They’ve seen it all: from the recession of the early 1980s to the economic paralysis that followed the dotcom bust and 9-11. Through layoffs and cutbacks, these advertisers and marketers faced the worst the economy could throw at them and emerged on the other side. Here’s what they remember about those trying times and the advice they pass forward.
SUNNI BOOT
CEO and president, Zenith Optimedia
There was a downturn in 1998 or 1999. I recall that one because we had just formed ZenithOptimedia under the Publicis banner. We were just starting to grow. Like our clients, we were part of a conglomerate, and there were margin commitments. There wasn’t any massive spending. It was a tough market. We realized we’d have to have some staff reductions. We were at about $150 million (in billings) a year, had two offices and a lot of broadcast business, which takes a lot of manpower. Yet we were running lean. We looked at all these people who’d helped us build the organization from scratch, working day and night, 24/7, and made a decision [not to let anyone go].
Layoffs are a slippery slope; once you start to decrease head count, there are fewer people to do the work. We’re in the service business—cutting costs means cutting people, because that’s all I have. I can say I won’t buy another boardroom table, but at the end of the day that’s not going to do anything. We needed every single person we had, so all senior and mid-level management rolled back their salaries. The amazing thing was that morale went up and we worked harder than ever. We came through that storm even better, a stronger group focused on our clients’ businesses and working with the media. There would have been 17 or more of us who took cuts, and that volunteerism [extended to other] parts of the organization that weren’t heavy wage earners. They were heavy lifters, people who check [media] affidavits. They’re all still with us.
PETER RENZ
Director of national marketing, Mitsubishi Canada
In 1991, I was senior account director at SMW Advertising right when Toyota launched Lexus in the heart of the recession. It was perfect timing. They launched the LS400 at $57,000 in a segment where the competition was $70,000 and up. Consumer spend levels were down, but they still wanted a product. So instead of buying a BMW or a Mercedes, they felt comfortable buying a Lexus backed by Toyota for way less money. It was an interesting time to launch a car. Within three months we were number one in the segment.
I was also working on Hewlett-Packard at the time. They definitely cut back a ton. I had Nikon, too. Our clients generally tended to cut back. They were expecting slower sales. Marketing is a variable cost, so you cut it back to weather the storm. But Lexus kept the agency going quite well. I don’t think we gained a lot of billing aside from them, but we were able to offset any losses.
GEOFFREY ROCHE
Founder and Creative director, Lowe Roche
I don’t think it even occurred to me to worry about the economy in 1991 when I launched my agency. We were lucky enough to be with clients that realized that was the time to grab market share. If you believe you’re that much better than the other guy, you should be able to pick up business. People were still [advertising], they just bought more wisely. They wanted to work with people they thought could deliver results. There have been times when I probably should have laid people off and didn’t because I foolishly believed we would take on enough business to justify it. When we lost IKEA Germany right after 9-11, that was a pretty dark time. I think everybody pulled back. That was the one time business could not move and I suspect it was the most conservative 18 or 20 months this country has ever been through. We lost a lot of money that year and the year after. I think IKEA was about $20 million, our number one client. So when people quit we didn’t replace them. Everybody just did that much more work. It took about five years to bounce back.
BRUCE CLAASSEN
Chairman, Aegis Media Canada, and CEO, Genesis Vizeum
In early 1982, I was just starting as media director at McKim. Everyone was worried they were going to lose their job, but the one thing I recall most vividly was the concern about cost control. It was salary freezes, hiring freezes, cutting back on travel—all those things you do to be as responsible as you possibly can. Generally, clients go through the same sort of exercises when you get into this kind of marketplace. They look at every item on their financial statement, including mid-line items like marketing. They’re going to cut back on marketing, and not just media budgets, but the stuff like the cards and posters they send out for merchandising. All of a sudden, that $17 million the client spent on mass media the previous year gets cut down to $12 million.
We had guys like Gillette cutting back. Bell and Molson cut back too. Everybody seemed to give their traditional advertising budgets a haircut. There’s been a lot of information and research to demonstrate that cutting back on marketing in this kind of economic situation is not the best move, that companies that hold their marketing budget actually end up winning market share. But you can send out a million of those reports and the CFO still eventually says ‘We’ve got to slice and dice.’ Many companies are public and they have quarterly earnings reports to present. It takes bravery to be able to keep that spending where it’s traditionally been while sales are down and margins are being squeezed. It’s a tough call.
FRANK PALMER
Chairman and CEO, DDB Canada
I’ve been through two or three recessions and some downturns after losing some major clients, which puts you into the same mode. People in my position have to help managers make decisions they don’t want to make. Management isn’t popular at these times. People don’t want to hear that there’s going to be a wage freeze, but at least they have a job. Back when we were independent, it was my money and my assets tied up in the bank. But even now, as part of a larger company [Omnicom], I still treat it as though it’s my money. Many managers spend like it’s not their money. They think differently than people who’ve been through tougher times.
If sales are down, there’s no question clients will cut everywhere they can to get the percentage profit back where it needs to be. It helps having a relationship with a client where you’re able to sit down and talk about business, not just about advertising. But it’s no guarantee. If a client is a public company, you’re able to look up how they did last quarter. But if it’s a private company, your understanding of their financial health is the word of an individual. We had a [department store] client called Woodwards about 20 years ago. They went bankrupt and took us for about $1 million, which would be like $10 million today. They were spending $20 million a year for all their television, radio, newspaper and flyer ads. That was our 9-11.
