For those who can remember the 2007 financial crash, the prospect of another recession seems likely. Last time it was subprime mortgage bonds; this time it’s a microscopic virus that started in China. As far as causes go, they couldn’t be more different, but the end results could be very similar from an agency perspective, as an article in The Drum points out.
So, with another recession on the cards, how should agencies be responding?
The most obvious and widely adopted solution to reducing the spread of the virus is remote working. More employers are introducing a work-from-home policy for all staff – from the smallest to the biggest-name agencies. For example, last week, the world’s largest advertising agency, WPP, instructed its 130,000-strong workforce that they would be working remotely and how that will work within their respective companies.
But working from home is only scratching the surface of how agencies will be impacted. The real challenge comes down to money (of course) – more specifically, the potential reduction in businesses’ marketing budgets.
At times of financial restraint, the first thing to get the chop is often a company’s marketing budget. During the last recession, marketers saw total marketing budgets plummet by around 30%. That meant prioritising work so investment in essential growth areas for the business and brand continued as usual while any activity that provided no direct returns was culled. It was a tall order, but agencies were on hand to help.
But as a result, it was the agencies that ended up taking the hit – agreeing to charge 30% less than the agreed price. In fact, in most cases it ended up with agencies delivering all the work for a significantly reduced cost.
As we move forward in today’s coronavirus crisis, will agencies still be happy to take a cut rather than lose a client? Seeing as that 30% discount has effectively become the new procurement benchmark, it’s hard to see how that would be sustainable in the long term. Finding that balance between financial reality and the fear of losing a client is not going to be easy.
But on the plus side, the current push for remote working could mean employers are less concerned about switching to virtual offices. A future where more companies embrace flexible working can only be a good thing. We have already seen many of our agency clients transition completely smoothly to a remote working model. Adapt and evolve is the agency way!
Looking after clients at this difficult time is more crucial than ever. If you’re looking to bolster your team, with either permanent or freelance staff, Stopgap can help. Brief us on a role now or contact one of our agency team - 020 8332 7656
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