Economic downturn squeezes media agencies
by Daniel Obi
May 18, 2016 | 9:47 am| | | Start Conversation
Nigerian media agencies that largely depend on clients’ marketing communication budgets for survival are in for difficult moment as tough economic times squeeze companies’ operations leading to cut in budgets and delay in contract payments.
It has become more difficult for the agencies, costing them to delay salaries as organisations are asking for more value on reduced budget, while some companies have adopted the market strategy to use one or two channels of communication for consumer engagement.
Dwindling oil price in the last one year has combined with devalued naira and weakened economy to impact heavily on various companies, forcing some of them to reduce productions, downsize workforce and cut operational expenses.
Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry (LCCI), confirmed to BusinessDay recently that companies’ profit margins were failin, saying, “Many businesses are closing shops, especially those in production, and those that have not closed shops are in the verge of doing so.”
Following the economic hit, consumption has slowed and consumer confidence has declined, which is confirmed by Lampe Omoyele, managing director of Nielsen West Africa, whose role at the global firm is to study consumers for comprehensive view of trends and habits.
Omoyele said the confidence indeed declined late last year from about 110 mark to about 104, a figure that is though relatively high in consumer research index analysis, but the unprecedented decline is a sign of red flag for businesses.
CEO of MediaCraft, a Lagos-based PR agency, John Ehiguese, acknowledged that it had been generally tough, but believed that it was not peculiar to media industry alone. “You are aware of the general economic downturn. We operate an economy in which government is the biggest spender, and when government is not spending, as has been the case in the past one year, every business is bound to be adversely affected, one way or the other. You could say that we’re also feeling our own share of the downturn,” Ehiguese said.
For the marketing communication firms, Ehiguese, who is the president of Public Relations Consultants Association of Nigeria (PRCAN), said: “We provide services for corporate organisations. If their businesses suffer adversity, it naturally rubs off on us too. The foreign exchange scarcity, and consequent high exchange rates have adversely affected a lot of businesses, and this has naturally led to budget cutbacks.
“There is hardly any of our clients who has not had to significantly cut back on their marketing communication budgets in the past one year. That invariably translates to aggregately less business for us all.”
Similarly, Bayo Adio, managing director of Optimum Exposures, an out-of-home firm in Nigeria, who spoke with BusinessDay recently, agreed that delay in payment of services rendered was a key challenge in media business industry.
Assessing the first quarter of 2016, he said it was a period of dearth in the industry. “First quarter is usually when the advertisers, the clients plan their business. It is a period that the advertisers are gauging the mood of what is happening. If you juxtapose that with what is happening in the Nigerian economy, the quarter was not a very rosy time for the OOH”
On whether the pains suffered by media agencies would force them to retrench, Adio said each company would embark on ethical options available to it.
At a recent forum on branding in a volatile economy, Aigboje Aig-Imoukhuede, president, Nigerian Stock Exchange, charged managers to always look at the brighter side of the current economic realities.
According to Aig-Imoukhuede, volatility does not connote negativity in the strictest sense, as it holds out as the best time for bold, discerning leaders to identify potential opportunities and key in to them.
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