Features
Creativity ‘at its best in the face of adversity’: agency execs on navigating the throes of inflation
With the advertising industry facing the "double whammy" of rising inflation, as it slowly emerges from the impacts of the ongoing impacts of the COVID-19 pandemic, Mumbrella's Kalila Welch caught up with HERO's Ben Lilley, TBWA\Sydney's Kat Alvarez-Jarratt, GHO's Eithne McSwiney, It's Friday's Pete Bosilkovski and Milk & Honey United's Andy DiLallo to find out how brands and agencies can navigate the latest rendition of difficult times.
As Aussie adland returns to some form of a loosely defined pre-pandemic normal, with in-office interaction, in-person events and business travel again becoming routine, a new challenge has emerged in the unfolding global economic crisis, with local inflation reaching its highest level in over a decade.
While the industry is one known for being insular, it is by no means immune to growing economic pressures, and while the impacts of rising costs of living may not have fully hit advertising yet, they are sure to be realised over the course over the year.
Ben Lilley, founder, HERO
How will the impacts of inflation affect the advertising industry?
In explaining the fallout of rising inflation in the aftermath of the COVID-19 pandemic, founder of HERO Ben Lilley describes it as a “double whammy”.
“The industry is already seeing inflationary pressure on salaries, and there’s a talent war – obviously partly because immigration has been so adversely impacted during COVID,” says Lilley.
“A lot of people have left the industry as well during the pandemic, you know, its caused so many people to question so many things in their lives and their careers. So, agency land is definitely already seeing that talent shortage and wage impact.”
Lilley notes the implications hear will inevitably mean flow on effects for agency pricing, describing increased prices as “something that’s going to need to happen, in terms of agencies starting to re-cost and recalibrate their own pricing in response to the increase in costs that they’re seeing.”
Kat Alvarez-Jarratt, executive creative director, TBWA\Sydney
TBWA\Sydney ECD, Kat Alvarez-Jarratt, adds the impacts are also being felt heavily on the client side.
“Adland is not a separate place (although sometimes we like to think it is). Our clients are certainly feeling the pressure particularly when it comes to physically making and distributing the work.”
Alvarez-Jarratt says brands will also have to be creative when it comes to marketing budgets, looking more towards interactive and earned ideas.
“Look for ways you can create exponential rather than incremental growth in your brand. The worst thing brands could do now is turn off that advertising spend.”
While yet to see the tangible impacts of inflation the industry, Eithne McSwiney, managing director of GHO Sydney says there has been a shift in the sentiment in businesses given the speed and extent of economic change.
“My view is that it’s more a question of clients being cautious with their next quarter planning but nothing like the challenges and uncertainty brought about by the pandemic over the past two years,” says McSwiney.
“In fact,” she adds, “we’ve seen confidence pick up a lot this calendar year as many clients have a backlog of projects they are developing with some urgency.”
McSwiney explains for the time being the agency’s focus will be in mitigating the impacts of the rising cost of living for its team, such as choosing not to pass on mandatory super increases.
However, inflation will still be something that inevitably impacts the agency’s approach.
“Of course pricing strategies will be more central to marketing activities and navigating brands through this change, in a way that is empathetic to consumer sentiment, will be critical.”
Eithne McSwiney, managing director, GHO Sydney
As for how agencies can expect clients to respond when it comes to their advertising budgets, McSwiney notes in previous periods of economic downturn “brands occupying the middle ground on discretionary products and and services” have been the most at risk, while more premium brands, and economy brand typically hold ground.
She notes outside of industries, like tourism, that have been enjoying a post Covid boom, “discretionary spend on clothes, furniture, dining and entertainment choices, may quickly see strong pressure on margins.”
“So, we can anticipate challenging conversations on marketing spend and its role to support brands and sales through this period.
“However, given the causes of these inflationary pressures are multi-faceted, (i.e. not just a tightening of monetary policy but international and climate events affecting food and energy supplies), the length and the scale of rate increases may remain uncertain for a sustained period of time. If this is the case, then we can expect to see a growing concern and a consequent impact on behaviour in these at risk categories.”
What have we learnt from the past?
Luckily, the advertising industry is not new to challenging times, having recently survived the ‘unprecedented’ pressures that came with the COVID-19 pandemic, which Pete Bosilkovski, CEO and founder of It’s Friday argues has equipped the industry with the ability to pivot quickly.
“No industry will be immune to these drastic shifts in costs of living; however, I think the advertising industry has just gone through a similar dance. Not identical but we’ve just come out of the pandemic, and I believe we’ve learnt a lot in the past two years. We’ve embraced seismic change and learnt how to navigate it with our clients. Like the pandemic, the impact of inflation has been fast and furious, and brands/agencies are starting to pivot quickly, again. They have no choice with consumer sentiment shifting at rapid speed.”
Pete Bosilkovski, CEO and founder, It’s Friday
Recalling the similar circumstances of the pandemic, Lilly asserts there are two types of clients in times like this – those who take the conservative route and cut spending, and those who take advantage of the drop in competition and invest in increasing their market share, brand value and brand awareness.
