When I read Sir Martin's latest announcement, I began to wonder if he'd lost his crystal balls. WPP's earnings are down 6.1%, not the 2% he predicted just a few months back, and he's not the only one to have missed the mark he set for himself. Publicis has also just reported worse-than-predicted results. What does it mean for the rest of us? asks Rose Lewis.
It's been a while since Sir Martin Sorrell invited me to tea, so I held my own party to look over the tealeaves left from the release of his last quarterly results. WPP's figures are intriguing in several respects, not least because its advertising business doesn't seem to have been hit anything like as hard as might have been expected. Earnings are down just 3.5%, despite the fact that we are all being told traditional advertising doesn't work any more.
Not a bit of it: the biggest drop in client spending has hit WPP's PR operations (down 4.3%) and what the firm classifies as the Branding, Identity, Health and Specialist” area (down over 5%) though that includes online/interactive so it's quite a broad classification. I have no hard evidence to substantiate this, but I'm wondering if WPP's big-spending brands have simply stuck with what they know in tough times and cut anything “experimental”. Despite the general move away from conventional advertising, they need to maintain market share even when the overall size of their categories might be shrinking, so advertising would seem a sensible tool.
Of course WPP's clients are not typical of those held by most agencies with which Pembridge works directly. Nevertheless, the downturn in WPP's fortunes suggests that smaller firms are going to be hit harder. Green shoots there may, or may not, be out there in the economy but the reality is that 2009 is going to stay tough and we need to develop a plan to overcome the challenges that lie ahead.
Drawing on the experience that each of Pembridge's partners has gained in successfully navigating through previous recessions, I pulled together a list of shared practical insights and suggestions for anyone wondering how they are going to survive this one. Here are the five key lessons we have collectively learned:
- Focus on your team
The uncertain times can have negative impact on your team. Keep open communication going, listen to their suggestions and concerns, and continue to keep them motivated through incentive schemes and training. - Client focus
Invest in developing strategic relationships with your clients. Look for innovative ways to increase the value of your service offering and embed yourselves in there future plans. How? You can start by asking for their business/strategy plan to see where they are looking to grow. - Operating efficiency and performance
Think about how you can become leaner, cutting unnecessary spend. Can you renegotiate your lease? Identify key metrics to judge your performance, and make yourself accountable to meeting the targets you set (ie. cost/revenue; Pitch Win Ratio, sales call conversion rates etc). - Cash Flow management
Viable businesses fail due to poor cash flow management. In these times, cash, now more then ever, is king. Create a plan to reduce cash tied up with debtors and stick to it. - Develop your own brand
By truly offering a differentiated service, you will stand out from the competition. Communicate why you're different. This will help prevent to prevent becoming a commodity, where all you have to bargain with is price.
Of course, all of the above should be part of an ongoing business strategy, in good times as well as bad. Yet it often takes a recession to force businesses to examine their approach to best practice. It will be tough for at least the next 9 months but if you can ignore the macroeconomic news and stay focussed on the little corner of the world that's yours, it will blossom again.
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