04/03/2009 - 22:00

Running lean means less burn

04/03/2009 - 22:00

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Advertising agencies are reviewing aspects of their business as the downturn bites.

REVIEWING their business models and running leaner operations have become the main focus for Perth's major advertising agencies, which are facing a contracting market while positioning themselves for enhanced activity when the recovery starts.

Staff retrenchments and the refinement of current practices seem to be the order of the day among the larger agencies as marketing budgets dry-up.

This includes a plunge in the volume of recruitment advertising and the widespread effect of the state government's decision to reduce its advertising spend by 15 per cent.

Some smaller agencies, however, such as Perth-based Block Branding, which employs about 12 staff permanently, say they are flourishing in the current environment.

Block Branding founder and creative director Mark Braddock said his company hadn't needed to restructure or retrench staff because Block's business model differed from the traditional advertising agency model.

"I don't want to be cocky about it but we run fairly lean, in fact, very lean, even in the good times," Mr Braddock said.

"For an industry that talks about creativity so much, it's been very uncreative in the way businesses are run.

"The model of most agencies is exactly the same that was set up in New York in the late 1950s and early 1960s, which is quite incredible."

He said Block's success this past financial year was its best on record, with the past six months being especially strong.

"We've benefited from some of the systems and procedures we put in place ... and some of the structural things we have done," Mr Braddock said.

This includes a software program Block developed to track the cost of each job and the profitability of each account.

"The traditional approach for agencies is to kind of tack on departments when they see a potential revenue stream, which I think is probably a model that may have worked ok in the good times, but I think it is coming back to haunt a few at the moment," Mr Braddock told WA Business News.

The Brand Agency's strategic planning director Paul Yole admitted his company had already made a handful of retrenchments and expects the next financial year to be very tough.

"I think it's going to be a bit of a dogfight, to be honest," Mr Yole said. "Clients are going to be evaluating what they are doing and how they go about it to make sure they are spending money really smart.

"Our view is they are going to be looking at their core strategies, so we're positioning ourselves to add value in terms of strategic planning."

Marketforce general manager Carrick Robinson agrees the industry is facing difficult times.

"We've seen a major downturn in recruitment advertising business, government advertising and some patches in the retail arena," Mr Robinson said.

Describing Marketforce as a diversified communications company offering integrated solutions, Mr Robinson is confident his company is well placed to weather the storm, even though the firm has recently retrenched up to 10 staff.

"Really, it's about finetuning our offering as time progresses and people need different kinds of services but overall I think we've got it pretty right," Mr Robinson said.

After laying-off 10 staff in recent months, 303 Group director Alan Taylor is not afraid to change direction if consumers call for it.

"I know there are other agencies that have done significantly more redundancies than that, and I think it's fair to say that overall there have been 30 or 40 people who have been made redundant in the industry in WA," Mr Taylor said.

"We are in good shape but I think it's as much about how the industry as a whole behaves.

"What will happen is that organisations will do anything to win and retain and steal business, and that could be dangerous and we could end up devaluing what we do; that's my worry."

Mr Taylor cites the government's reduction in spending as a key contributor to fluctuations across the industry, a sentiment echoed by West Australian Newspapers Holdings new chief executive Chris Wharton.

Speaking at a Perth press club function last week, Mr Wharton urged the state government not to proceed with the planned 15 per cut back on advertising, arguing it would be counter-productive.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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