Madness . . .

The opening weeks of 2011. An increase in VAT (Value Added Tax) by the Government from 17.5% to 20%. Marketing budgets, by contracts, have increased by 0.5% at the end of Q3 2010 according to the IPA Bellwether Report.

Client-side decision makers will have to bargain keenly with agencies, perhaps even revisit existing contracts and charges, in order to ensure that their marketing spend delivers effective returns. This is no surprise. As Private Eye might have it ‘any fewl know’. It is a logical corollary of rising costs and diminishing returns.

Yet there is a hint of madness in the air. The proliferation of routes to market bewilders some brands. Just take a look at the newspaper and publishing industries. Some agency operations are fragmenting as clients depart for other agencies better positioned to deliver ROI. Some clients are even bringing marketing back in-house. New business models for agencies are starting to look attractive.

Is this just a temporary reaction to a perceived recession? In theory the recession officially came to an end in the middle of 2010. Or is this a sensible approach to the circumstances we find ourselves in? It’s a bit of both to my mind.

Brands should always look to spend their money wisely. Many agencies (too many) have relied on the cosy cushion of lucrative deals hatched over expensive hospitality. Few agencies have invested in creativity and new business models.

There are some agencies that have always had ROI and effective and efficient working at the forefront of their business model, even going so far as to have no direct employees. Creative Nation is just one example (I declare an interest here as I am their Digital Director).

Two years into its existence Creative Nation is firing on all cylinders – there is much to be done.

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