Marketing in Vancouver: ‘It’s a market share game’

Advertising in Vancouver can be summed up by the image-makers themselves in a word: buoyant.To even the most optimistic agencies, however, buoyancy means only that they are not sinking in a sea of red ink.Everyone agrees the agency business of the...

Advertising in Vancouver can be summed up by the image-makers themselves in a word: buoyant.

To even the most optimistic agencies, however, buoyancy means only that they are not sinking in a sea of red ink.

Everyone agrees the agency business of the 1970s and ’80s is dead.

‘For years, we were in an expanding market,’ says Alvin Wasserman, head of two-year-old Wasserman Cozens Dundon and former president of pre-merger McKim Advertising.

‘Now we’re in the same position our clients have been in for some time,’ Wasserman says. ‘It’s a market share game, not a category-building game.’

While the local economy fared better than Toronto in the recession, nearly every sector in the Lower Mainland has pulled its marketing in-house, particularly retail and service industry clients.

With the long-awaited shakeout looming, most agree it will happen among agencies still struggling with the transition from advertising to below-the-line promotions.

As a result, the bottom end of the market is filling up quickly with highly skilled freelancers and creatives who have been let go by their agencies and are now sharing space in cramped quarters, hoping to take a slice of business away from the graphic designers.

An agency’s nightmare, the market is a client’s dream, according to Paula Kelly, now in her ninth year with media buying company Immediate Buying Services.

‘Clients are piecemealing their services out to the low-cost bidder because they now have more flexibility and control over their advertising costs,’ Kelly says.

‘At the same time, clients have a surplus of top quality talent available at very low rates,’ she says.

Clients also have their choice of lower cost services from production and post-production companies involved in audio, film and video.

‘Prices are kept down because of a large talent pool of experienced freelance professionals,’ says Alex Downie, president of audio production company Airwaves Sound Design.

‘Clients want three to four quotes on every project,’ Downie says. ‘It’s not enough to be the best in your field anymore.’

Airwaves went through the recession of the early ’80s and by the start of the current economic slump had already diversified by getting into multimedia digital graphics and animation to balance the commercial work it was losing.

Airwaves picked up work from outside the province, mainly from American producers with animated and feature projects who liked Vancouver’s talent pool and the low Canadian dollar.

‘The ad market is still pretty healthy,’ Downie says. ‘But it’s in comparison to Toronto.’

Lower billings mean local agencies, large and small, find themselves bidding on accounts they would have walked away from a few years ago.

‘We’re all on a level playing field,’ according to Dick Hadden, president and creative director of ad agency Cossette Communication-Marketing. ‘And everyone is waiting for somebody else to fumble.’

According to Bob Bryant, general manager at ad agency Scali McCabe Sloves, survival means battling it out in a market where agency Palmer Jarvis already has 20% of market share.

‘Business has changed,’ Bryant says. ‘This isn’t the business it was when I started 25 years ago.’

After losing the $2-million Woodward’s department store account two years ago to bankruptcy, Palmer Jarvis restructured its $85-million agency into profit centres to counteract the trend of clients contracting out small pieces of business piecemeal to freelancers.

If it had not done that, the agency says it would be 50% smaller today.

‘Agencies [had] better get used to shrinking budgets and less money for their efforts,’ says Frank Palmer, president of Palmer Jarvis Communications, the agency under the newly formed Palmer Jarvis Group.

‘The agency business has turned upside down the past three years,’ Palmer says. ‘For me, it’s fun, because I’m the lead horse. The second horse doesn’t get the same view.’

Its profit centres are starting to bring in revenue through graphic design, retail, small business media, as well as youth marketing and publishing.

In addition, the agency is still flexing its creative muscle after winning the Clearly Canadian Beverage account, the highest profile local brand win for any agency in the last several years.

Life among mid-sized agencies has always been hard, says Bob Stamnes, partner in Glennie Stamnes, now in its fifth year in Vancouver.

Stamnes says the agency chose to be selective with respect to its accounts, and is growing slowly but steadily by providing complete business solutions, not just advertising.

He says this eliminates many of the organizational issues that create barriers in the execution of good advertising.

‘Not many agencies are prepared to operate at the same level as their clients with computer technology or even management skills,’ Stamnes says.

‘We operate alongside our clients,’ he says.

With more agencies competing for less business and that business generating lower fees, there are many fewer agencies-of-record these days.

Most work is project-oriented, so agencies must work much more efficiently.

‘We’re in an over-capacity situation,’ says Gary Grafton, vice-president and account director of ad agency VRH Communications.

‘There is such pressure on margins that agencies are no longer in a position to do speculative work, or go after work they can’t make a lot of money on in the long term,’ Grafton says.

‘Agencies will have to develop niches to survive,’ he says.

Ad agency bbdo has taken the position that agencies must take a larger role in their clients’ business issues. Therefore, it is unwise to show up at all the presentations, especially those that want creative on spec.

‘Just doing a campaign won’t solve a problem for a client,’ says Jim Southcott, vice-president of client services for bbdo.

‘Advertising has to be more sophisticated, because many of the issues affecting a client are deeply rooted in their operations,’ Southcott says.

That pitch helped bbdo take a bite out of the Armstrong Cheese account recently from under the nose of Scali McCabe Sloves.

