As we plan for the future of our business, looking across the 110 countries in which we operate, we try to identify the trends that we think are shaping the global marketing services industry. Here’s our top ten:
1. Power is shifting South, East and South East
New York is still very much the centre of the world, but power (economic, political and social) is becoming more widely distributed, marching South, East and South East: to Latin America, India, China, Russia, Africa and the Middle East, and Central and Eastern Europe.
Although growth rates in these markets have slowed, the underlying trends persist as economic development lifts countless millions into lives of greater prosperity, aspiration and consumption.
2. Supply exceeds demand – except in talent
Despite the events that followed the collapse of Lehman Brothers in 2008, manufacturing production still generally outstrips consumer demand. This is good news for marketing companies, because manufacturers need to invest in branding in order to differentiate their products from the competition.
Meanwhile, the war for talent, particularly in traditional Western companies, has only just begun. The squeeze is coming from two directions: declining birth rates and smaller family sizes; and the relentless rise of the web and associated digital technologies.
Simply, there will be fewer entrants to the jobs market and, when they do enter it, young people expect to work for tech-focused, more networked, less bureaucratic companies. It is hard now; it will be harder in 20 years.
3. Disintermediation (and a post-digital world)
An ugly word, with even uglier consequences for those who fail to manage it. It’s the name of the game for web giants like Apple, Google and Amazon, which have removed large chunks of the supply chain (think music retailers, business directories and bookshops) in order to deliver goods and services to consumers more simply and at lower cost.
Take our “frienemy” Google: our biggest trading partner (as the largest recipient of our clients’ media investment) and one of our main rivals, too. It’s a formidable competitor that has grown very big indeed by – some say – eating everyone else’s lunch, but marketing services businesses have a crucial advantage.
Google (like Facebook, Twitter, LinkedIn and others) is not a neutral intermediary, but a media owner. Google sells Google, Facebook sells Facebook and Twitter sells Twitter.
We, however, are independent, meaning we can give disinterested, platform-agnostic advice to clients. You wouldn’t hand your media plan to News Corporation or Viacom and let them tell you where to spend your advertising dollars and pounds, so why hand it to Google and co?
Taking a broader view of our increasingly tech-based world, words like “digital”, “programmatic” and “data” will soon feel out-dated and obsolete as, enmeshed with so many aspects of our daily lives, network-based technologies, automation and the large-scale analysis of information become the norm.
The internet has been a tremendous net positive for the advertising and communications services business, allowing us to reach consumers more efficiently, more usefully and often more creatively on behalf of clients. But it won’t be long before those clients stop asking our agencies for a “digital” marketing strategy (many already have). It will simply be an inherent part of what we’re expected to offer.
4. Changing power dynamics in retail
For the last 20 years or so the big retailers like Walmart, Tesco and Carrefour have had a lot more power than manufacturers because they deal directly with consumers who are accustomed to visiting their stores.
This won’t change overnight, but manufacturers can now have direct relationships with consumers via the web and e-commerce platforms in particular. Amazon is the example we all think of in the West, but watch out for Alibaba, the Chinese behemoth due to list on the New York Stock Exchange later this summer in what could be the largest IPO in corporate history (and heading a capitalisation of around $200 billion).
5. The growing reputation of internal communications
Once an unloved adjunct to the HR department, internal comms has moved up the food chain and enlightened leaders now see it as critical to business success.
One of the biggest challenges facing any chairman or CEO is how to communicate strategic and structural change within their own organisations. The prestige has traditionally been attached to external communications, but getting internal constituencies on board is at least as important, and arguably more than half of our business.
6. Global and local on the up, regional down
The way our clients structure and organise their businesses is changing. Globalisation continues apace, making the need for a strong corporate centre even more important.
Increasingly, though, what CEOs want is a nimble, much more networked centre, with direct connections to local markets. This hands greater responsibility and accountability to local managers, and puts pressure on regional management layers that act as a buffer, preventing information from flowing and things from happening.
7. Finance and procurement have too much clout, but this will change
Some companies seem to think they can cost-cut their way to growth. This misconception is a post-Lehman phenomenon: corporates still bear the mental scars of the crash, and conservatism rules.
But there’s hope: the accountants will only hold sway over the chief marketing officers in the short-term. There’s a limit to how much you can cut, but top-line growth (driven by investment in marketing) is infinite, at least until you reach 100% market share.
8. Bigger government
Governments are becoming ever more important – as regulators, investors and clients. Following the global financial crisis and ensuing recession, governments have had to step in and assert themselves – just as they did during and after the Great Depression in the 1930s and 1940s. And they’re not going to retreat any time soon.
Administrations need to communicate public policy to citizens, drive health initiatives, recruit people, promote their countries abroad, encourage tourism and foreign investment, and build their digital government capabilities. All of which require the services of our industry.
9. Sustainability is no longer “soft”
The days when companies regarded sustainability as a bit of window-dressing (or, worse, a profit-sapping distraction) are, happily, long gone. Today’s business leaders understand that social responsibility goes hand-in-hand with sustained growth and profitability.
Business needs permission from society to operate, and virtually every CEO recognises that you ignore stakeholders at your peril – if you’re trying to build brands for the long term.
10. Merger flops won’t put others off
Despite the failure of one or two recent high-profile mega-mergers, we expect consolidation to continue – among clients, media owners and marketing services agencies. Bigger companies will have the advantages of scale, technology and investment, while those that remain small will have flexibility and a more entrepreneurial spirit on their side.
FMCG and pharmaceuticals (driven by companies like 3G and Valeant) are where we anticipate the greatest consolidation, while our own industry is likely to see some activity – with IPG and Havas the subject of constant takeover rumours. At WPP we’ll continue to play our part by focusing on small- and medium-sized strategic acquisitions (31 so far this year, and counting).