Dear Commercial Acuman... what can I expect from 2017 and what should I be doing?

Dear Commercial Acuman... what can I expect from 2017 and what should I be doing?
"Thought 2016 was turbulent? Trust me, the revolution is just beginning. The true cost of Brexit, a backlash in France and a new cold war - 2017 is set to be far bumpier."

Robert Peston, writing in the Mail Online and quoted above, characterises 2016 as the year of the Great Rejection. Speaking to the IPA Council at the end of 2016, Fraser Nelson referenced Lenin in the same vein: sometimes nothing happens for decades and then decades happen in a single year.

Was 2016 just a blip, or has the world entered a different era? Ultimately only time will tell, but we may well look back on the 25 years from 1989 – 2014 as a period of abnormally benign geopolitical stability.

Writing in the New Statesman, Ian Leslie explains why he called Brexit and Trump wrong – it’s the status, stupid:

“if there’s one thing we’ve learned in 2016, it’s this: people are not voting according to how well off they want the country to be, or even how well off they want to be, but how big they want to feel. Politics has become a status game. You vote for the candidate that makes you feel high in status, relative to others.”

It is an understatement to say that we are living in febrile times; in this context, it is hard to know how much to read into a diplomat’s resignation, a set of disappointing trading results or Brexit optimism.

Looking back

Economically, however, 2016 actually delivered the “more of the same” that many, including our own review, forecast at the beginning of the year.

This year’s straw poll showed that overall the year was slightly better than expected – there was a net positive of 8%, with 26% of agencies reporting it was worse, 35% better and 39% the same.

Taking all things into consideration how was the financial performance of your agency in 2016 compared to what you expected at the start of the year?

chart1

Against 2015, sentiment was overall net negative concerning all aspects of the P&L.

On the top line, agencies experienced the full range of revenue trends from significantly worse to significantly better.  By contrast, on costs, the vast majority of agencies encountered little change but where change did occur, it was almost entirely for the worse.

Thinking about any financial pressures faced by the agency during 2016 how would you describe each of the following:

chart2

Looking ahead

Looking to 2017, agencies are not bullish about prospects either for the economy in general or for the advertising sector in particular. However, personal optimism remains and respondents reported that they feel their agency is in a strong position; while 22% of respondents felt that 2017 would be slightly better than 2016 for the industry generally, a much higher figure (52%) expected the year to be better specifically for their agency.

Although we witnessed this same pattern of potential over-optimism in our 2016 poll, levels of optimism (where surveyed in both years) have fallen significantly.

Thinking ahead how would you rate the prospects for 2017:

chart3

The B-word - Brexit

On Brexit, none of our agencies see Brexit as having a positive impact on 2016; 39% see it as having a demonstrably negative effect; 22% see an effect, but say it is balanced overall and 39% say it has not been factor in the decisions taken by themselves, their clients and suppliers. This trend continues for 2017 prospects.

Thinking about your clients, suppliers and staff, as well as the general business environment, are you seeing a discernible impact of Brexit for 2017 plans – i.e. are people explicitly citing it as a key factor in their decisions?

chart4

A tough year

When asked to characterise 2016 in a single word or phrase, the largest number of people opted for “tough”, “challenging” or some variant thereof.

The next most common reaction was unpredictability and uncertainty, with others citing the need to remain focused.

The best summation of the year, however, comes from this combined comment: power lies with those with the best narrative, not necessarily the best facts; a bad idea that millions of people agree with is still a bad idea.

Which sort of brings us back to where we started.

Next steps

On what our agencies want to see from the IPA, the vast majority cite a strong, consistent narrative, thought leadership and actionable insights around how agencies create value, deliver value and, especially, capture value.

Other issues of concern were cited as Brexit and talent, influence at Westminster and making sense of change.

What we did, what we are doing and what you can do

The industry’s commercial challenges are at the top of the agenda of the Commercial Leadership Group; the 2016 Commercial Conference was a masterclass in pricing, selling and negotiation.

2017 will see further Commercial outputs with a Pricing Discipline white paper, deeper survey insights with a focus on commercial behaviours as well as financial results, regular commercial breakfast briefings from the FBG and a re-named Business Growth Conference building on 2016’s learnings.

For more information and resources on IPA Commercial initiatives, check out the Commercial Hub; for help with commercial issues or to get more involved with the Commercial Pillar, contact IPA Finance Director, Tom Lewis.

Last updated 11/01/2017

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