How prepared is your advertising agency for 2012?

December has been a month of conversations, trying to make sense of the year ahead for advertising, media, digital and PR agencies. As the stock market gets hammered, as the anti-corruption movement ebbs and flows, and as the government is semi-paralysed, what will 2012 hold for all? In a nutshell, it’s not going to be an easy year - but there are still those who will gain and those who will hold their own. Here’s the year ahead, in points.

Stable relationships will be important

This is a year when some brand managers, under pressure to bring down costs, will call for pitches. In some cases, the pitches will be for genuine reasons - because they want fresh thinking or are unhappy with the current agency. But in a large number of cases, it will be for no reason other than to force the incumbent to bring down the retainer.

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Make no mistake about this - we will see more pitches in 2012 than we have seen in recent years.

Agencies with stable relationships will, therefore, be able to weather the storm easier than the others. Agencies such as JWT (even if they look, currently, to be in some distress), O&M, Lowe, Draftfcb, RK Swamy BBDO, Leo Burnett, McCann and Law & Kenneth–have a broad spectrum of clients with whom they’ve seen good and bad times. These are clients who are least likely to want change in a tough year. In a tough year, they’ll stick to tried and trusted communication partners.

Digital will come to the fore

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If the slowdown in 2008-09 saw some marketers testing the waters as far as digital is concerned, we’ll see more demand for digital communication competence this year. Importantly, brand managers will look for more digital communication solutions from the creative agency. Many brand managers are today dealing with the painful complexity of talking to a creative agency, digital shop, PR agency and media agency for large campaigns. Creative agencies with in-house digital competence will gain - and those without, will lose. If the digital contract results in a large retainer, the creative agency can immediately expect pressure to reduce theirs.

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There’s a lot of talk about this, but little done. Creative agencies need to come up to speed on digital, whether it’s how a creative director understands the dynamics of the medium or an account executive.

As digital becomes increasingly important, the percentage of media spends on digital will go up - and grow at a frenetic pace. Some categories, such as travel, banking, automobiles, will grow faster than the others. The more the media spend on digital (the impact of which is eminently more measurable than any other medium), the more attention the brand manager will pay to this area.

Digital shops should see 2012 as a huge opportunity; agencies low in competence in this area should see it as a worry. There are solutions, though.

Buy a digital agency quickly, or enter into a solid, binding relationship with one.

Measurement will be of high importance

Agencies will have to answer one question that they are not used to answering. No longer will the question be, “Is this a great commercial?” It’ll shift to “Did this commercial work?” Brand managers will increasingly focus on the measurable impact of their communication - and will even allot disproportionate budgets to the media that is more measurable.

How many in your agency are remotely interested in measurement? How many have the capability to brief a research agency? How many understand the basics of data? How many can have a coherent conversation with a brand manager when he wants to discuss something as simple as detailed IRS data? All this was fairly simple when the media ‘department’ was a part of the advertising agency. Well, it’s no longer a part of the agency - but the need to understand measurement is back with a bang.

In a nutshell, agencies will have to have capabilities beyond the creation of pretty ads.

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Collaboration will be key

There will be more and more campaigns which will require true collaboration for maximum impact; true collaboration between creative agency, digital agency, PR agency and media agency - and media. Agencies will have to learn to work with these other agencies in the true spirit of partnership - or the brand loses. This also means that both suits and creatives in creative agencies will have to gain more than a rudimentary knowledge of these other disciplines. It’ll also mean having genuine respect for all the elements that come together to make a successful campaign. It’s not going to be easy, but it will have to be done.

While on collaboration, PR solutions in times of crisis often see a PR + advertising combination. Remember the Cadbury problem? Or the Coke one? How prepared is your agency on dealing with such crises?

Thanks to various scams, most notably the 2G scam, we’ve seen mighty brands being felled by bad news. Often, the bad news became worse because the corporates were poorly trained in handling bad news. The same is true of political parties; 2011 exposed their incompetence in dealing with the unpredictable. Bad news does not come conveniently and planned. How could Emami have anticipated the AMRI fire and their link to it? How could the Congress party have foreseen Anna Hazare’s charisma? More and more brands will seek genuine PR counsel, more for being ready to handle crises than to disseminate press releases. Good for PR agencies - but not the ones without the skills to train their clients and have genuine, deep understanding of media. As far as the creative agencies are concerned, they will have to learn how to use PR for the communication that they create and for brands that they handle. It’s not an area very many agencies do well at.

Understanding cost and the implications

It’s something the Japanese learned immediately after World War II; being a low-cost manufacturer is the key to managing competition and tough times. It does not mean that you have to be cheap; the low cost allows you large margins - and the flexibility to reduce the selling price in difficult times. The last few years has seen an explosion of independents - whose costs are low.

To make matters more difficult for the network agencies, these indys are manned by competent professionals who worked in (and even headed) network agencies immediately before they set out on their own. What this means is that brand managers can choose from an indy - which has a high level of competence - and a large agency. The big difference will be the size of the retainer, not the capability. Large agencies will have to look at every cost head to figure out what can be cut or eliminated in order to stay competitive. There are many cost heads one cannot do anything about, but there are many - travel, communication and entertainment come to mind - where there is extraordinary wastage. Stare at this area.

How will the year be for you? Here’s a simple check list:

1. Do you have stable, long-lasting relationships with your clients?

2. Is your agency capable of providing solutions for digital communication?

3. Does the agency have the capability to understand research and data?

4. Is the agency ‘wired’ for collaborative communication?

5. Is there a lot of wastage in the agency?

These are questions agencies should have been asking themselves in the past five years. If you haven’t, you’re already in some trouble. If you have, well, then, have a great 2012.