How 5 Agency CEOs Are Preparing for a Likely Recession

The signs for recession are here: Consumers and corporations alike are already tightening their budgets, economic growth has slowed, stock markets have tumbled in 2022 and inflation continues to remain high due to global conflicts, disrupted supply chains and elevated gas prices. The 4A's invited Adweek to a lunch with CEOs across the industry landscape to talk about some of the most pressing topics in the industry, but how to navigate a recession as an agency leader dominated the first third of the 75-minute conversation. Marla Kaplowitz, the 4A's CEO, co-moderated the talk with Adweek, which included Aaron Walton, the CEO and founder of Walton Isaacson, Dan Granger, founder and CEO of Oxford Road, Louisa Wong, the CEO of the Americas region for Wavemaker, Sarah Kramer, the global and US CEO of Spark Foundry, and Tracey Faux-Pattani, the CEO of BSSP. "Across the board, there's almost no client that the topic [of a recession] doesn't come up," Kramer said. Can Political Advertising Weather a Recession? A potential recession ahead A recent Morning Consult-Politico poll found that about two-thirds of Americans already think the country is in a recession. As that recession likely looms throughout Q4 and into Q1 of 2023, brands are quickly shedding jobs, with agencies likely to follow as budget tightening trickles down through agencies. The CEOs at the 4A's lunch discussed how to best navigate an agency through a recession. Spark Foundry's Kramer told Adweek that clients are making assumptions that a recession is to come, and as a result, agencies need to scenario plan for their clients and think about the roles of different kinds of messaging for brands, like whether they should be investing in brand building versus promotional and value-based messaging. Ultimately, she said, an agency's role is to ensure its clients have confidence in the outlook for their businesses. Walton, whose agency recently won creative AOR for American Airlines, told Adweek that clients are more open to innovative thinking to find new ways to reach consumers when budgets are tighter. "What we did last year doesn't matter anymore," Walton said. "It's about how we're going to do it in the future." One advantage agencies have now is they've learned from the past how to convey to clients the value of marketing in a recession, BSSP's Faux-Pattani said. "We're doing a better job in talking about the importance of marketing through it," Faux-Pattani said. "I don't feel in the past, when we've hit recessionary periods, that it's been as loud as it is now." What we did last year doesn't matter anymore. It's about how we're going to do it in the future.Aaron Walton, CEO and founder of Walton Isaacson The result, Faux-Pattani said, is that clients are not just hearing it, but believing in it because agencies are better armed with data to support not culling marketing budgets. To Faux-Pattani, the key is to push clients to create assets that have a long shelf-life that can help brands navigate the uncertainty of 2023. A different type of recession Wavemaker's Wong was blunt in her assessment of the impending recession: "There's no playbook to any of this because even this recession is not a typical recession." She sees the challenges clients will face being different than in previous recessions because there are other factors currently complicating business, like inflation, supply chain issues and maintaining profitability on retail platforms. "You have to fundamentally shift your thinking around what you're going to double down on," Wong said, adding clients need to focus on what matters not just to their business but to their consumer in order to thrive. Clients have been more forthcoming with real business results in recent years, Wong said, which helps the media agency have more strategic conversations around managing their media budgets to ensure their clients' dollars are working harder. The better collaboration means agencies can get away from the typical "knee-jerk" reactions that lead to brands going down a rabbit hole of cost reductions. Instead of the focus being on how to spend, Wong said clients should be asking themselves, "how do I want to show up in 2023?" "We can do more for less," Wong said. "That's the reality of it. Because we're marketeers and [we] will figure out a way. But it's not strategically the right thing for your business to be doing." Evolving messages Oxford Road, which is a podcast advertising agency, saw clients stretch for high-profile advertising opportunities in the podcast space over the past two years. But now, they're pulling back, turning down opportunities to sponsor six-figure opportunities and instead gravitating "from top-line growth to bottom-line growth and protection as risk aversion is starting to step in," Granger told Adweek. You have to fundamentally shift your thinking around what you're going to double down on.Louisa Wong, the CEO of the Americas region for Wavemaker He gave one example of a client that shifted its thinking to focus on efficiency and profitability. One way the client, which Granger couldn't name for confidentiality reasons, is evolving its messaging to consumers to help them understand how the client's service becomes more valuable to businesses in a recession. Granger's team created a whitepaper explaining the value of the clients' services and marketed that report to potential customers. "There's always an opportunity to pivot the conversation and create a way to underscore value, which is starting to replace some of the ambitious objectives that we've had over the last few years," Granger said. Multicultural marketing P&G chief brand officer Marc Pritchard stressed during the ANA conference last month that multicultural marketing has become mainstream marketing. As a result, Pritchard said that brands should be heavily investing multicultural marketing and diverse-owned media suppliers. But headed into a recession, one of the first shortsighted things brands often do is to slash budgets with their multicultural agencies, even though Walton said multicultural groups helped drive businesses' growth during the pandemic. "It would be disastrous for these brands, if all of a sudden they said, 'Okay, we're in a recession, we're going to retreat and go back to what is comfortable and what is familiar with us,'" Walton said. He added that agencies must reinforce using data that their growth came from diverse segments, and therefore they should continue investing in those segments. "The world is changing. And these brands have to change with it or get left behind. There is going to be some competitor that sees that and says 'I'm going to invest in that and I'm going to do it long term.'"