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Will the admen survive the downturn?

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Advertising budgets are among the first to be slashed in a downturn, and many media companies become collateral damage. In spite of this, is the mounting evidence proving it’s the businesses that keep up with their marketing through the tough times that will fare the best when things start to pick up.

To find out what’s really going on in the world of advertising, on his program – SWITZER – on Sky News Business Channel, Peter Switzer caught up with Clemenger’s MD and long-time adman, Andy Pontin.

A new strategy

The name Clemenger is synonymous with advertising – what began as a family business in Melbourne in the mid ‘40s is now an international operation, the biggest communications group in Australia and is still Australian-owned.

So in the shift from advertising agency to communications group, what changed in Clemenger’s business strategy?

“Everything, really,” says Pontin. “Everything’s changed: in terms of the types of media we use, the way we’re renumerated, the types of skills we need. But a big part of our business is still advertising.”

Encompassing the rise and rise of the online space, public relations and experiential strategies, alongside the traditional channels like TV and radio, advertising, in today’s age, is a very loose discipline.

“We now need to be competent in all of those areas across the board for all of our clients,” says Pontin. “So it’s a more challenging; a more fragmented business.”

Still, the challenge remains: how to get the most effect for the client’s dollars. Pontin tips the current trend of stunt-based or event-based marketing as a prime example of the strategies of savvy agencies – these events generate media coverage without having to pay for the space.

“If you can get your event on the six o’clock news, you’re not paying for the media costs,” says Pontin. “There’s always different ways to advertise – you’ve just got to find a way to get best bang for buck.”

It’s the memorable ads, says Switzer, which show an agency’s worth. He quotes the Yellow Pages catchphrase – ‘Not happy, Jan!’ – that has since been established as an Aussie colloquialism as a case in point.

“The best form of advertising, as everyone knows, is word of mouth,” says Pontin. “And if your advertising can really stick in the vernacular – such as ‘Not happy, Jan!’ – you get free advertising every time that’s mentioned.”

Tough times

The best things in life may be free, but money still matters. So is the industry bottoming out, as the commentary surrounding Fairfax’s $380 million loss seem to imply?

“There’s no doubt it’s been tough,” says Pontin. “I think it’s been particularly tough for the media owners. As you look across our suite of companies, the guys who are hurting are the media buyers and agencies.”

There are some, though, that have been cushioned from the fall out – Pontin says creative agencies are stacking up reasonably well, as are those in growing areas, such as digital and experiential.

“I wouldn’t call it that we’re on the upswing yet, I think we’re probably at the bottom of the downswing,” says Pontin. His clients, anecdotally, don’t foresee any more cuts on the horizon, nor do they see a commitment to any more spend.

“It’s interesting,” says Pontin. “We argue that advertising is a very simple game, it’s supply and demand. And when demand’s down, media space becomes cheap – therefore for the same amount of media budget or advertising budget you get more exposure. So really the guys that stay in the market get more bang for their buck.”

So did the companies who cut back cut too much, too soon?

“Advertising is always the canary down the mineshaft, we’re the predictor,” says Pontin.

“We have many clients who are offshoots of global companies, and even though their domestic market might be stacking up pretty well, they may be getting a lot of pressure form their global headquarters to extract as much cash to prop up other markets that aren’t performing.”

Leading the charge

There are, says Pontin, parallels between his industry and the financial planing industry with their current push towards a push for a fee-for-service model.

“In many ways, the advertising industry was in a similar position a few years ago as the financial planning industry is now,” says Pontin. “We basically had a model where we bundled together creative services – that is, idea generation – together with media buying. We gave away the thinking at the front end because we clipped the ticket at the back end. That’s not dissimilar from the financial services industry right now – they’re in the situation where they’re giving away the advice, and making the money on commission. That leaves you in a very exposed position.”

It was a question, says Pontin, of educating clients on the true value of services.

“We had to reinvent how we put value against the core service that we have – the core strategy of service and creative ideas, the ‘Not happy, Jan’ that you still remember. Nobody remembers the media plan, you remember the ad.”

And it wasn’t just an issue of transparency.“It’s the remuneration system that does lead into a certain element of complacency,” says Pontin. “It’s forced us to be much more commercially transparent about what we do, much more accountable about the value and quality of everything we do.”

 

 

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Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Saturday, October 03, 2009

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