The year that was … the year that may be

Indeed, 9/11 has solidified 2001 as a groundbreaking, historic year in our collective consciousness. Moreover, the stock market instability triggered by the dot-com collapse earlier on was only accelerated as consumer confidence shattered. So how do we make sense of it all? And, more importantly, where do we go from here? Strategy asked experts, on both the agency and client sides, to reflect on major developments in their industries during the incredible year that was, and also to gaze into their crystal balls to give us their take on 2002.

Indeed, 9/11 has solidified 2001 as a groundbreaking, historic year in our collective consciousness. Moreover, the stock market instability triggered by the dot-com collapse earlier on was only accelerated as consumer confidence shattered. So how do we make sense of it all? And, more importantly, where do we go from here? Strategy asked experts, on both the agency and client sides, to reflect on major developments in their industries during the incredible year that was, and also to gaze into their crystal balls to give us their take on 2002.

The agencies

Chris Staples, Partner

Rethink, Vancouver

It’s been a tough year for ad agencies on the West Coast. At Rethink our business is up about 30% over last year, but a lot of that is because we have of out-of-market clients like Dominion Foods in Ontario.

There was an immediate shock to the advertising community when the provincial government changed, because the NDP had been spending over $10 million a year on advertising and that disappeared overnight with the Liberal government coming in. They have done half-a-million dollars in advertising since they’ve been in office. Many agencies in Vancouver were quite dependent on either government advertising or crown corporation advertising. For instance, ICBC, the provincial auto insurance monopoly, which was one of the largest advertisers in the province, virtually stopped advertising, as did BC Hydro. That had significant effects on the agencies that handled those accounts.

Although we have some high tech out here, we were two or three years behind the wave of dot-com explosion of advertising in the U.S. So we weren’t too affected by the dot-com implosion.

I think Vancouver has too many agencies for the number of accounts. Two things will happen: more will bring in accounts from the rest of Canada and the U.S. or they will end up folding. Grey Worldwide has just opened an outpost in Seattle and is hoping to attract clients from the Pacific Northwest with our weak dollar. That’s an interesting possible trend, although I think it is an ambitious goal.

Bob Bryant, Chairman

TBWA/Canada, Vancouver

Formerly Chairman and CEO of Bryant Fulton & Shee, Vancouver

This past year hasn’t been as much of a benchmark as the past five. There has been a disproportionate number of creative awards given to agencies in the West, relative to our size. One of the reasons we’ve been strong is because of our ability to reach senior executives fairly quickly and easily. There hasn’t been as much of a hierarchical structure at some Western companies. It could be their size, it might be cultural differences between multinationals headquartered in the east and entrepreneurial enterprises that have started in the West … There are also not so many international campaigns being adapted and picked up here so there’s more original work.

From our point of view at Bryant Fulton & Shee [which is part of the TBWAChiatDay network], we had the strongest year we’ve ever had. And while we anticipate some slowing, we haven’t seen it yet for 2002. But I sit on the board of the ICA [Institute of Communications & Advertising], and I hear what the other leaders of agencies are saying and I know there is concern.

Jean-Marc Leger, President

Leger Marketing, Quebec

This season we had the Grand Virage, which established priorities for the industry over the next few years. Training, quality of creative, and the creation of one big organization for the sector will be priorities. The idea behind Grand Virage is that we can no longer tell clients that they have to use Quebec agencies to reach consumers. It’s less true now. A good idea from Toronto or New York can have the same level of efficiency.

Another important trend is mergers and acquisitions. The biggest was BBDO acquiring PNMD, but many others made alliances with global companies.

We have too many agencies in Quebec, so there will be more mergers and acquisitions. Everyone is afraid of the future, because ad spending has been down in the last six months. Companies are also asking for more services – from advertising to direct marketing to the Internet. That will be a big challenge – the client is more demanding. There’s a lot of pressure to pay on efficiency, and that will be a big debate next year in Quebec.

Marc Byron, CEO

Mosaic Group, Toronto

Agencies who are project-based and tactical are going to have difficult times competing going forward. The old days of just doing a promotion for the sake of its being sexy are gone. Today brands are much less focused on the project of the day versus how to acquire customers cost-effectively and service them over a long period of time. They are looking for strategic partners who have breadth of both financial and human resources, as well as intellectual capital and systems capability to deliver a full-service solution rather than a one-off project. … I think a lot of agencies talk the lingo about full integration, but very few know how to do it. I think those who have the reasonable size, scale and scope and get to the position first will be the companies that win.

There will be a place for small shops, but they’ll be marginalized. There will always be those with entrepreneurial flair, creative capability or special knowledge that’s vertical- or function-oriented. But they will either get bought up, go away, or remain small and innocuous, versus the bigger guys.

