Category: Insights

As the world faces its gravest crisis since the second world war and the Great Depression, it is inevitable that our attention will focus on behaviour – of all sorts. Since the Covid-19 pandemic affects just about everyone, will impact every corner and sector of every economy around the world; and because the disease occupies just about every square inch of newsprint and every minute on virtually every type of media, there’s no other story in town and, in developed economies at least, it feels as if we are on some sort of war footing. And while during the war and the Depression, negative coverage tended to focus on the bad behaviour of individuals or groups (from nations to companies), in our brand-dominated age, the focus in 2020 falls on brands. Interestingly, earlier on in this developing story, coverage tended to focus on the brands that were doing good things, behaving altruistically. But as the scale of the crisis has escalated, and the reach of the virus has become universal, and in the “wartime spirit” of “we’re all in this together”, it is now expected that brands will behave well, acknowledging the depth of the crisis. So, earlier this week the housebuilder Taylor Wimpey – one of the first construction firms to close down its sites – said it was scrapping annual bonuses and announced that its board were taking a 30% pay cut; and, the same day a number of major banks announced that, following order from the Bank of England they were scrapping shareholder dividends and were thinking of doing the same with bonuses. Given the crucial role that the banks – who have, in the eyes of a great deal of the public yet to be forgiven for their role in the 2008 crash – are going to play in the coming weeks and months, especially as hundreds of thousands of companies and individuals teeter on the edge of ruin, banking brands will come under the spotlight more than any other brand. Already they have been criticised for being ‘too commercial’, and I think, as a result of public and governmental pressure, we can see banks becoming less hard-nosed and fulfilling a social function, perhaps even working in the service of the wider public good rather than the demands of stockholders. Given the scale and reach of the suffering caused by this pandemic, the public – and perhaps governments, particularly if they’re looking to get re-elected – aren’t going to forget or forgive those brands which transgress, and not just banks either, which brings me neatly onto a fascinating survey – The Trust Barometer, compiled by PR giant Edelman from 12,000 respondents in leading global economies – published this week. It says that brands’ actions during the coronavirus pandemic will have a significant impact on future purchasing behaviour for consumers (as a side note, it will be fascinating to see how followers of certain Premier League football clubs, who have so far made an absolute hash of things during this crisis, react. As every marketing student knows, footy clubs enjoy unrivalled brand loyalty – if they are seen as behaving in a way that goes against current sentiment, such as furloughing ground staff whilst continuing to pay the full salaries of professional footballers, what will happen to their support?). Already, reveals the Barometer, consumers are demanding that the must change the way they interact and communicate during the Covid-19 crisis, with 65% agreeing with the statement ‘How well a brand responds to this crisis will have a huge impact on my likelihood to buy that brand in the future’. When looking at individual country responses, the figure for the UK was 64%, with China (interestingly) way out in front with 88%. One-third of respondents said they had already stopped using a brand that was not acting appropriately in response to the global crisis. The importance of the role brands could play is reflected in the sentiment that globally 62% of consumers said they did not think their particular country would make it through the crisis without brands playing a “critical role” in the fight against Covid-19. And, even more importantly, consumers are holding companies to very high standards – the first thing they demand of brands and their owners is for them to ‘protect the well-being and financial security of their employees and suppliers, even if it means suffering big financial losses’; with 90% of global respondents supporting this statement and 52% saying brands ‘must’ do this to earn or keep their trust. Another vast majority (89%) said brands should shift to producing items that help people meet the new challenges presented by the virus and/or offer free or lower-priced products to health workers and other high-risk individuals. We’ve already seen this, with formula 1 racing teams and others offering to make ventilators (and working with the NHS to design and provide equipment), companies such as Zara owner Inditex switching to mask and PPE production, Diageo providing 96% ethyl alcohol used in vodka and gin production to the production of hand sanitizer and LVMH, the luxury conglomerate, is switching production from making high-end perfumes to turning out the same. Various take-out food and coffee shops such as Pret were providing free hot drinks and discounted food to NHS staff and Uber are offering free rides and meals to NHS staff, whilst onboarding a significant number of independent restaurants and speeding up payments via Uber Eats. This is the new normal – it’s no longer good enough to be ‘great value’ or ‘good quality’, brands now not only have to respond to the crisis in a positive way, but they also have to be seen to be doing so. 90% of respondents expect brands to keep the public fully informed of how they are changing the way they operate in light of the global health crisis. Brands are warned against being light-hearted in their communication strategies with 57% advising against advertising that is too humorous. The public are entertaining themselves by sharing amusing videos and cartoons on social media, they don’t want brands to try to be funny and gatecrash the party. And it would appear they don’t want really want brands to connect with them regarding virus-related issues via social media with only 19-31% (depending on platform) wanting communications via Social, compared to 45% via traditional media (TV, newspapers and outdoor) or email (41%). Unsurprisingly, the most trusted spokespeople are doctors and health authorities (trusted by 78%), but strikingly, brand CEOs and brand ambassadors/experts were still trusted by 44% and 48% respectively, meaning that high ranking directors and marketers have an opportunity to build on and reinforce themselves as trusted advisers (or need to, depending on your point of view). So, in our new reality, brands should properly contribute to the greater good; not act alone. One of the criticisms of big pharma right now is that the companies are protecting, rather than sharing, their data – data sharing is seen as crucial to developing a breakthrough. Brands need to collaborate and work towards a common goal – we have seen this with supermarkets ensuring specific times kept free for vulnerable shoppers and sharing deliveries and data about stock levels with each other; they should solve, not sell; their marketing messages must be authentic and considered in tone, they must communicate with emotion, compassion and facts. And what part can marcomms agencies play? I think it will be a crucial one – one of wise counsel as opposed to just being the “people who sell”. Agencies need to focus on enhancing their role as protectors of brands. In this way, traditional agencies, which understand brand stories better than anyone (perhaps even more than the brands themselves), who know the power of visual and textual narratives to change behavior and reassure, can claw back some of the ground they have lost to ‘in-house’ and the big consulting firms. But that’s a subject for a future piece. Read more

