Is there a way to predict when this recession will end? And is there a way to determine which industries might lead the way and therefore offer the best opportunities for new agency business? McKinsey analysts recently looked at spending peaks and troughs during several recessionary periods. The analysis was done on a macro level and focused on returns to shareholders and changes in EBITA (earnings before interest, taxes, and amortization) but a review of the charts showing leading and lagging indicators by industry is helpful for agencies seeking new clients.

• In the last four recessions, drops in consumer discretionary spending led the economy down. In the last three recessions, declines in IT spending also happened earlier than declines in other categories. When recoveries began, consumer discretionary spending and IT(information technology) lagged or were in line with the recovery but were not leaders.
• Drops in consumer discretionary spending and in the financial services sector have been leading indicators of the current recession. Note that the 1900 and 2001 recessions each followed a boom period in the IT industry which lagged during the subsequent recoveries. Following this logic, we should not expect spending in the financial sector to lead the upcoming recovery.
• Industries which have consistently experienced almost no effect as a result of the last two or three recessions include consumer staples and health care.

What does all of this mean for your agency? Safe harbors in most economic storms continue to be consumer staples and health care. Also, the McKinsey analysis does not address the issue of how the disruptive introduction of new technology or political situations might lead to a recovery. Many economists point to U.S. involvement in World War II as the chief influence in increased spending following the Depression. In another example, the IT industry led the way out of the 1980-1982 recovery with the advent of desktop computing as a disruptive technology. If clean energy can manage a similar disruption in the marketplace, especially when fueled with significant federal monies, the utility/industrial sector might be worth watching this time around.
[Source: Mapping Decline and Recovery Across Sectors, McKinsey Quarterly, January 2009]

If your clients are hesitant to launch a new marketing campaign because of the down market, you might be able to convince them to share the costs of a co-branding campaign. In February, Procter & Gamble began jointly advertising with The Limited. It’s no secret that laundry detergent is in the mature phase of its product life cycle and the apparel industry is struggling with slack sales.  But the goal of this $60 million dollar campaign is to remind target consumers, in this case it’s women, that laundering clothes purchased at The Limited with Procter & Gamble detergents will provide the ultimate in ‘fashion care’. By branding these products in a campaign that targets female shoppers, the companies hope to increase sales while creating associations in the minds of consumers.

This strategy could work at the local level as well. Are there clients in your market that might consider co-branding campaigns? Some consumers might be swayed to enjoy coffee and cake at a dessert bar before they go to a movie to take a break from recession worries.  Creating associations between and for your clients could boost sales for everyone involved.

[Source: Company Release, Procter & Gamble, 2.23.09]

Agencies need to step up to the plate and lead. That was the message delivered by Marc Goldstein, Group M’s CEO-North America at the 4A’s Media Conference. He called upon those in the advertising world to use their creative talents to meet consumers’ increasing expectation for something unique and different. Agencies, he said, are experienced at evolving and adapting, something which they will need to continue to do in light of the weak economy. Read on for the opening of Goldstein’s speech, and click here to read it in its entirety via Advertising Age.

“As you know, the theme of this year’s conference focuses on the consumer. As the title states, the consumer is watching, listening, clicking and connecting. And as we would all acknowledge, the consumer has more control than ever before. Technology has made sure of that. DVRs, online programming, mobile applications, video-on-demand, iPods, podcasts, gaming and all the other new channels of communications have given the consumer-and by the way, let’s not forget that’s us too-the ability to watch what we want, when we want, either with or without commercial interruption.

So, as I said, the consumer is in control and as a result “we are not.”

I also think something else is going on with consumers. They are doing all those things mentioned in the conference’s title — watching, listening, clicking and connecting. But I believe there is another word ending in I-N-G that should be included on that list.

The consumer is expecting something, and I believe they are expecting something from us. I believe they’re expecting us to be more innovative, creative and imaginative than we’ve ever been in our careers. I think they want us to give them things they’ve never seen before, and to inform them of the things they need to know in ways they’ve never experienced before. I think they’re expecting us to respect the way they receive and process information while still informing and entertaining them. I think they’re expecting a lot from us. And my friends, I’m here to tell you that we better deliver….”.

If your clients are telling you that it is useless to advertise because nobody is shopping, point out to them, as Time magazine columnist Sean Gregory explains, that consumers are still shopping: Differently.  Here’s how shopping has changed and how your clients can carve their niche in the new marketplace.

• Information is instantly available online so consumers find that going into a retail store is not necessary to purchase household goods or electronics. They can find what they want online. Even apparel retailers have reported growth in their online channels.
• When consumers do make it into a bricks and mortar store, the purchaser is typically female, not male. The environment must be ‘female friendly’ to succeed.
• Price is king. As with any recession, larger numbers of consumers want to spend less money on essentials. In the brief recession of 2001-2002, consumers flocked to the dollar store channel and that trend is recurring today.

Read the rest of Gregory’s talking points and propose a marketing campaign that addresses the new shopper psyche in order to boost client sales.

[Source: Gregory, Sean. How Consumers Shop Differently Today. Time, 2.22.09]