The clients

Alison Lewis, VP Marketing

Coca-Cola, Toronto

Because we’re in a slower growth period, consumer insight is driving everything – when it’s high-flying days … you don’t have to be quite as disciplined in your approach. Now, as the belt tightens, there’s a retrenching. People analyze the business, and ask ‘is this the best way to invest my dollar?’ I think you’ll see more of that.

There has been a lot of reinvention of the old. Examples would be Diet Coke with Lemon or Pepsi Twist. It’s happening because the carbonated soft drinks category is seeing relatively flat growth. So I think people are looking to reinvigorate the category.

Reinvention will continue and can take many forms, even in terms of the way we approach promotions. An example is General Mills inserting CDs in cereals. Cereal companies had been in-packing for years, but [General Mills] did it differently, and I believe they got stellar results.

Ron Smith, VP Marketing

DaimlerChrysler, Windsor, Ont.

Everyone is talking about 0% financing and huge incentives. Our plan is that it’s a short-lived initiative to stimulate the economy. The trend was led by General Motors, and then Ford and DaimlerChrysler jumped in. Nobody wants to be there long term. We can’t continue down that path, and we even have to take prices up to make up for it. We believe in a price value story, which is incredibly important to consumers. They aren’t concerned about half-a-cent less down the street, but what they get at a reasonable price.

The one segment that has grown is compact sport utility vehicles and it is on fire. I think it’s because a lot of manufacturers are playing in that field, and they’re bringing new vehicles into the segment, and it’s new for consumers. I think it will absolutely continue next year. From our standpoint, we’re going to keep pushing design and we’re going to continue to introduce new vehicles along the line.

Claude Bernier,

National VP of Marketing

Rona, Montreal, Que.

The fact that the government has decreased interest rates is positive, because consumers are more willing to put money into their homes. And after Sept. 11, consumers have been cocooning.

But the big element has been consolidation. It will continue and small banners will disappear.

This influences the type of marketing you do, because there are fewer players. They are bigger, but the pie is not increasing, so there’s a fight among them. That’s why our stores [which include big box, medium and small banners] are all called Rona now and why we launched a campaign for the Rona brand in Ontario. We will introduce the Rona name in the West in January, as our goal is to build a strong brand across the country.

In the long-term there will only be two big players in the big box category. Right now there are three. So something will happen. Exactly what, we don’t know.

Discussions on softwood lumber between the U.S. and Canada will also have a big impact in 2002. Right now the price of wood is low, but what happens will have an influence because it’s directly related to business.

John Bradley, SVP of Marketing

Cadbury Trebor Allan, Toronto

In our category, one thing that stands out is how little it is impacted by fads. We don’t see up and downs, just a continuation of long-term trends and growth of the mass channel, from a retail perspective.

But I would say the main news this year was [product innovation]. We introduced Dark Chocolate Caramilk, and Nestle did Kit Kat Chunky and Aero Chunky. Taking existing franchises and creating different flavours or formats is the main activity that has been going on. There’s room for new brand development, but it has to be innovative. It definitely will continue because, although the brands are old, the consumer is stimulated by news. If we could stimulate them with things like Cadbury Crunchie Orange Crush, [introduced as a one-off last summer], that will definitely help sales.

The main challenge, although we’re immune to recession, is that retail may cut back on stock, even if confectionery does well. We’re starting to see a cautious retail trade. So to maintain the level of distribution that the category needs is a bit more of a challenge.

Jeff Schulz,

VP Marketing

& Business Development

Future Shop, Burnaby, B.C.

The crash of the dot-coms and the stock market, as well as the lack of capital that resulted [has had an impact on our business strategy]. There are a lot of ventures that looked solid, but didn’t survive. That’s forced us to take a harder look at who we do business with, because if we offer a service to a customer and the [service] company isn’t around in three months, we have an unhappy customer.

But this year has been good for us. Consumers are still buying electronic products. They’re choosing not to travel, but they still want to enjoy themselves.

It’s been a good year for new products too. We had the launch of the Neptune and Calypso in appliances, all the new gaming products, Windows XP, and there are excellent DVD titles coming out right now. This has helped to keep the category strong. We’re hoping next year will see just as many product launches. The digital marketplace is starting to gain momentum.

Going forward, the question is consumer confidence, and that’s directly related to Sept. 11 and the ongoing war on terrorism, as well as the economy and how companies perform. We’re looking at things we can do to add value, like making sure accessories are packaged together and priced to be attractive. Also we are providing financing options.

Our strategy will be a strong marketing push. We’re optimistic about the future, and we want to be aggressive in terms of promoting our products and services. We are not looking at pulling things back.