Specialization: Core for Ad Agencies’ Survival

Following the economic mishaps of the last year and the consequent lose of business, advertising agencies are further concerned that advertisers may cut down on their marketing communications budgets this year. Also, a major client, the banking industry, is undergoing incisive reforms.  Yetunde Ogundipe speaks to practitioners on how the industry can best position to match the times.

The Executive Director/Chief Executive Officer of the Association of Advertising Agencies of Nigeria (AAAN), Lekan Fadolapo, captures the difficulties experienced by practitioners in 2009 when he described the past year as very challenging for the industry.
According to him, “In year 2008, the industry billing was N56 billion, a growth rate of 40 per cent above N40 billion recorded in 2007. However … the industry billing will decline by 25 per cent in year 2009. This will put the industry billing at N42 billion.”
By his reckoning, the reasons for the decline are not far fetched. “Most advertisers had problems and had to cut down on their promotions budgets because they were trying to pay up working capital and money borrowed from the banks.”
While assessing the impact of the economy on the ad industry in 2009, he maintains, “it was a very tough doing business in the past one year as some agencies downsized and others delayed payments.”
It naturally follows that coming from a tough year, agencies are worried that the economy may not improve in the first quarter of this year particularly with the mass movement of accounts due to budget constraints. This might be the most dreaded issue for advertising agencies in the current business year. Every agency head fears the day the client drastically reduces its advertising budget, citing “challenging economic climate.” Fadolapo says.
But a compressed budget does not compare to the outright migration of an account. The impact of account migration may be devastating for the agency losing, hence the sharp reactions it often generates. Akin Adesola, the Managing Director of Newton Project Room, is appalled that “agencies react to the loss of an account with shock as if they never expected it. Oftentimes however, months before the catastrophe, the signs are usually all over the place. But they simply ignore them”.
In his opinion, budget slash is only a step away from account migration, wondering why, “on the other hand though, we (agencies) often have a feeling of déjà vu when a client cuts back on the budget, as if it was the normal thing to do.”
However, there is a growing feeling that the worst may be over as industry sources say practitioners are wiser and have been able to weather the storm. Proactive agencies are already re-strategizing in other to position themselves stronger in business.
Preferring a way forward, Akinyemi Lofindipe, the Creative Director of Brand Believers, calls for a retooling of agency business via specialization. “The rise of specialized agencies is not new. Some set up Media, PR departments and some basically set up new networks. The industry is reacting to clients’ insistence on touch point marketing.
He notes that, “Most agencies are spinning-up specialty units from their companies. Some agencies would be aligning with each other to form an experiential marketing company.”
Some agencies seem to have re-strategized already, re-positioning themselves to fit into the realities of the times. According to Steve Ogundipe, the Deputy Creative Director of 24-7 imc, “agencies need to re-position to be able to align themselves with clients’ needs. And if ATL (Above the Line) is not forthcoming, they should try BTL (Below the Line),” he says.
Hakeem Adenekan, the Managing Director of CommStrat Associates, gives more practical insight by advising agencies to start the re-strategizing exercise in-house. According to him, “Agencies must stop bleeding themselves. They must start from in-house expenses.”
For Lafindipe and like minds, the time to specialize for increased competence and better client satisfaction is now. A Jack-of-all-trades attitude does the industry no good they reason. “What we’ve seen is a lump of specializations. They claim to do PR, experiential, direct marketing and so on. What they need to do is look at the skills available to them, there is always a market space available.”
Adenekan advises “agencies should strive to look for new windows by doing things other than what they have been doing on a normal day.” He has one word for those who counter that there is nothing to do: “Create.”
In a softer vein, Lafindipe applauses the agencies for managing the twist of fortunes very well, saying “they are responding very well to the challenges.
And the reason why clients are using touch point is because in the current economic situation, it is more measurable. It will solve sales orientated problems. So advert agencies should start considering how they can reposition themselves to fit in”.
Ogundipe recalls that at the beginning of 2009 “it was rough for us. We had to re-strategize to fit in” and confidently asserts that “in this time, the industry needs to be more proactive, taking the initiative by acting rather than reacting to events.”
The summation of these professional opinions is that agencies must wake up to the prevalent realities in the environment and proactively retool their businesses to remain relevant in the new era.