Don’t call it a comeback: How agencies are navigating economic recovery with their clients

Jay Langan, CEO of Ocean Media, said his agency has been impacted by downturns like “most of the industry,” largely the result of the pandemic accelerating many digital and retail changes and concurrent corrections.

Langan said during these times it’s normal for clients to pull back on spending while evaluating the impact to their business. Ocean Media has focused on more scenario planning at different budget levels and closely monitoring performance.

“You want to be ready to ramp quickly when the economy picks up, and this can vary across different categories,” Langan said. “The brands that tend to excel and come out stronger are not sitting back waiting for things to improve. They are optimizing media mix based on performance, adjusting messaging, and leveraging data to capitalize on the inevitable turnaround.”

For example, during Covid the travel category was hit hard and Ocean Media client Priceline cut back on spending, Langan explained. However, Etsy and Rakuten saw an uptick in their business by taking advantage of the lower media rates.

For the upcoming year, agencies seem encouraged about ad spending delivering a lift to their businesses. Based on Digiday research, 12% of agency execs said ad spending on behalf of clients will significantly increase in 2023 compared to last year, while 47% said the spending will somewhat increase compared to 2022. The survey also found 32% of agencies strongly agreed about being optimistic about their company’s prospects for 2023.

Leveraging AI to increase efficiencies

Other agencies have focused on improving efficiency internally and externally. Peter Prodromou, president of Boathouse Palo Alto, said his company has invested in “performance AI” over the last several years. In January, Boathouse launched an AI narrative capability that supports clients’ campaign strategy and channel engagement. The dashboard uses natural language and machine learning AI to analyze data from tens of thousands of sources, ranging from sentiment and hashtags to themes and passion.

“Going forward, particularly with performance AI… [there is] the need to be more efficient than the changing expectations of us as consumers,” Prodromou told Digiday. “They’re going to have to deploy more of that technology into their marketing… and into their business in order to make it work better.”

Client expectations have also changed amid Covid, Prodromou noted, pointing to the ability to source international talent as modern-day work life has made location requirements more flexible.

“We changed our business model in that sense, away from being physically constrained by the cities that we’re in to being able to access talent,” Prodromou said. “Like 25% or 30% of our workforce is from different cities than where our core offices are, and that to me is an enormous growth opportunity… clients, because of the pandemic, aren’t caring about you being at their front door in the way that they used to be.”

For instance, he said companies still seem to be sending out RFPs the same way as before — but there is not as much an emphasis on having to be physically present to pitch and close business. This flexibility is “a good thing,” Prodromou added.

Changing KPIs and brand basics

Over the last year, agencies and brands have found they need to reprioritize some metrics that took a backseat as the pandemic impacted businesses. Amy Lanzi, COO of Publicis Commerce, previously mentioned that the agency is seeing a shift recently from return on ad spend to new-to-brand and lifetime value of a customer as KPIs. As commerce grows, Publicis is continuing to gather data on multi-touch attributes and exploring a new product with Amazon’s ad tech team to test attribution.

It is about going beyond ROIs to understand “total sales and however your client wants to talk about that,” Lanzi said. “But I would say that in the last month, there has been a definite tempo change from our clients, particularly around the metric of new-to-brand.”

Evan Levy, president of indie agency Fitzco, agreed that businesses are going back to fundamentals, like brand building and differentiation after some of them slipped during Covid as the industry pushed toward high-performance media. Levy added that slumps are also an opportunity for agencies to examine what they put off when things were busier, which can be fine-tuning their tech or reviewing projects that were postponed.

“Then you have to make your own magic,” Levy told Digiday. “That sort of goes back to doubling down on client partnership. What’s the business challenge that you know exists but hasn’t been briefed into the agency before? What is some spec work that you could do?”

Levy has focused on managing the business in a fluid way, though the agency has benefitted from its client base — 30% of which are in health care, and other sectors not as impacted by the economy. A year ago, the agency also guided clients on how to invest during a recession, which has helped in cementing close partnerships with them.

“The best agencies have steeled themselves against the headwinds that we’ve been facing and will continue to face,” Levy said. “So if [clients are] going through a slump, we have to be prepared to go through that slump with them — and that requires just nimbleness that the agency is built for.”