Ad Execs: Things Could Get Worse Before Better in 2002
Marketing & Media
by Jennifer Bellantonio
Advertising agencies hunkered down in 2001 trying to weather what has been dubbed the worst business climate in a decade.
The year started with agencies reeling from the dot-com meltdown and technology downturn. Next profit-crunched Corporate America tightened its purse strings. Then came Sept. 11.
Weeks, even months later, advertising still has not returned to normal. What’s in store for the industry this year? I asked some local ad executives to offer their takes.
Will the ad slump get worse or better in 2002?
David Murphy, chief executive, Y & R; Cos., Irvine: It all hinges on consumer confidence. Right now consumers are in a fragile state. Two events have the power to ease or deepen the slump,the situation in the Middle East and Wall Street. These are two barometers I will be following.
Ingrid Otero-Smart, president, Mendoza, Dillon & Asociados Inc., Newport Beach: The ad industry (especially Hispanic) will get better in 2002. It will not happen fast, but it will happen. We are already seeing some positive movement with projects that we presented before Sept. 11 being approved. These are not significant in terms of money, but they signal a return to normalcy. We may not see the same levels we had seen in 2000, but it will get better.
Jim Harrington, president, Foote, Cone & Belding Southern California, Irvine: I anticipate things will improve toward the second half. While many companies reduced spending in 2001 because of the sluggish economy and Sept. 11, recent studies indicate consumers are looking to get back to normal. Marketing efforts should reflect that.
Ray Baird, president, RiechesBaird Advertising, Irvine: No one can accurately predict where things are headed. Seeing glimmers of hope from certain economic indicators leads people to jump to optimistic conclusions. Other indicators are still vague, negative or fluctuating. We see things probably getting worse before better.
Billy Fried, president, OC Advertising Club and Spasmodic, Laguna Beach: The slump will get worse. We’re still reeling from the backlash of the tech crash where so many worthless companies were overheated and overvalued. Since the beginning of time, advertising is the easiest line item to chop.
How has the industry changed from the downturn?
Murphy: Clients are demanding more disruptive creative ideas to break through and capture the customer’s attention. We will see more nimble strategic planning that balances long-term brand building with short-term results.
Otero-Smart: Clients are realizing that we have to get back to business or things will get worse. In our case, the U.S. Census Bureau showed that if a client is not reaching the Hispanic market, they are leaving a significant opportunity on the table. We will see more clients wanting to “explore” the Hispanic market.
Harrington: The industry is smaller than in the past and will have to work smarter with fewer people. Clients are expecting more involvement in their total marketing effort. Many traditional agency people will need to diversify their experience and become experts in less traditional media such as direct response, database, Internet. At the same time, agency management will need to look for additional sources of revenue beyond traditional advertising to achieve financial goals.
Baird: The most obvious change will be that weaker organizations won’t be around. We’ve already seen that. But the recession and how it affects the ad industry is the result of a much bigger story. The conditions we face are due to three factors that predate the current economy: agency execs have lost their relationships and influence with the executive on the client side; firms that could not drive the e-strategy when the Internet became a marketing force lost significant percentages of business to firms that could; and the 15% rule, which says agencies typically lose 15% of their business every year. Without the ability to replace that when a recession hits, agencies have a much more difficult time surviving
Agencies need to regain the strategic high ground, establish executive-level relationships and function as consultants and strategic partners to industry leaders. The groundwork for the 2001 advertising downturn was laid out years before Sept. 11. The current recession is just the catalyst that sped up the process.
Fried: Agencies will have to come out of the ether and start producing advertising that works. “Branding” will no longer be the clarion call. “Selling” will. But agencies will survive. Ever since the first caveman drew a petroglyph to find a wife, we’ve had advertising. We’ll just batten down the hatches and ride this one out.
