Opinion

When the recession finally hits, Australia’s marketers will not survive

Australia’s world-record winning run of recession-free economic growth has to end at some point. When it does, advertisers and marketers will be the first to notice, writes Jason Rose.

If you work in the advertising and marketing industry, I would like you to stand up right now and just say thank you. No matter how hard your day has been, no matter what disasters engulfed you, I want you to take a moment to genuinely express how grateful you are.

Why is that?

Because Australia has recently set a new world record, and for once it doesn’t involve a 50-metre swimming pool or a yard glass. We have just enjoyed the longest ever run of successive quarters of economic growth without a recession – 103 quarters or 26 years.

That means that if you started working in advertising and marketing at any time after 1991, you have never experienced the impact of a recession on what is traditionally the most sensitive industry to an economic slowdown.

I believe that this good fortune also carries with it an enormous risk for the industry, because an entire generation of agency owners and managers have never had to survive an economic slowdown. All their skills and experience have been developed in benign economic times.

That’s not to say that times have necessarily have been easy. The industry has certainly faced a range of challenges from digital disruption to far more savvy clients. However, those challenges are minor compared to a recession when the consumer economy literally goes backwards.

Everything you read about entrepreneurship today is about growth. Every second profile on LinkedIn uses the term growth hacker.

That’s all fine when times are good. But what happens in a downturn? How equipped is everyone to deal with a shrinking economy when no-one is spending, customers aren’t paying their bills and suppliers are yelling down the phone for payment? It’s tough.

My fear is that agency management today are like boxers who have only ever learnt how to throw punches on a back-pedalling opponent but have never learnt defence. They’re in for a big surprise when they come up against an aggressive opponent who fights back.

And don’t be fooled into thinking that today’s marketers are more aware of the long-term risks to a brand of cutting budgets in a recession. They’ll still do it. That was certainly the experience in the UK in the aftermath of the GFC.

Marketers feared losing their jobs far more than they feared losing future market share. Indeed, perhaps they too lacked the experience of previous generations of marketers and panicked far more than their predecessors might have.

The other great concern is that I regularly speak to people in agency land and it’s scary how many independent shops can (secretly) teeter on the brink of insolvency from one month to the next even in these relatively gentle economic times. They are disasters waiting to happen in a true downturn.

Now, I don’t want to sound like a doomsayer. That’s not the point. I just think it’s important that agencies recognise that despite the occasional news stories about poor consumer confidence, tough retail conditions and so on, they have been living through a period of unprecedented growth.

Agencies need to absolutely continue focusing on growing their businesses. However, they also need to dedicate time to considering their vulnerabilities to an economic downturn and developing and implementing strategies to minimise those vulnerabilities.

After 26 years of unbroken economic growth, I am reminded of the quote by the world’s greatest investor, Warren Buffett: Only when the tide goes out do we see who’s been swimming naked.

When the tide goes out in the local marketing services industry, I hope there’s not too much bare flesh on show.

Jason Rose is co-founder of marketing services investment company Ambient Ventures and an associate director of corporate advisory firm Concept Financial Services Group.

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