Carol Hayek: How we can overcome the industry pitfalls
The advertising industry with its unique combination of creativity, communication, research, networking, marketing and management makes it the most attracting field for young people. It offers various career options and offers variety and excitement far from routine. However, this industry is facing today a big challenge to keep up being a profitable business. In a chaotic market, no sustainable growth can be achieved or maintained without a syndicated and legal body.
Looking at the Lebanese media scene and its main active players, we notice that there is no major change during the last few years except few, giving a perception that the market is enjoying a sustainable growth, with a monitored advertising spending growing yearly by 4%.
But the reality behind the scenes does not appear to follow the same trend. Recognizing the common pitfalls associated with our advertising industry is essential to find solutions if we want our business to continue to grow and thrive.
PROFIT MARGINS:
Profit margins are getting squeezed starting at the level of the product and service, followed by the trade, and reflected at the end on the overall marketing activity and the advertising budgets.
Clients, who experienced the importance of media investments on their brands, are maintaining the same communication pressure on their audience but through lower budgets, hence less profit made by the media. This practice although it looks efficient to clients on the short run, is affecting the overall chain, making the business less profitable on the long run.
The success of advertising relies on its role of consultancy, creativity and innovation, for which qualified and skilled experts and professionals are needed. And with less income, those controlling the financial decisions, might be placing the advertising/media companies’ human capital at risk.
CASH FLOW:
For a healthy running business, it is crucial to have a good cash flow control. In our market, cash constraint is becoming a major risk factor, affecting seriously the growth of our business. Payment in advance as suggested by the AA (but not yet implemented) can be a solution to break this circle and solve the cash flow issue and bad debts at the same time.
INVEST IN CHANGE:
Assuming that we will continue to be successful based on what worked before is very unwise. We need to assess the current and future business needs and provide the necessary resources and solutions to service it. We must keep up with the market; technology is opening new doors constantly, which often not welcomed by those who are not keen to move out of their comfort zone. However, those who are committed to growth have no other choice but to invest in the change.
NEW VS EXISTING CLIENTS:
Most of advertising agencies and media suppliers are engaging in head-to head competition in search of sustained profitable growth. But competing head-on creates rivals fighting over a shrinking profit pool and it will not necessarily create growth in the market.
Personally, I encourage creating new business to the market through a blue ocean strategy by tapping into new spaces and new innovative services. Also, I favor focusing on servicing better the existing clients, and on building with them a more profitable relationship while maximizing growth for both. Focusing on the growth of existing clients brings more values to the client, to the media and to the overall industry. New business should be considered as an opportunity to diversify the portfolio of an agency or a media vehicle, helping reducing the fluctuation of media budgets based on category spending affected by certain market conditions (e.g. real estate dramatic ATL decrease during last year)
RULES AND REGULATIONS:
In a chaotic market, no sustainable growth can be achieved or maintained. Therefore, clients, agencies, media reps and media should all support the AA, being the syndicate and the only legal entity, in its regulator role for the advertising and media industry.
RESEARCH:
Our market has been the first in the region to implement peoplemeters, and today, the need for similar advanced methodologies and technologies enabling the measurement of other vehicles like radio and OOH is becoming crucial with the increasing number of touchpoints. Clients are not having a common currency for research enabling them to value exactly the performance of each medium of their media mix. This lack of common data and platform for the industry is giving room to misperception, like believing that digital is the only performant vehicle offering accurate KPIS and enabling clients tracking their campaigns performance.
Despite the tough times facing advertising professionals and marketers, I am a strong believer that our advertising industry will overcome the challenges with the help of all stakeholders.