Perspective... Cost versus value as the recession takes hold

As marketing budgets contract, price naturally becomes the key battleground for clients and agencies.

And if Media’s 2009 Marketers Poll, published in this issue, is any indication, we can expect much more of the same throughout the year. More than half of those marketers polled said they would review their agency in 2009, while a further 30 per cent said they were as yet undecided. When outlining what they would look for in a new agency partner, value for money was the most popular criterion, alongside strategic insight.

This attitude was reflected throughout the survey, with greater value and improved ROI emerging as the key marketing mantras for the year. 

It is important, however, to make a distinction between cost and value. On the one hand, marketers are seeing their global or regional budgets reduced severely, and in the worst case scenario could see their departments absorbed into sales or procurement. For them, value means a more agreeable price.

Agencies, on the other hand, believe they are already providing value to their clients in the form of quality work and services. What they don’t want is to begin equating value with cost. Competitive pricing across the region may be good for clients’ balance sheets, but what will be the effect on the overall level of service that agencies can provide? 

As the Marketers Poll shows, almost half of those surveyed say they would like their agency to take the lead during the financial crisis. To do this, though, the agencies need to be given the right support.

Already, agencies are scaling back costs in the easiest way they know, by shedding staff. So far, the majority of these losses have been explained as ‘natural attrition’ or ‘annual retrenchment’, but as more people find themselves out of work, the less convincing these euphemisms are going to feel.

In a recession, everyone needs to tighten their belts, but as accounts shift to the lowest bidder and agencies continue to cut costs and reduce their staff counts, the underlying danger is, as McCann Erickson’s Mark Ingrouille points out, a further dumbing down of the industry.

The other big talking point from the poll is the evolving relationship between marketers and digital media. As in previous versions of the poll, marketers were keen to highlight the growing role that digital channels will play in their communications plans. Everyone, it would appear, wants to be seen in digital.

But question marks remain about whether this increased enthusiasm will finally translate into greater levels of spend, especially given the current economic climate. The indications from the Marketers Poll are not encouraging, with digital still way down the pecking order when it comes to actual budget allocations, regardless of how appealing it might be as a communications channel.

What this suggests is that digital may not be as recession-proof as many in the sector have sugested. Rather than shifting spend from traditional media platforms over to digital, it appears that many clients are simply negotiating on price across the board.

Furthermore, a cursory glance at recent job cuts in the industry shows that digital is just as vulnerable as any other sector to lower client spending — MRM’s job cuts in China, for example, are believed to be linked to key client Microsoft slashing its marketing budget. 

Digital operators can still claim to offer more visible return on investment as a means to attract budget from price-conscious marketers. But there are increasing doubts as to whether digital will benefit from the current crisis to the extent many of its torch bearers have previously maintained.

Got a view?
E-mail [email protected]