The year ahead for...global groups

Maurice Levy thinks that although the UK will suffer, and redundancies are inevitable, the recession will not mean the end of consumerism.

Maurice Levy...the year ahead
Maurice Levy...the year ahead

Life will never be the same again, people told me when I went to the US in the immediate aftermath of the attacks on the Twin Towers. That's true - but only to a tiny degree. Obviously there are tighter security checks for travellers but, that apart, nothing much else is different.

The fact is that changing people's minds in a profound way is very difficult. I recall the 1974 recession, when we were told that people would drive only cars that were practical, that they would no longer be concerned about image. That idea lasted "the time of a cherry", as we say in France.

I suspect we'll have a similar hiccup this time. Nevertheless, there will be some significant differences between this recession and those that have gone before.

The last one came from the real market and the real economies. This one began in US real estate. It was like a television series. Each week there was a new episode. Then it hit the real economy and it's hurting.

In previous recessions there were still lots of reserves in the financial system. This time, billions of dollars, euros and pounds have just vanished. People buying pensions or investing in stock and mutual funds have seen 50 per cent of their plans disappear.

The other aspect of this recession is that it's a global crisis that's changing the view of the world economy. In the past, everything coming from the state was wrong and the market was right.

Now we are seeing the market going in teams to ask for taxpayers' money. It's a kind of socialisation of the global economy.

Superficially, the prospects for 2009 don't look so bad from a global perspective. The UK may be seriously hurt, Spain's investment in freefall and the German economy slowing dramatically, yet growth is coming from emerging markets.

But that's dangerous because those markets are not stable. So much depends on their ability to export. If China can't export, its internal market won't grow by the 7 or 8 per cent expected. Nor do we know what the long-term effects might be of the terrorist attacks in India.

Then there's the question of oil prices. If they stay at between $40 and $50 a barrel, that's good news for the global economy. But in the Middle East, Russia and Latin America, plans are founded on a price of between $80 and $100. What happens if they raise prices by reducing volume?

For all these reasons, 2009 will be a tough challenge. Not least in the marketing services sector, where even the most brilliant agencies will have to cut their workforces. I don't know how many job losses there will be. But they will happen because they always do during a financial crisis.

We'll also see that some agencies are not well positioned to cope. While the boutiques and the groups will come out of the crisis in better shape than when they went in, those agencies with no clear positioning, whose financial positioning is weak or which have too much dependence on one client will be vulnerable.

One interesting sign is the number of "marriage" proposals I've had from independent operations since the summer. Some think the time is right to be aligned with a group. Others are clearly facing financial difficulties at a time when the media landscape has never been so complex.

For groups like us, the financial pressures will be intense. If you ask me if procurement specialists are going to be even more influential, I would say that's impossible. They now make all the decisions.

I know that in trying to find the cheapest way of getting what they need they're just doing their job. But the effect is to continually depress the price of an agency's client service to a point where it can't get any lower. This is a time when advertisers will need more inspiration, care and time from their agencies. And that requires a lot of investment.

Of course, it's always possible for clients to find people who will do a job for them more cheaply. But agencies will still have their place. Just look at the Obama presidential campaign. It showed that advertising works, that good strategies work and that holistic communication works. Agencies that deliver these things are the agencies of the future.

Meanwhile, it will be up to us to make our case to clients tempted to make big cuts in their adspends. We'll have to convince them that if they're just doing it to satisfy shareholders, then it's useless. The stock market simply doesn't conform to any rationale and analysts aren't always right.

If it's because clients have other serious issues, then our role is stay close to them, to show understanding and to help. We have to show clients that by reducing advertising, they reduce the amount of conversation between consumers and their brands. Also, in tough times, we will have to ensure clients get quick and measurable results that will convince them that we're giving them the right solutions.

The recession is bound to force agencies to explore new revenue streams. But the true importance of doing this will be to ensure that we stay relevant to clients. I want everybody in my group to be able to speak the digital language. In a crisis you have to offer clients the right tools with which to address their issues.

Whether or not the downturn will change the way consumers think and act is an open question. Global warming, climate change, scarce energy resources and concern - particularly among young people - about what we're doing to the planet is high now. But deep down there lurks a need for fun and pleasure, and I suspect bad habits will return pretty quickly.

That's when we as an industry will have to shape up. In the past, we've projected many images that were not right and encouraged people to behave in the wrong way. We have a responsibility - and we will have to face it.

- Maurice Levy is the chairman and chief executive of Publicis Groupe.