REPORT ON WORLDWIDE ADVERTISING: Asia under pressure - In post-bubble Asia, agencies must fight for work from increasingly savvy clients

Push is rapidly coming to shove in Asia, where advertising agencies are having to deal not only with the worst recession the region has ever seen, but also with clients who are increasingly savvy about what to expect - and demand - from their agencies. Gone are the days when an agency could happily coast along offering familiar solutions, tried-and-tested media plans, and pitch only for new business that it really, really wanted.

Push is rapidly coming to shove in Asia, where advertising agencies

are having to deal not only with the worst recession the region has ever

seen, but also with clients who are increasingly savvy about what to

expect - and demand - from their agencies. Gone are the days when an

agency could happily coast along offering familiar solutions,

tried-and-tested media plans, and pitch only for new business that it

really, really wanted.



Now the advertising industry in the region crackles with a sense of

increasing urgency: few can realistically hope to reach target this year

but, by God, they’ve got to keep trying. Accounts that were sneered at

less than a year ago are being fought over ferociously, with even the

big multinationals getting into the scrum. In Hong Kong, for example, an

account worth a paltry HKdollars 3 million - that’s less than pounds

235,000 - is enjoying the hitherto unimaginable luxury of watching six

(yes, six) media specialists battle for what crumbs remain of the budget

after the creative portion of the account was awarded a month or so ago

to another agency.



It’s a buyer’s market and even clients that have long-standing

relationships with their agencies are shopping around, calling for

credentials pitches on the off-chance that they might get a better deal.

So what are agencies doing? On the surface, little that’s sensible.

There have been major staff cutbacks - in Thailand and Indonesia, for

example, more than 50 per cent of the workforce in the ad industry was

laid off last year, while staff numbers were cut by 10-20 per cent

across the rest of the region, according to a poll by Media magazine and

CNBC Asia last November.



Then there’s the silent, deadly sin of commission cutting. In a

Media-CNBC poll conducted last December, more than 75 per cent of

respondents reported that commission cutting had increased in the

previous 18 months and nearly half said commissions as low as zero to 5

per cent were being accepted. Translated, that means agencies are pretty

much paying the client for the pleasure of handling their business.



The waters have been further muddied because most agencies have spun off

their media departments. Leo Burnett announced in March that it would

roll out its Starcom brand across Asia-Pacific, and Publicis has

unveiled its own media specialist network, Optimedia Singapore.



While opinion is split on what media specialists bring to the party -

they say it’s better planning, research and strategy, detractors say

it’s just bulk buying and cheaper media costs - expertise in media is

fast becoming an agency network’s main currency, threatening to eclipse

that of creativity. ’The launch of Optimedia is one of the consequences

of the recent crisis in Asia - after all, media is where the client’s

money goes,’ Guillaume Levy-Lambert, regional director for Publicis

(Asia-Pacific), says. ’There has not been too much of a focus on media

in the past. I believe it is all about what we use as our mantra -

’smarter media solutions’ - not just in buying, but also in the

creativity of the media planning.’



For this reason, Optimedia refers to its staff as ’media conceptors’,

not planners or strategists. ’Chances are that the big idea will soon

involve a significant element of media creativity,’ Levy-Lambert

says.



’That’s the future of the industry. It’s more than just leveraging

client dollars.’



Others are equally convinced that what previously passed for a ’big

idea’ no longer applies in today’s environment. According to Kent

Wertime, regional managing director at the Orchard Group, BBDO

Asia-Pacific’s below-the-line ’integrated ideas agency’, the retreat of

the big idea is linked to a lack of respect for below the line in Asia.

Wertime, formerly general manager of the above-the-line agency, BBDO

Thailand, believes that below the line has the power to build brand

platforms. ’Traditionally, brand platforms come from an agency idea, and

BTL brought it to life in different ways. But not all agencies are

producing great brand campaigns, or great advertising, or even great

ideas,’ Wertime says. ’The business has got to get back to celebrating

the great idea.’



However, the prospect of negative growth is looming. ’On the whole,

margins have been severely impacted by the downturn, which has seen

agency income and payments drop faster than the ability to lower

internal costs,’ Jonathan Fox, regional CEO at Grey Asia-Pacific, says.

’In addition, many clients have used the situation to renegotiate

compensation terms downward.’



Ogilvy & Mather’s regional president, Miles Young, points out that in

some Asian markets cheap labour costs give agencies a different cost

structure to the West. ’The real problem comes when global clients

insist on having expatriate agency staff in recession-hit markets.’



At Grey, staffing levels are down an average of 16 per cent across the

region, Fox says. While this has created some degree of increased

productivity, he notes: ’I don’t think we can really say we have gotten

more efficient.



Just fewer people, more overworked.’



Leo Burnett Asia-Pacific has introduced programmes to train staff and

build loyalty. ’We have developed a curriculum approach to ’lifetime

learning’ at the agency,’ says its regional managing director, Steve

Gatfield. A global competency programme has been developed with Hay

Consultants to drive ’high performance behaviour’.



’The reality is that clients need strength in adversity,’ Gatfield

says.



’There is a distinct difference between being fat and being strong. Our

focus is to build strength by putting on muscle where there is greatest

opportunity, namely in driving insight and ideas about how to build

brands in the post-bubble era in Asia.’



Fox is confident about the long-term outlook, noting that agencies in

Asia have ’learned an important lesson’ and made significant and

permanent structural changes. ’Agency compensation will never again

permit the kind of ’fat’ staffing of the past,’ he says. ’Savvy agencies

are developing through-the-line resources that can justify

performance-based compensation.



Fewer, smarter people with more highly compensated skills is the

paradigm of the future.’



Suzanne Miao is editorial director of Media magazine.



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