It’s no surprise that the current situation with Covid 19 and the nose dive in the economy will lead to challenges for the advertising industry. The market crash of 2008 lead to a 13% reduction in advertising budgets as a whole according to Ad Age and this current economic downturn could be significantly worse. The IAB recently conducted a survey of advertising planners and buyers across a wide range of industries and company sizes. Across the board they saw that advertising budgets are expected to be cut by at least 30% or more this year. Large publicly traded advertising groups like PPP, Omnicom and IPG are laying off or furloughing as much as 20% of their staff and some agencies like Mullen-Lowe in Boston are making one third of the staff redundant. And those who still have jobs are seeing cuts to salaries of 20% to 30%. But with all this doom and gloom, there could be a silver lining for smaller agencies.
In boom times big advertising agencies seem great. Full of highly paid talent, with wonderful pitch teams, plush offices and big expense accounts. They also feel safe. There’s comfort in saying; well we hired the big guns, so we’re covered. But as advertising and marketing budget shrink, there is unending pressure on CMO’s, Brand Managers and Marketers to do more with less. They are keenly aware that their jobs are on the line if they cannot produce results and generate revenue in short order. And herein lies the opportunity for the small independent ad agencies.
In lean times, when marketing dollars are tight and there is immense pressure to show quick results, there are five key advantages that smaller independent agencies have versus the big guys:
1. The ability to evolve.
Large ad agencies are structured around the AOR model and therefore require a steady flow of work and billings. It’s difficult for large agencies to retool and rethink their business practices in a very short time frame to be able to deal with the new norm of smaller budgets, no retainers and tighter turn arounds. Most small independent agencies are built on a project-based culture and thrive on the pace and volume that culture requires. They’ve been working this way for years and have the discipline and flexibility to deal with whatever comes at them and make it work.
2. A business model for the future.
Independent agencies are built as nimble, anti-hierarchy organizations mirroring a more non-traditional, flat organizational structure. Less bureaucracy means that there’s lower costs to pass to the client, more accountability and quicker turnaround of projects. This type of leaner, more responsive and more accountable type of agency will be the invaluable to clients under pressure to deliver more with less.
3. No team is one size fits all.
Smaller agencies have the ability to rapidly flex up and flex down on a frequent basis. They can expand and contract based on the ever-changing needs of clients and they are designed to adapt, expand & execute to suit various budgets and opportunities. Because smaller agencies don’t rely on a fixed team model, they can build and customize teams around the needs of the clients. They can tap into a deep pool of freelance talent that can be managed by the agencies Creative Directors or Account Managers, making it seamless to the client. Why have a TV Director and a producer on staff or a TV media planner and a buyer, if a client suddenly decides to stop doing TV work and focus their budget on digital platforms. Large teams of full-time talent are a huge expense to big agencies and ultimately those costs are passed on to clients in the form of higher fees and more billable hours. This is not the case with smaller agencies.
4. Diversity of thought.
As discussed previously, because small agencies thrive on project work and have the ability to build custom teams around those projects, they enjoy the benefit of having different people with diverse backgrounds, skill sets and influences working on these projects in a variety of ways. This leads to more creative outcomes and smarter solutions for clients. And because of that, diversity of thought is encouraged, celebrated and promoted within smaller agencies.
5. A smaller budget is suddenly a big budget.
All of the key advantages of working with smaller agencies outlined above, lead to one obvious conclusion; a client with a reduced budget is worth a lot more to a smaller agency than they are to a bigger agency. Independent smaller agencies are not beholden to shareholders or a board of directors. Their primary objective is to keep their clients happy and a happy client means more projects for the agency. A client whose budget is limited, means that they only have access to B or C teams at larger agencies. They will enjoy the focus of the best people at a smaller agency and direct access to the owners of that agency. It’s a win for Clients and for the smaller agency.
Just because the economy is putting a strain on budgets, it shouldn’t mean that outcomes are compromised. The quality of creative can improve, the effectiveness of strategic media planning can be enhanced, and ROI can be increased, if clients are willing to look at their agency relationships differently. There are a lot of eager small agencies out there, ready and able to do the best work for clients.