertising spending is declining nationally at a rate close to 10% and local spending has declined 25% or more. Business is weak for many agencies right now, and while others are still plugging away and may have OK years, clearly 2009 will be a year many agencies will want to forget.
A little perspective is warranted as this is not the first recession to hit the communications industry. The recessions of '74-75, '81, '91, and '01-02 were also painful, particularly in some sectors of business. But this is far different. The economic downturn is deeper and far more pervasive across virtually every business segment, and while the serious economic issues that we are facing may ultimately fade, they will not recede quickly. The communications industry had already been changing drastically before the economic meltdown last year. So with those cheery thoughts, what's a smart communications agency to do to survive in the short term, and hopefully flourish in the longer term?
There is no time where it is more critical for an agency to have a strong reason for being-something a little stronger than the patter of many agencies, "We are not too big, so our clients get management attention. We are good people and get results".
I have heard that same patter from many small and mid-sized agencies (lest I be too critical, I cringe that I mouthed the same patter at one time as well). Of course, every small/mid-sized agency offers "management attention"- you're not that big, and every agency, large or small, promises "results".
That's why ever agency needs to strengthen its reason for being. A strong reason for being for a communications agency can be an expertise in a specific type of industry, or a strong focus in a specific type of marketing communications-online, PR, media etc. But those who try to do "lots of things" of "all types of clients" are struggling mightily--and have been failing-- at a far greater rate than those who have a strong focus. There was a time when the "we can do it all for you" story had some merit as clients sought integrated solutions that they thought an agency with multiple disciplines could provide. But the reality is that most agencies don't have universal strengths across all disciplines and businesses.
Moreover, companies have gotten far smarter and better at orchestrating their own integrated marketing and as a result pick and more choose the agency resources in a project and ala carte manner based on the specific agency's expertise, which is why having a unique specialty in industry or discipline is so critically important.
So here are 5 things every smart agency should be doing right now to insure its future success, even in today's awful economic environment:
1. Determine what you do best, and FOCUS on that--Focus is tough for many agencies who believe in the "yes we can do that" mentality. That you can do many things doesn't make you good at them. Furthermore if you want to be known for something, focus is the only way to get there. In fact lack of focus is the enemy of real success. Focus is difficult, requires discipline, and an agency may have to take a step back to ultimately leap ahead.
2. Accept the fact that agency of record assignments are declining.--Advertisers large and small are moving away from historical AOR relationships to project ones. Agencies can be very profitable handling significant projects but the changing nature of relationships forces a different mindset and mode of operation (see #3)
3. Operate with ruthless efficiency--Question every expenditure and every staffing decision. Have fewer FTEs and more part timers and contract relationships. Every agency needs to be more flexible in expanding and contracting its work force. There are many freelancers available to help at a minutes notice if an agency builds its network-and these freelancers are more than recently laid off employees. There are many top pros who have built a strong freelance practice because they chose to manage their lives, schedules and income based on their own personal agendas.
4. Strengthen your digital capabilities--This suggestion comes under the headline of incredibly obvious and many years too late. But for those late to the digital party, better get there fast and strong.
5. Pitch only when you believe you will win--Strengthen the odds of success by being far more selective about your pitches. Again that's why focus is so important. Agencies win business when they are positioned to win-when they have relationships, category knowledge and come into a pitch well regarded. Pitching lots of business and losing has serious costs mentally and financially.
The economic issues the industry and the country are facing may fade within a year or two and there may be fewer agencies in the wake. However, stronger, more focused, and more flexible agencies will survive and thrive in the years ahead.