Friday 17 January 2020

John McGee: 'Why marketers should expect more of the same as a new decade dawns'

'Unilever, the second-biggest advertiser in the world, announced before Christmas that it will miss its full-year revenue growth target.' Photo: PA
'Unilever, the second-biggest advertiser in the world, announced before Christmas that it will miss its full-year revenue growth target.' Photo: PA

John McGee

As another decade begins, one thing is clear for anyone working in the wider marketing communications industry: the past 10 years have probably been the most disruptive, challenging and exciting in the sector's history.

What the next 10 years bring is anybody's guess but if we want some clues as to what might unfold over the coming 12 months, there are a number of obvious developments and trends to watch out for.

Climate change and sustainability have hogged many headlines in the year just gone.

So brands will step up their efforts to grapple with the many complexities involved in balancing their need to make a profit with the need to reduce their environmental impact - while encouraging more sustainable behaviours among consumers. Not before time, many will argue.

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But as these often fickle and polygamous consumers are not as loyal to brands as they were 10 years ago, customer experience strategies and loyalty initiatives will continue to be prioritised by firms in 2020. Indeed, customer retention may well be the new customer acquisition over the next 12 months and beyond.

You can add to this list many other things, like digital transformation, increased adoption of marketing automation, managing customer data more effectively, obtaining better and more transparent analytics from agencies, and the seemingly never-ending quest for marketing to get a seat at the boardroom table.

But much of what unfolds over the next year, never mind the next decade, will be heavily influenced by external factors, many of which are beyond the control of marketers and their brands.

Marketing and advertising do not operate in a bubble, and many external factors, like the economy and general consumer sentiment, can have a huge impact on how companies allocate marketing budgets. In the case of Ireland and the UK, Brexit is still hanging ominously over the wider marketing world, and continues to be a drag on overall business sentiment.

But there are also other signals to be found across different industries, and the FMCG sector is a good example of this. For the past few years, many of the world's leading FMCG companies have struggled to grow sales, with low-single-digit annual increases now the norm. Many of these are companies that understand marketing inside out and the role it plays in delivering growth.

Unilever, the second-biggest advertiser in the world, announced before Christmas that it will miss its full-year revenue growth target. The manufacturer of products like HB Ice Cream, Lyons Tea, Dove and Hellmann's expects underlying sales growth for 2019 and the first half of 2020 to be less than 3pc. At P&G, the largest advertiser in the world, sales growth for its financial year is expected to be around 5pc. While P&G has delivered reasonable dividend growth over the past few years, it has done so on the back of improved efficiencies and, yes, tighter and more measurable marketing and advertising expenditure.

When bellwether companies like Unilever and P&G, with their enormous global marketing footprint, are struggling to generate meaningful growth, it won't come as a surprise to see them continuing to make tighter, more transparent and measurable marketing investment decisions.

The same is true in other sectors, from retailing through to financial services.

Tightened purse strings will have many knock-on effects across marketing, ranging from more tactical short-term, often price-driven, campaigns to the pruning of agency rosters, further pressure on agency fees, and a doubling down on anything marketing-related that will save the company money, including ad spend.

In other words, for 2020 anyway, it's more of the same. More of the same, however, will continue to present plenty of challenges for the agency world and for media companies that depend on advertising income for their survival.

In the advertising world, 2020 could see a global merger or acquisition by one of the big five networks. Yes, we have been down this road before when Publicis and Omnicom tried to tie the knot in a $34bn (€30bn) transatlantic 'merger of equals' in 2014. But the nuptials soon turned into a battle for control of the proposed enlarged entity and, in the end, cold feet prevailed. Both suitors went their separate but suitably chastened ways.

This time around, however, the underlying logic for a major merger or mega-acquisition is more compelling. With most agency networks reporting sluggish organic growth after a heady acquisition binge over the past 10 years, shareholders are getting impatient and, perhaps, nervous.

Clients, too, are piling on the pressure. They want a less complex, and more streamlined and transparent, offering from the agencies they work with. This has triggered a return to the full-service model - let's call it Full Service 2.0 - which gives clients the opportunity to buy all their creative and media services under the one roof. Others will want to bring some of these services in-house, where they can regain a degree of control and clarity. While in-housing is still relatively new, there are case studies to back up its effectiveness and, more importantly, how it can save brands money.

For agencies, this will continue to pose challenges. With one eye already fixed on the so-called 'cagencies' like Accenture and Deloitte, and the in-house specialists like Oliver and Firewood Marketing, some larger networks have been scrambling to head off these challenges by merging certain key agency brands or offloading others, in an attempt to streamline and future-proof their businesses.

WPP, the largest marketing communications business in the world, has retired agency brands like J Walter Thompson, MEC and Maxus, while it has offloaded Kantar to a private equity fund. Expect more of the same.

For the smaller independent agencies, what's happening in the marketing world will have a considerable bearing on how they plan for the future, and whether they remain independent or be tempted to enter the M&A arena. While independence does come with benefits, it also presents challenges, particularly in an increasingly competitive, complex and digital world where the client's needs are changing all the time. In other words, plus ça change, plus c'est la même chose!

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