“Study after study over the years has proven that it’s the client who continue to invest or in fact, increase their investments during times of economic pressure who always come out significantly better,” Lilley note, pointing to the example of the pandemic, where the companies that stuck to their brand fundamentals came out on top.
“A key learning that hopefully most people worked out very quickly during the pandemic was, the more you started talking about the pressures of the pandemic, the more consumers would punish you,” says Lilley. “Because, when you’re living through tough times, or economic pressures, or down turns, or adverse health events and so forth, the one thing people don’t need constant reminding of in advertising and marketing is how bad things are.”
Lilley continues that investment in the creativity of a brand is the single best investment a brand can make, and that it’s “even more important when times are bad.”
His views are echoed by creative leader and Milk & Honey United founding partner Andy DiLallo, who says now is the right time to invest in brand, with inflation only likely to rise over the coming years.
“I really feel like the investment in brand now is gonna be paying larger dividends, particularly with inflation,” says DiLallo. “Things aren’t gonna get any cheaper, and long term return on investment is gonna happen over the course of building brands.”
He also highlights rising costs will inevitably change the way clients are engaging with their agencies, adding while tactical work will always have its place, greater demand for brand work will require less volume and more experience.
“Things and money have been incredibly cheap for the last few years and you’ve kind of seen that with agencies as well, where you’ve got rafts of talent inside these places and you’re getting cheaper and cheaper juniors and people to be able to facilitate volume. Whereas, clients are looking to build brands and are probably leaning harder into things like experience and actually getting more senior leadership and whatnot in order to build those things.”
Andy DiLallo (right) with Milk & Honey United co-founder Steve Jackson (left)
Bosilkovski adds that “consumers don’t go into hiding, they seek greater value.”
“This is the time for marketers to reassess how their brands can innovate and help consumers by demonstrating greater value,” says Bosilkovski .”We’ve all seen the data from previous recessions, this period makes and breaks brands. We’ve seen the rise of powerful brands that double down on marketing activities during these times, and we’ve seen brands that have faded away as they have pulled back. Why should these difficult times ahead be any different? If anything, as others run away from the chaos, there will be more opportunity than ever to deliver real value to the world. If history proves to be any predictor, these times have seen the launch of the world’s most amazing companies, like Disney, General Motors, IBM, and Microsoft that used recessionary times to launch and disrupt categories.”
For McSwiney, advertising at this time is more important than ever, especially when leveraging it in ways that show your customers how you are showing up for them.
“Everyone knows the story of how Stork margarine advertised through World War One and came out ahead of everyone else. During adverse times it’s important to show up both from an emotional connection point of view but also for brands to be there for their customers, supporting them through difficult times — whether it be by freezing the price on essential items (as Woolworths is doing) or enabling people to take a holiday from their mortgage if you are a bank. It’s imperative that brands acknowledge and adapt to the environment, whatever that is.”
How much should we let the difficult circumstances influence creative work?
For those clients who continue to produce work, there is a question of how much, if at all, should the current state of the world affect the creative.
Bosilkovski says it is a fine line, with COVID having taught us brands are seen to go above and beyond to help their consumers during difficult times typically fare the best.
“Brands will need to stay authentic to their purpose and values while ensuring they are not being tone deaf. Both are equally important. We saw many brands during COVID completely shift their tone in comms, almost turning themselves into a different brand. this is a terrible strategy. What is far more effective though, is brands standing up and creating brand acts that are driven to help and provide greater value for consumers. We’ve seen the banking, supermarkets and QSR categories step up and go above and beyond with their brand acts during the pandemic. Those brands that rise to help consumers in need, will leave their competitors for dust. We know consumers never forget.”
McSwiney is on a similar page, reminding us of the continued scrutiny Qantas has faced for failing to help its customers.
“Those that ignore the changes in sentiment do so at their own peril. Recently, we’ve seen Qantas being asked to take down the Spirit of Australia line because, in part, its perceived lack of empathy for travellers has been damaging. We need to make a strong link between our brand promise and consumer’s changing needs and expectations. A good example of this would be Coles “Value the Australian way”, which I believe is hitting the right cord for these times.”
Alvarez-Jarratt echoes Bosilkovski and McSwiney’s calls for empathy, but warns this does not need to take take a literal form.
“One of the strongest tools a creative has in their arsenal is empathy and a deep understanding of the audience they’re trying to reach. So it makes sense that brands and agencies are really considering people’s mindsets in this moment – however that doesn’t necessarily mean reflecting that literally in the work we produce,” says Alvarez-Jarratt.
“There was a moment in 2020 when clients were asking the industry to create content with people wearing masks, and as it turns out people didn’t want to be reminded of the pandemic in the content they were consuming. They wanted to escape.”
On a final note, she shares that she is “a firm believer in creativity being at its best in the face of adversity.”
“When faced with big problems to solve, we find bigger solutions. Truly disruptive thinking is the only way to push brands further and unlock new ways to engage, excite and involve people.”
topics
Andy DilalloBen LilleyEithne McSwineyheroIt's FridayKat Alvarez-JarrattMilk + Honey UnitedPete BosilkovskiTBWA
Have your say