For The Drum’s Predictions Deep Dive, RocketMill’s chairman Sam Garrity takes a look at the macroeconomic picture for agencies, and predicts how smart colleagues will tackle the year ahead.
I’m going to leave the metaverse and non-fungible tokens talk to others, and look instead at the macro issues we face and how these might inform our activity as performance marketers as the year progresses.
We emerged from the worst of Covid-19 with many marketing teams thin on human resources, creating a rush for talent. This created a scarcity value, pushing average salaries up.
We followed this with a war in Europe, which has led to bigger inflationary pressures than we’ve seen in a generation. The ensuing cost of living increase has resulted in more upward pressure on salaries. So, the biggest cost in our sector (with the possible exception of media budgets), people, has been rising at unsustainable rates.
Meanwhile, the market has turned against us and inflation has caused the Bank of England to row in the opposite direction. Since the credit crunch we’ve had historically low interest rates alongside increased liquidity for capital markets. Money has been cheap, M&A has been rife, and company valuations have hit record levels.
Today, we’re going the other way. Interest rates are rising, capital markets are dry, company valuations have diminished, and customers are poorer. All of this will result in headcount challenges for many businesses. Some have over-invested in talent; some operate in markets that are exposed more keenly to recessionary pressures, and some may lose their financial runway.
We began 2022 with talk of the great resignation and a rush for talent. We ended it with the real prospect of job losses in areas of our sector. The kindling has already been lit, with mass redundancies by some of the tech giants and banks. 2023 will define how far the fire spreads. There’s plenty that our industry is already doing to fight back; a reappraisal of in-housing, a spreading-out of performance marketing techniques, and a new professionalized approach to podcast marketing are among our most promising tools.
The re-appraisal of in-housing
I believe we’ll see a rebalancing of the supposed trend toward in-housing. The commercial flexibility, alongside the responsibility for the human culture/cost that agencies provide, will be of great value to brands in these market conditions.
Our trade press has, in my opinion, presented the story of in-housing as a one-way street. In reality, we’ve seen that success stories are not abundant. Perhaps we’ll recalibrate our view on this matter from here on.
Performance marketing across the funnel
Tactically, I feel the sector will move on from associating performance marketing skills with the final 100 yards of the customer journey.
Agencies like ours have invested in the old-world talents of strategy and creative, aligning them with our heritage in data-driven, digital marketing. These agencies address the full funnel through the unfiltered lens of performance.
With the skills and platforms brands have access to, this recession doesn’t need to be characterized by a flight of budgets away from broadcast channels toward the end of the funnel in an ever-decreasing circle.
Today, we can segment and address audiences across the whole funnel, optimizing creative for specific audience segments, and it doesn’t cost the earth. This recession will mean brands demand value. How we deliver it for them will be new.
The professionalization of podcast media
Podcasts are often added to media plans as a late sprinkle of creativity to please a client, with a lot of the planning and intelligence coming from podcast media owners. This lacks thought and independence, and I see it changing.
The use of this channel, across the funnel, needs sharpening. I see this as a huge growth area, which is professionally under-serviced from strategy right through to analytics. It’s ripe for disruption.
Many businesses will face headwinds that result in slimming workforces. In some areas, agencies will benefit from this turbulence due to the flexibility and accountability they offer.
I also believe that marketing spend during this recession will differ from others, with the demand for value remaining evident, but not necessarily followed by a flight toward end-of-funnel activity. Podcasting is the area that presents the greatest opportunity for creating new value for brands.
For more takes on the year ahead, by and about marketing agencies, check out our Agencies Predictions hub.