SINGAPORE: Leo Burnett and Rapp Collins have implemented measures
to cut costs to combat Singapore's worsening recession.
In a pre-emptive move, Burnett retrenched eight people based on
forecasts that the ad industry would contract next year.
"This decision has nothing to do with (what has happened) this year but
next year," said John Borzi, managing director of Burnett Singapore, who
predicted that the city's agencies would experience a 15 to 25 per cent
revenue fall in 2002.
"Our clients are being cautious when it comes to spending money on
advertising so we're going to be cautious with them," he explained.
"I don't think the economy will rebound until the third quarter of next
year."
Borzi predicted that the deepest cuts in advertising spend would occur
among companies in the finance, telecommunications and technology
sectors.
Burnett has around 85 staff following the retrenchments in its creative,
account service and administration departments.
Rapp Collins, which retrenched four staff in June, has vacated its Club
Street office after only a few months there, partly so it could cut
costs by sharing space with sister company DDB.
"It's been a fairly tough six months and things aren't going to get
better," said Paul Gotham, managing director of Rapp Collins.
"Sharing backroom operations - human resources, finance and so on -- is
more synergistic."
The other reason for moving in with DDB was because management felt the
two companies would work better together if they shared offices.
"There was an element of out-of-sight, out-of-mind," said Gotham.
Despite the recession, Gotham predicted that Rapp Collins would increase
revenues next year because it expected to win some regional business as
the network expanded across Asia.
He also argued that clients would be spending less on above-the-line
advertising during a recession but would continue to spend on direct
marketing to generate immediate sales.
"When things get tough media budgets are cut (which impacts on ad
agencies) but clients then look to run direct marketing campaigns which
benefit agencies like Rapp Collins," he said.
"In 1997, when I was at (direct marketing agency) Finex, we actually
increased our revenue even though it was during the Asian financial
crisis," he added.
Singapore is experiencing its worst recession since 1965. The economy
experienced a 5.6 per cent drop in gross domestic product for the third
quarter, year-on-year.