There is no need to write an introduction explaining why I’ve pulled together this piece with my team at Green Square. What we have done is gather our thoughts and learnings, and put them together with the experience of various peers in the industry who have been through dark times before. We hope that what follows may be a useful guide to help agencies through a period of extreme uncertainty. There are three key areas that need to be considered – leadership, clients and commercial. Let’s start with the former.

Leadership

Particularly in the current maelstrom, leadership is about giving people confidence and faith when what they are probably experiencing is fear: fear for their health, their job and their livelihoods. However, what leaders must not do is bullshit or stick their heads in the sand. They will not have all the answers. The situation is fluid, things change daily, and they may well get worse before they get better. People need to be told this and reassured that their leader will do the best they can in these constantly changing circumstances. People need to see calm leaders who encourage, support and give optimism wherever possible while keeping to the truth. It’s completely expected for a leader to tell people they don’t have all the answers. It’s also reasonable for them to ask their teams to constantly pivot depending on how the situation evolves and react to whatever legislation and government support is made available. But as leaders, bear in mind you are not alone. Many people are in exactly the same position as you – experiencing the same fears, the same self-doubt, wanting to know if they are doing the right thing. Reach out to your peers and, if you don’t have anyone you feel you can easily chat with, consider using a coach. Non-execs are also excellent sounding boards at times like these. Indeed, this is when they should come into their own. Key points Communicate regularly with your staff and particularly with your direct reports. Do video calls for all staff if you are able to; it’s personal and as intimate as we can get right now. If you can’t, then send some other form of company-wide communications. People will crave information and communication, even if there’s no new news, so make sure they get it. Ensure that everyone in the senior management team has bought into the plan and is mirroring what is being said. People need reassurance and they do not want mixed messages. The chief operating officer, chief financial officer, HR director – everyone must all bang the same drum. These are the senior players that people turn to for further reassurance. People need to know what you expect from them – the key issues the business is facing and what you can collectively do to mitigate the risks. Nothing unites like a common enemy, the enemy, in this case, being a virus. Prepare a schedule for how staff should operate when working from home, get it down on paper, create the framework for people. Some staff may have to manage children that are now unexpectedly at home or ill relatives. Understand what can be done to mitigate the impact of these things and where you can, be flexible. Alongside giving direction, don’t forget to be humane. People need empathy, particularly in tough times. There may be some very tough decisions regarding your staff base, despite government intervention and support. When these decisions are made, be decisive and try to do it once. ‘Death by a thousand cuts’ breeds fear and mistrust. Do not procrastinate. This situation is likely to get worse before it gets better. Don’t rely on false assumptions that the next roll of the dice will come up a six. Implement the plan and stick to it, while allowing pivot points when things don’t pan out as expected. Scenario plan in the event of your own illness and those of the management team. Who will take over from whom? In theory, those affected will recover within seven days from symptoms starting, but many could fall more seriously ill and families will need to remain self-isolated for longer. Make sure you have the succession plan (albeit, hopefully temporary) in place now.

