Magazine article Marketing

No Wonder the Agency Fleet Is All at Sea: As Adspend Falls, Agencies Go under and Redundancies Rise

Magazine article Marketing

No Wonder the Agency Fleet Is All at Sea: As Adspend Falls, Agencies Go under and Redundancies Rise

Article excerpt


I was looking for a simple way of summarising the fundamental problem with the advertising business, as the agencies lurch unsteadily into 1991. Then I spotted the headline in the Financial Times: Too many fishing boats chase too few fish. It actually referred to EEC catch quotas, but for me it aptly sums up the crisis in adland.

There are simply too many agencies. Leith and Price's database lists nearly 1500 - and that excludes PR, direct marketing, sales promotion and other marketing service agencies. So there are more agencies than ever before, and at a time when total advertising spend has shown its biggest downturn (7%) since the war. The rest of the bad news is easy to catalogue:

* The marketing services sector has collapsed on the Stock Market.

* Failures have been numerous - and the recent Coopers and Lybrand survey suggesting that 59% of agencies are technically insolvent shows that many more could be just around the corner.

* Redundancies are running at a frightening level, when one considers the ensuing loss of talent and experience, quite apart from the personal and family tragedies involved.

The 1990 drop in billings - nearly 20% in real terms - is obviously the major problem - especially for businesses with traditionally high salaries, rents and other overheads. However, much new business is on the loose, and there was an unprecedented number of account moves in 1989 and 1990, you cannot budget for it.

I believe that things started to go wrong in the early 80s, when there was a fatal shift in emphasis from husbanding client business to indiscriminate chasing of new business.

As a consultant to companies on the choice and use of agencies I am struck by a paradox. With a plethora of agencies to choose from, most of them absolutely desperate for new business, it should be a classic buyer's market for clients. But that does not actually make it any easier to choose the right agency.

At Agency Assessments we have insisted for the last two-and-a-half years on a two-phase evaluation of contending agencies. We check long-listed agencies' credentials independently and send them an outline brief before getting into face-to-face meetings. By the time client and pitching agency meet, the agency should know exactly what the client is looking for, the size of budget and what the timetable is. The client will have had a written response to the brief and answers on terms of business and the prospective team.

It is most important for the initiative to be with the client. Proactive clients make more sense in the new business process than proactive agencies. …

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