As a result, we owed a lot of money to the media companies. We lost 25 or 30 people because of it, but it turned out to be a good thing for the company overall. We went to all the media we owed money to and said that if we could pay the money over a four-year period, we’d pay 100 cents on the dollar instead of 10 cents on the dollar. About half of them said that wasn’t necessary. It took us two years, but we paid everyone back 100%. About a year later, I got an award for being a friend of the industry. They’d do anything for us because they trusted us. It built our reputation in Western Canada. Sometimes through hardship, if you take the right approach, are honest about where you are and fulfill your promises, you can benefit.
TERRY O’REILLY
Founder, Pirate Radio
This is the third recession I will have lived through professionally. When I got out of Ryerson in 1981 to begin my career right smack dab in that deep recession, it was such a tough time just to find a job in the industry. To show how bad it was, I bought my first car at 22% interest. No agency would hire me because they were running lean. I managed to get my first job at a radio station, which is kind of telling actually. Radio, as a rule, has always been the medium that kind of hung on through lean times—I think because it was so affordable. In the 1991 recession, when we started Pirate Radio, we grew through that period. It wasn’t a slump for us. It probably helped that we built it during lean times, because the DNA was forged with us knowing how to be lean; when times got good again, we were well structured.
After 9-11, we had a brutal year. Everything was on pause, kind of like now—just holding patterns. We didn’t have to lay off, but it got very slow until 2003 or 2004 when we got back to pre-9-11 levels. But there was an opportunity to offer greater services and the same level of creativity even though margins were going down. There’s a chance to forge stronger relationships with clients. You just have to figure out how to leverage yourself. We’ve said to agencies that if they’re pitching new business, just talk to us and we’ll help you win it if we can, pro bono.
LARRY ROSEN
CEO and chairman, Harry Rosen Inc.
I’ve been through the 1991 recession, 9-11 and the Toronto SARS crisis the following year. I remember the depths of October and November of 2001, when people were talking about never vacationing again because travel wasn’t safe. They thought that airlines and hotels would all go under, everyone would stay home and never go abroad again. But how long did that last? Not even a year.
We tried a lot of different things, a lot of wrong things. In 1991, we saw that people were mortgage-poor so we introduced a $495 suit. It was absolutely the wrong thing to do. Our clients weren’t looking to trade down in the calibre of garment they were wearing. There’s a certain quality standard that people expect from us. We were just disappointing people. We weren’t creating new clients.
I’ve learned to stick to [our] brand and quality standards. If people buy a little less—going from two suits a year to one—that’s fine, I don’t care. Manage your cash and expenses carefully, plan correctly. Don’t be an ostrich and put your head in the sand. People will expect you to do things a little differently at such times. It’s all right to go on sale a little early to take care of inventory problems. As long as you do it in a way that’s consistent with your brand and don’t sound too desperate, you’ll be fine.
I do think we have to spend our marketing dollars more effectively. You pull back to the things you’re more certain of. During good times, you do things like throw big PR events that cost a lot of money, but you’re not really sure of them because the benefit’s not as measurable. I think you tend to spend more on proven media and communication strategies in bad times. I know, for example, that The Globe and Mail delivers my customer. You can bet your bottom dollar I’ll be there. I won’t be scaling back. I’ll be increasing my Globe spend. Report on Business magazine, Toronto Life, I know these things communicate to my prospects. You don’t change those types of buys.
In some ways, there’s a silver lining to a recession for our business. That environment brings back a focus on looking smart in business and looking the part. Personal brand becomes extremely important. And these types of situations shake out the marginal competitors that are really just market spoilers—poor operators that don’t operate with integrity. When people have access to similar product but treat it with no respect, that’s not good for us.
ANDY MACAULAY
CEO, Zig
I joined Geoffrey B. Roche & Partners about 10 months into its life in 1991. As a startup, you’re working off your own personal contacts. You use that to establish a foothold in the market; that’s what it’s like when you’re in start-up mode no matter what the economic situation is. But when the situation is the way it was then, it can create a paralysis in some of your competitors that you can take advantage of as a nimble, newly minted, differentiated offering.
Zig was born in 1999, and shortly thereafter we had to weather the dotcom meltdown. One of our largest clients was Look Communication, a start-up company using a line-of-sight technology to distribute television signals. They were about 50% of our revenue. It was a capital-intensive model. Unfortunately, we helped them get really successful really quickly, and it sank them because they couldn’t find the capital. I’ll always remember the client looking me in the eye and saying ‘Remember those hundreds of thousands of dollars of fees that we were planning on paying you this year? We can’t do that.’ There was nothing we could do about it. We had to pull our horns in pretty quickly. We were nimble enough to get by because we didn’t let our costs get ahead of where we thought our revenue was going to be, but we had to let a couple of people go, and we didn’t hire a few people we wanted to.
GARY PROUK
Partner, Sebastian Consultancy
We started Scali McCabe Sloves during a recession [in the early 80s]. We had an opportunity and went for it. I don’t remember thinking about the economy. Maybe the fact I can’t remember it means it didn’t matter. We seemed to always be growing. We had lots of growth during recessions. There’s an opportunity for agencies to move ahead at the expense of not-so-good agencies. There’s a survival of the fittest thing that goes on, a culling of the herd. I don’t remember less [client] spending, just spending at different agencies. The relationships between clients and agencies are fickle anyway. When clients’ sphincters start quivering, they start looking around at other suppliers.
There’s a wonderful [car racing] movie called Grand Prix with James Garner. In it there’s a line that says something like, “When I see a crash, and I see my friend burning in the wreckage, I push down on the accelerator.” It’s savage, but it’s interesting.