Clients

One of the biggest risks is client spend being reduced or pulled. For some businesses, the likelihood of this happening will be high. For others involved in things such as streaming, online content, delivery services, the risks will likely be much lower. A clear balance needs to be made between ensuring clients contracted to work with you continue to abide by their obligations while not burning a long-term, respected client relationship for short-term cash inflow. Key points As this is not a typical recession situation, and virtually everybody will be impacted and in survival mode, it’s not one where you can easily ask friendly clients for support. What you should be doing is regularly checking in with your clients, making sure they are well and offering any support you can realistically give. Focus on your clients, not yourselves. Understand the crises they are facing and how you can possibly help mitigate their problems. This is the time to focus on nurturing the client relationships you have and to revisit lapsed clients too. Strengthen those relationships. Get key client plans in place and review them at least weekly. Name specific responsibilities for individuals and focus on ensuring agreed actions are taken. Make sure your best people are all client-facing and client-engaged. This applies to those lapsed clients also. Go back through your invoices: who have you worked for in the last three years that you no longer have live projects with? Follow them up, check that they are OK. Clients for which you have committed projects must be prioritised. Those who have promised work to you must be promptly followed up with to get that work locked down. The world hasn’t stopped. People are still working, albeit mostly remotely. Continually review your pipeline and be pragmatic and realistic, not optimistic. Understand what’s gone, what’s going ‘on hold’, what’s still a live prospect and what needs to be done to convert it. Understand your clients’ external focus and drivers and what you can provide to facilitate them in delivering their objectives. There’s no point offering them your regular services if their key priorities have changed and you are no longer relevant. Be proactive in suggesting you adapt or delay work already underway, where it no longer makes sense to continue that project. Look for work, not budgets. This may not be services you currently provide for a client, but services you provide for others that your other clients may need. In a recession scenario, long-term brand building quickly gets sidelined for short-term sales initiatives. Think about how you can support your clients in helping them shift product short-term and protect their own revenue streams. Focus on low-hanging fruit. What work can you quickly pick up, deliver and get paid for? Productise your offering where possible. Say: “This is what we do, this is how we do it, this is who we do it for and this is how much it costs”. Make your services easy to understand and easy to buy. Stay close to your referral partners. If you use a lead generation firm or have a referral program in place, ensure you fully maximise opportunities through these channels. But be careful to properly evaluate new work coming in – watch out for those looking for a cheap deal or time-wasters searching for free ideas and advice. Be politely upfront with new prospects; you need to establish that work actually exists and, more importantly, that you will be paid. Crank up your PR – this is an incredibly important time to drive awareness and profile. Develop relevant articles and thought leadership pieces that will be valuable to clients and potential clients. Get them out by email, into the trade press and on social media. Avoid discounting. Just because we are in this situation it does not mean you should cut your pricing. If you do this then it is very hard to raise rates again once we are out the other side. An alternative is to break projects into stages, with payments linked to delivery of each stage. This way clients will not have the worry of a large fee commitment (so will be more likely to progress the work) and you have reduced the risk of non-payment at the end of the project. You need to ensure everyone with responsibility for chasing in debtors is onto it. If you have clients that literally can’t pay, then you will need to look at breaking the debt into bite-sized chunks. If it’s a case of them being able to pay but just choosing not to, you have to decide if this is a client you really want once we all get through this. If not, go legal early or you will find yourself at the back of the queue. Clients may come out of this with different business models and different marketing strategies. Understand what you can do to aid their recovery, how their models may have shifted and how your offer needs to be adapted to assist them going forward. Keep track of ideas you have that may help clients with their recovery phases.

