I think it’s irresponsible, to be honest.

The whole of the marketing communications industry keeps telling clients that they must maintain their spend on brand-building, even in a downturn.

The deeply dull volumes of Ogilvy on Recession employ some truly Neanderthal arguments to support the case. For example:

“In the 1974-5 US recession, Ford cut adspend by 14%. Chevrolet, however, ….increased its adspend. Chevrolet’s market share rose by 2% points, while Ford lost share and took years to regain its previous position.”

Well, if I was Rick Wagoner, this argument would undoubtedly have persuaded me to maintain my advertising expenditure at all costs, right up until the precise moment I was fired.

In Singapore, the communications industry proves its case with astounding naiveté in a TV spot that keeps popping up in the middle of every recession. Apparently, if you stop bouncing a ball up and down with your hand, it eventually stops bouncing completely. Just like if you cut your brand advertising budget, in fact.

Wow – that should make Citibank think twice about cutbacks right now!

This kind of advice is not just irresponsible – it’s pathetic. In fact, it’s likely to do our industry much more harm than good. Because it shows that we don’t understand the profound dynamics that our clients are facing. And it proves that we’ll say whatever we need to say to make a buck. 

Because this is the truth:

There has never been a recession like this one. Ever.

The problem is cash.

For years, companies have built businesses on the basis that they’ll grow faster if they exploit their cash balance than if they keep it.

Now they’ve found themselves in a cash squeeze. Banks aren’t lending. Creditors aren’t paying. Sales are declining. Cash is disappearing. Companies can’t pay their debtors, can’t pay their staff and can’t pay to keep going.

So some of the world’s largest companies are going bust. Thousands of Asia’s SMEs have disappeared. And millions of their staff have lost their jobs.

Meanwhile, our little industry is still using arguments from the 1970’s to try and persuade companies to spend what cash they have left - on brand-building.

Dear oh dear oh dear…..

If you had a choice right now between brand-building or bankruptcy, which would you choose?

Well, that wasn’t very pleasant, was it?

In my last blog, I thought that I would ruffle some feathers when I said that “the traditional creative agency in Asia is becoming become little more than a glorified studio.”

Unfortunately, I didn’t.

Even more unfortunately, everyone who has commented on my last post seems to agree!

The key conclusions seem to be that:

1. Most clients in Asia care more about advertising visibility (media) than about advertising content (creative).

My good friend Tony Wong at Kitchen replied with a typically brutal summary:

“Exposure counts, be it frequencies or areas of space.” he writes: “No-one (clients, agencies and audience) cares about what’s inside.”

2. Now more than ever, clients don’t want to spend a fortune on new creative content.

Costs are being challenged like never before. As John Kerr says: “In this environment, many marketing services are being procurement-ised and budget-slashed down to the most basic (even more than usual) tactical level.”

3. There are many cheaper places for clients to get their content from than big, old-style creative agencies: from Media Companies to Media Agencies to Mac Operators.

Clients don’t really mind where their creative content comes from….and why should they?  

Today’s media environment demands more executions for more media channels, so clients need them cheaper - and, very often, they need them faster than traditional agencies are equipped to deliver.

Media agencies, and the media themselves, are (rightly) quite happy to give them the creative they need - and they are increasingly happy to give it away for free in order to get media contracts.

At the other end of the spectrum there’s another new, equally dangerous challenger, as Tony describes:

“It comes to the power of Mac, and the internet. To home users it’s good news to have such a beautiful and powerful device at home for less than HK$10,000, yet to the ad business owners it’s just nightmare. To be honest, a fresh grad well versed with a Mac can basically produce everything a client would have paid big bucks for years before, e.g. a print ad (with nice photo), a eDM, a TVC (now Web video)…..

“And since no one cares about content, of course, under such current economic situation everyone will go for the cheapest guy.

“The big agencies then charge the small agencies’ charge - and the small agencies charge the amateurs’.”

 So what’s the solution?

4. “The best way to move forward is to blow everything we know up. And start all over again.” says Terence.

My point exactly.

The next question, of course, is this:

If you were to blow it up and start again, what would you start with?

It seems like my strategy of building M&C Saatchi’s consulting expertise has caused a bit of debate recently. (“Can ad shops become consultants”, Media Magazine, 9 April 2009).

Not surprising, really.

Given that we have no intention of making M&C Saatchi into a consulting company, as some have suggested.

No – we’re launching a range of specialist consulting businesses that stand entirely apart from our creative agencies. They offer totally different expertise, are built on unique skillsets, working within different cultures, charging on completely different principles, measured against totally separate P&L’s.

And – in my humble opinion – anyone who thinks that such a plan doesn’t make sense is either blind, stupid, naïve or, most likely, all of the above.

For one brutally simple reason:

Since media agencies started taking the lion’s share of client budgets, the traditional creative agency in Asia is becoming become little more than a glorified studio.

Particularly in the smaller markets, where there are too many agencies for the size of business.

So everyone’s dropping their rates in the scramble for business.

So clients are paying less and expecting more.

Which means that the industry can’t afford to employ as many people in general, and less senior talent in particular.

Which means that the quality of service is declining.

And so the industry’s role within client organizations is becoming increasingly subservient, and its relationships are slipping further and further down the food chain.

Which means that clients – quite rightly – want to pay less for it.

Etc etc etc….

It’s commoditization gone crazy!

Much of the problem is fuelled by the misconception of most big holding companies, who believe that their agencies must have offices in every country (even though they patently don’t).

They think that a global network is the key value that they create, the key value that clients are willing to pay for (which many major global clients have made clear that they’re not.)

Yet once they have an agency in every country, they’ve got to face a fundamental problem: how to pay for it (otherwise the global bean-counters, who basically run these businesses, go bonkers).

So their offices have to grab every piece of income they can find.

And so they end up cutting prices to get business.

And cutting staff costs to deliver the numbers.

In short, they destroy their value long-term in order to make a buck today.

Now, I might be barking mad, but I have a brutally simple view of business:

If you’re not making money, you’re obviously not creating value.

(Or, if you are creating value and you’re not making money – then you need new management!)

The key question is not “How do we sell our creative advertising and digital capabilities to clients.”

The most critical question is: “What do clients most need to help them succeed in business - and how can we provide it better than anyone else, such that they are willing to pay a premium for it”?

If you started off with that question, I doubt if you would end up with (believe it or not) 68 creative agencies that are currently members of the Singapore 4As.

But I think that you would find a significant number of high-level business consultants, most of them making very nice margins, thankyou very much.

Maybe I’m nuts, but it seems like brutal simplicity to me.