PR people tend to be glass is half full people. This means that when the recession started they tended to put a very brave face on it and were almost in a north African river (denial). Indeed it was only when things had hit the bottom that many PR heads would really talk about how bad it had been. But has the industry really started a recovery? Here are some arguments for and against:
1. Clients have released project dollars that had otherwise been held on to
2. Budgets cuts are no longer taking place and in some cases clients are modestly increasing their spend
3. Staff are starting to get recruited as agencies feel more confident of their revenue streams
4. Staff who are moving are starting to look at agency work rather than in-house. In-house is often considered the safe place to be in a recession (relatively)
5. New business opportunities have improved for agencies and the process has become more normal (number of agencies involved and budgets are back to normal)
1. The release of project dollars is potentially just a year end phenomena. Many clients have calendar fiscal years and so they are now starting to think about their budgets for 2010. If they don’t spend their ’09 budgets they will have a challenge getting $$ in 2010.
2. PR budgets are generally linked to the sales of companies. Given sales are still sluggish, across the board rises in PR spend are unlikely for quite some time.
3. While the new business environment is much improved it is still very tough relative to a non-recessionary environment. Procurement departments have used the recession to sharpen their teeth and get better deals. It will be some time before agencies can get back the concessions made during the recession – if ever
The above would suggest that as an industry we are still in the early stages of the recovery (assuming you are still a glass is half full person). But what it really says to me is that we should not be looking at the recovery as a chance to get back to where we were but rather as a reminder that we need to innovate and come out of the recession offering a better solution to the one we did going in. This is easier said than done and I suspect that many agencies will look at progress in social media and feel that they can tick the box called innovation. I’d urge them to think again. The shift towards digital is important but every part of the industry has embarked on that mission. Real innovation is spotting the less obvious challenges and embracing them along with the obvious. Good luck in that challenge. Oh, and if you figure it out, do let me know!
Just as in the fashion industry everyone awaits the answer to the question: “what’s the new black?” business leaders should be asking “what’s the new behavior?” The new behavior I’m referring to here is recession behavior. Of course the obvious signs of the new behavior are people being more cautious with their spending. However, the behavior shifts are a lot more complex than that.
The new behavior is built on people replacing one action with another. For example I heard from a friend who is a family doctor that many of the patients that would normally be in her office at this time of year complaining about a cough or cold are simply not coming in. This isn’t because they don’t have a cold but because they don’t want to make their copay. So instead of going to see a doctor they are taking over the counter medicines and riding it out. Put another way they are still doing something. They’re just taking a different (cheaper) path. Of course this may end up being an equally expensive route and could even wind up being more expensive.
Replacement recessionary behavior as I’d call it, is something we can expect across all aspects of life and isn’t simply limited to consumer behavior. This is something PR people need to consider when they plan activities for ’09. For example is your client’s product a product that could be a replacement for another more expensive (normal market conditions) option? Or is it a product likely to be replaced by another? In many cases the way the product is sold will need to change. For example if you are selling chocolate or a latte I’d suggest it is sold as a replacement to those who are cutting back on eating out. If you can do this it may actually open up a new market.
As I mentioned this type of behavior won’t be limited to consumer markets. For example in business, people are cutting back on off sites and business travel. How about spending some of that saving on Skype video conferencing technology (a few cheap web cams)? I for one would much rather do a video conference than spend hours on a United Airlines flight across country. In other words for every change in behavior there is an opportunity. The challenge is how to make your client’s product or service the beneficiary of this change. In some cases it will require some creativity but I can assure you it will be worth the effort.
Mixed results from technology companies in recent weeks have people speculating that the tech market is still in or perhaps heading for another recession. A closer examination of the data does of course tell a different story. Indeed close examination can tell you almost any story you want it to. In recent weeks we saw Intel raise guidance on profits and Apple again exceed expectations. We then saw IBM miss its numbers due to weakness in some of its markets in Europe followed by Lexmark that missing its profit forecasts. These contradictory results have been attributed to economic cycles, business management and simple poor forecasting. What’s clear however, in almost all cases is that sales have actually been rising. Even IBM, which has sales that rival the GDP of some countries, saw an increase that would satisfy Alan Greenspan. Wall Street, however, doesn’t care about sales that much. Wall Street cares about margins and of course earnings – and most importantly future earnings. It’s this last point that still seems to be where the tech industry is struggling. The bumpy state of world markets is making it hard for most businesses to project with certainty. The good news is that almost all the trends in tech sales are up. Of course there are sectors that are struggling but the encouraging news is that in general sales are trending in the right direction. The real challenge for the tech industry would however appear to be how to break out of low GDP-like growth and get back to the high growth rates achieved in the late 90s. Companies like Oracle are saying that growth will only come by acquiring market share. That seems rather a defeatist approach but who am I to argue with Larry Ellison. Actually I will argue with him on this point. The tech industry has a great chance to break out of GDP level growth but only if it wants to. I think the drivers of potential change exist. For example the growth in wireless technologies that make infrastructure way simpler for businesses and individuals to deal with. This growth is fuelling the opportunity for millions of people to access technology and technologies previously available only to the likes of the Fortune 500. At the same time the success of On Demand software such as Salesforce.com is showing that if you make it easier for people to access the technology they’ll buy it. At this point both of these areas of technology are relatively small when compared to the large traditional enterprise software and hardware markets. But I’d argue that if the industry really does focus on reducing barriers to technology in the same ways these markets have then growth could once again be quite explosive. Look hard at all the small businesses you know and ask if they use all the technology they could. The answer is no in almost all cases. Of course most businesses now own a computer but an alarming percentage of companies still don’t have a meaningful online presence. Add to that the unsophisticated approaches to distribution and purchasing that most small companies use and you see how big the potential opportunity is for just a few areas of the small business market. Getting to this market is of course easier said than done. Barriers such as affordability, accessibility and reliability still need to be adequately addressed but again examples such as the OnDemand software solutions from Siebel and Salesforce show that when you tackle these issues markets open up. So in closing I guess the message I want to leave is one of optimism about the long term opportunities facing the tech industry. This optimism, however, rests on the tech industry’s ability to create new markets by tackling the barriers that exist rather than simply fighting over existing market share.