Commercial

The following are the more hard-nosed financial impact areas that need to be considered. This does not make easy reading and you must take into account your legal obligations as well as the need for humanity and integrity. You must also take proper advice from your relevant professional advisers. Key points Be absolutely realistic regarding revenue forecasts and cash flow. Do not kid yourselves it will all get better in the near term. It could get worse. Build a worst-case revenue forecast and assume all projects that have not been signed off and committed to will be put on hold. Make sure you strip out anything that is not contracted. Clients will be cancelling and delaying projects. Anticipate retainer fees ceasing. Go through each contracted client and identify where the ‘at risk’ points are for projects being cancelled or postponed. Build a cashflow forecast. Based on the direst revenue forecast above, when will you run out of cash on a business as usual basis? This is your starting point for the actions below that you need to consider. Get an immediate grip on your costs. Immediately remove any superfluous costs that can be cut. This is not just cancelling the entertainment streaming subscriptions when no-one is in the office. This will include contractors and freelancers who are not currently involved in client projects that can be stood down (but bear in mind you should try and look after those valued and talented freelancers who will be snapped up by other organizations when normality returns). Freeze hiring and pay rises. All discretionary expenditures must be stopped. Look at every line in the P&L to find savings, and work with suppliers where possible to mitigate costs. Focus on where any savings can be made, no matter how small. Your biggest cost is likely to be your staff. In the UK, you need to consider making those not currently working on projects ‘furloughed workers’. The UK government has said it will reimburse 80% of furloughed workers’ salaries up to a cap of £2,500 per employee. This may be a viable alternative to a wholescale redundancy plan. You will need to check eligibility criteria and bear in mind you will still be liable for 20% of the salary costs and amounts above the cap. Or perhaps you will opt for a combination of this plus government-backed lending – the doors to this opened on 23 March. Consider asking people to go part-time or temporarily seconding staff into clients. Bear in mind there is always a minimum point you can’t cut below and still be able to deliver the work, but don’t let this be an excuse for not taking hard actions from the outset. Owners and directors need to lead from the front and one such step would be a salary deferral or temporary pay cut (while continuing to work full time). If this is what the leadership decides to do, make it clear to the staff you are doing this. It is important they see you sharing the pain. Evaluate your property situation. Can you temporarily sublet, share with others or negotiate a rental deferral? Develop a forecast with key metrics and plan future ‘trigger points’. These trigger points will be actions you will take should your key metrics not be met. For example, if actual revenue is 5% below the forecast in a given month you will make further staff reductions or request everyone goes part-time. It’s not all about cost-cutting. Look at efficiencies: are there ways you could be doing things differently, better or faster? In the good times, these things get overlooked; in the bad times, they become a necessary point of focus. Be ruthless in chasing in unpaid invoices and watch out for potential bad debts. Clients may wish to delay paying you, but job losses and restructuring announcements at client companies are a sure sign that you may not be paid on time. Get everyone focused on profit. Understand the ramifications of any offers you are making to your clients and ask whether they are sustainable. Is there an opportunity to come together with other agencies to best effect an increasing breadth of offering? In the case of needing to rationalise staff, is there an opportunity to ‘huddle together to keep warm’ or temporarily outsource the work you otherwise would have done together with some staff? Even, perhaps, to a friendly competitor? Where you are part of a group of companies, have private equity backing or external shareholders, you will be under more intense pressure to provide constant financial updates. Understand exactly what your investors need and manage that relationship carefully. Investors do not like nasty unexpected shocks. Keep them updated on your plan, how it is progressing and when you need to make changes to that plan.

And when this is all over?

In many cases, the business models will change, not simply because of need, but because we will have had to do things differently – less travel and mobility, more reliance on the internet for online meetings and people will have focused on things they can do at home that may be different to their day-to-day routines. People will have had new experiences and this may drive new consumer behaviours – from simpler things – such as a growth in home learning and home cooking – through to a potentially accelerated decline of the high street, as the vast majority of people will have been forced to do everything online. You will need to ensure your business can adapt to whatever new paradigms may exist. As long as you behaved with compassion and integrity throughout and maintained excellent relationships with your most important business constituents – your clients and your staff – you will hopefully come through this just fine and in a good position to rebuild. At the end of the day, it is important not to bury our heads in the face of adversity. Despite the bleak current outlook, there will be new opportunities, and these could be very exciting. I would like to give specific thanks to our friends Noel Penrose and Chris Savage who have added valuable insight.

