Desperate times, and clients, put industry creativity to test

Advertising agencies face paradigm shift Advertising agencies face shift in paradigm

02:46 PM PDT on Monday, August 17, 2009 By Robert Rogers Contributing Writer

An accepted tenet of business strategy is to focus on advertising amidst an economic slump so that consumers will turn to your business when things improve.

But for Inland Empire ad agencies, this is no ordinary slump, and the marketing industry's rapidly shifting paradigm has forced fundamental changes that may persist long after the recession has ended.

"The trend of the future is more advertising businesses like ours will be smaller, more nimble, more cottage industry-like in the future," said Angelique Strahan, a media coordinator and partner at the Rancho Cucamonga-based Perry Design and Advertising. "For us, that's a challenge we're meeting. For clients, it's a good thing."

With plummeting revenues from their bread-and-butter accounts designing newspaper and magazine ads, and clients with less money to spend on ads, agencies find themselves struggling to maintain share of a market now dominated by newer Internet-based advertising along with decidedly low-tech street signs and storefront banners.

Clients are loath to commit to the long-term advertising contracts that were once commonplace, now demanding short three-month work contracts, after which they often take the advertising templates laid down by the agency and go it alone in the future to cut costs. The do-it-yourself option has been opened up by the ability to maintain a continuous advertising presence on the Internet. The downward-spiraling pricing pressures and diffusion of technologies - most every small business has a Web site - have made the landscape more competitive for ad agencies.

For the ad agencies in the area, this emerging phenomenon - compounded by the tough economy - is translating into small staffs, big demands for maximum creativity and long hours.

"We are working a lot harder, more hours, trying to a better job than anyone else can do," Strahan said. "But we're happy to have the work."

One of the biggest challenges that haves faced established ad agencies like Perry, which has been in business for 10 years, has been diversifying their skill sets so they can provide sophisticated online services in addition to high-quality print, sign and banner advertising.

"We've had to change our focus, and with a steep learning curve, to include social networking and other online innovations," Strahan said. "A lot of our clients now opt for this digital advertising instead of the newspaper."

Still, despite some successes - including maintaining a five-person staff - and signs of stabilization this year, revenues were down about 40 percent from last November to April over the same period the year before, Strahan said.

The story is similar at Redlands-based Hyatt Advertising Inc., a small boutique agency that also maintains a staff of five and has been in business for 12 years.

"I would say we're doing 70 percent more work for 30 to 40 percent less money," said President and CEO Adrian Hyatt-Ward. "If anything, we're increasing our creativity, quality and work; we're just getting less money for it. But we're not alone. This is what we're all experiencing in the industry."

Hyatt-Ward said her firm has aggressively sought new clients and diversified its clientele to deal with the downturn, which has eliminated some clients and severely constrained the budgets of others. Before, its clientele was heavily in the financial sector, but now the firm is working more with schools and hospitals, Hyatt-Ward said.

And the struggles of the remaining small ad agencies in the area might have been even more trying if not for the dissolution of one of the region's biggest agency, Wilkin Guge Marketing, which ceased business operations earlier this year. That move resulted in some employees branching off on their own and putting clients up for grabs.

Andrew Wilkin, an ownership partner in the now defunct company, said he, like others at the firm, has ventured out on his own with a new, smaller business model. He characterized the closure of Wilkin Guge as a decision, not a necessity.

"My partner, Gail Guge, and myself made the decision to dissolve the partnership/corporation and pursue individual interests," Wilkin said.

One small area firm is seeing some silver linings in the dismal ad market, thanks to innovations in the way in which it delivers services.

Ontario-based ThunderWheel Communications has gained some market share since its January startup by integrating numerous communications services, including public relations, corporate communications and event planning under one service umbrella, said Kim Munkres, the firm's owner.

Munkres, a former Wilkin Guge strategist, declined to talk about the circumstances surrounding the dissolution of her old employer but said a model of smaller, specialized service providers with broader expertise is the industry's future.

"We come in and help our clients integrate all their communications operations," Munkres said. "Creating synergy not only within organizations but among our client mix helps us deliver effective services, which is really demanded in this economy."

In an industry that is scaling down in size, ramping up services and experiencing a transformative time in terms of how to deliver marketing and advertisements, change is the name of the game, Munkres said.

"We're an agency for clients who want to rethink their approaches," Munkres said.

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