Twenty-five years ago, Steve Vrlak and local radio legend Red Robinson grew VRH Communications to $20 million. Spectrum Group bought the agency in 1986, at which time Robinson left. Vrlak left in 1991, soon after Spectrum sold out to bbdo.

‘It’s too complex to grow an agency today, and there’s not as much money in business anymore,’ Southcott says.

‘In the old days, you could run an agency of 10 people with $1 million in billings,’ he says. ‘Today, that same amount allows you to keep 1.2 people.’

Among the few bright spots in the Vancouver agency picture are three start-ups – Moreland & Associates, Lanyon Phillips Brink and Wasserman Cozens Dundon – that began their businesses at the worst point of the recession.

Today, these agencies are winning most of the awards, creating most of the talk in town, and getting invited to the most presentations.

Both Moreland and Lanyon Phillips Brink are headed by Americans who see no reason why Vancouver cannot become another creative hot spot such as San Francisco or Portland, Ore.

‘The problems of the local market are a result of people not taking their craft very seriously,’ says Chuck Phillips, who set up his agency 2 1/2 years ago with Peter Lanyon, an award-winning creative director then at Cossette in Toronto.

Starting with several high-profile creative awards for largely pro bono work, the agency swiped BC Ferries and Boston Pizza and project work for B.C. Savings Bonds.

Lanyon Phillips Brink put its creative brand on the market early and often, nearly proving Phillips right when he said that world class advertising ‘can make a market happen.’

However, with Lanyon’s return to Toronto Aug. 1 to become president and chief creative officer at MacLaren:Lintas, Phillips must try to reprove his theory with another creative wizard from the East.

‘The problems of local agencies are self-inflicted,’ Phillips says. ‘There are not many vibrant agencies in Vancouver.

‘It’s been proven before that an independent, creatively driven agency can set the bar at a new level,’ he says. ‘If Peter had stayed, we would have made it happen.’

Wasserman agrees that creative work can make it happen, but he has been in the market longer and knows how hard it is to do good creative work with fewer resources.

Most importantly, a smaller agency needs a deep well of paying clients to buy time for the creative process to work.

Wasserman’s slow and steady approach is to build a core of small accounts that allow his shop to do creative only while letting the client do the rest of the media juggling and account services.

Now in its third year, Wasserman Cozens Dundon has won an impressive string of clients – most in head-to-head competition against its two principal rivals, Moreland and Lanyon Phillips Brink.

‘Clients are still wanting agencies to fill in the creative blanks, but they aren’t willing to pay for many services associated with the creative process, like research, and the time it takes to make phone calls,’ Wasserman says.

‘For a creative agency today, it’s very hard to capture the costs of your time spent developing expertise,’ he says.

There are those who speculate Moreland’s time may be running out without a major account to pay the bills.

But Bill Moreland, who set up the agency out of his house little more than two years ago, delights in proving his critics wrong after the agency won a fistful of Lotus awards and local kudos for its work.

Now, Moreland must prove the agency is past survival stage and on its way to new business prospects.

He says he is not daunted by the negativity in the market, but challenged by it.

‘Vancouver is myopic because it tends to measure itself in terms of the local market rather than against major centres in Chicago, San Francisco, Toronto,’ Moreland says.

‘Our goal is to be first to bring a brand from back East to Vancouver where we can handle an Eastern-based account just as easily as an Eastern agency can handle a Western-based client,’ he says.

Bringing in new business had long been a dream of local agencies, and three years ago, the Advertising Agency Association of B.C. (aaabc) tried an initiative known as its Cascadia campaign to attract u.s. clients.

(Cascadia refers to the region of northern California, Oregon, Washington and b.c.)

Despite the enthusiastic backing of Larry Tolpin, then creative director at ad agency Baker Lovick Advertising, which had just won Advertising Age’s International Agency of the Year designation, the collective effort was an embarrassment to many.

The topic is an unpleasant one for those who were involved, in part, because no one could agree on a format to present themselves collectively.

‘The initiative failed because great creative work is not something you can package,’ says Paul Andrews, longtime observer of the Vancouver ad scene and publisher of Media Wave, a Vancouver-based magazine which reports on the culture of communications much the same as Wired.

‘And, there are only a few local agencies capable of producing that kind of work,’ Andrews says.

Despite its uncertain future, advertising continues to run in the veins of a few young people who come to Vancouver looking for work in the industry.

Aspiring copywriter Susan Andrews, who moved out to Vancouver from Ottawa two years ago to look for work, has been pounding the pavement, distributing samples of her work in unconventional ways, first in matchbooks, and, recently, by attaching a small sample of her writing on jars of jalapeno pepper jelly she made.

In her first delivery of 42 jars, she found that one in three shops had either closed, changed addresses, or were inhabited by new people as she began her tour through Gastown and Yaletown, where most of the industry resides.

Undaunted, she delivered all of her jars on target and has since landed several interviews with creative directors who were impressed by her promotion and perseverance.

‘I’m surprised there aren’t 30 to 40 people [in line to see the creative director] in front of me,’ Andrews says. ‘It’s tough, but you can’t just send in a resume and sit back. This is the way people used to get work.’

Grafton is philosophical about what may be on the horizon for the advertising world in Vancouver.

‘While the form may be different in the future, this is still a place for creativity,’ he says.