What’s next for beleaguered M&C Saatchi is the question now being asked after the resignation of the agency’s co-founder and three fellow directors in a shock move many have described as a “sad” ending to the advertising mogul’s career. Yesterday (10 December) Lord Maurice Saatchi resigned from the agency alongside board directors Lord Michael Dobbs, Sir Michael Peat and Lorna Tilbian following a year of profit warnings, lost clients and a “cock-up in the accounts department”. Defiant chairman Jeremy Sinclair vowed the business was “determined to restore the operational performance and profitability” and has started a process to reconstruct the board with new independent directors who will have “a mandate to conduct a full review of all aspects of our governance”. Sir Martin Sorrell began his advertising career at Saatchi & Saatchi (the unrelated creative shop later acquired by Publicis) in 1977, under brothers Charles and Maurice. The ex-WPP chief, now founder of S4 Capital, simply said of his former boss’s departure: “It’s rather sad really.” It’s a sentiment echoed by others in the industry. Ollie Latham, planning director at VCCP said: “This is such sad news. Lord Saatchi always smiled and waved when you passed him in the hallways. He set up a poetry foundation in memory of his wife. He is an advertising titan who deserved a much better end to his career.” Saatchi’s departure comes after a devastating year for the self-declared ‘biggest independent creative agency in the world’, which after being established nearly 25 years ago now operates in almost 30 markets and owns the likes of Lida, MCD Partners and The Source. In August, PwC discovered a series of historical “misstatements” in the company’s accounts, including an “overstated accrued income” of £2.6m. Last week, it issued its second profit warning when it revealed an £11.6m hole in its earnings. Clients have also fled, with NatWest, which contributed a significant chunk of revenue, recently moving its advertising account to The&Partnership resulting in a round of voluntary redundancies. It will now fall on chief executive David Kershaw, founding partner Bill Muirhead, chief financial officer Mickey Kalifa and finance director Andy Blackstone to turn the ship. Sources told The Drum Kershaw intended to resign but was persuaded to remain. All past and present directors have declined to comment. Tony Walford, a partner at corporate finance consultancy Green Square, said the company line on the proposed reforms and reasons for Saatchi’s exit have left more questions than answers. “The resignations are over the proposed reforms in respect of governance and the restructuring around this. What we don’t know is whether they felt the proposed restructuring is too stringent, isn’t strong enough, because they don’t like what is being proposed from an operational point of view or because maybe they wanted David Kershaw to go,” he said. “We have to wait to see what else comes out over the coming days (I’m sure there will be a lot) that will put things into more perspective.” While the latest personnel exits might not be felt on a day-to-day basis when it comes to client management or delivery, it has sent a signal to the market that the departing quartet were unwilling, or unable, to provide solidarity during the most challenging period in the agency’s history. After voting with their feet, M&C Saatchi’s share price fell almost 6%. “A completely leftfield thought could be they are looking to take advantage of the collapsed share price by raising private equity money and taking it private,” suggested Walford. “Maurice keeps his baby, much less governance and public scrutiny as a private company and, if the share price falls further, it could be a bit of a bargain (although quite an expensive thing for Maurice to do if the price drops again due to their departures, given the 4.5% shareholding he already has). That said, Lorna’s prior banking background would certainly help facilitate something like this.” Meanwhile, rumours have quickly swirled in ad land that another buyer might be ready to swoop in and snap up the bruised advertising group. City traders have posited that Accenture Interactive could make a £70m play in a bid to build out its own sports marketing and sponsorship offering through M&C Saatchi’s Sport and Entertainment agency. “They’ve literally had the perfect annus horribilis – the accounting disasters, loss of an anchor client and now this,” surmised Walford. “Thus it’s really hard to predict what the future will hold. David Kershaw must be desperate to see the back of 2019.”