Regional Market Outlook on Creative Advertising

Market Maturity

Maturity of Service Providers

  • The maturity of service providers in Europe is high, due to innovative services and the adaptability to the latest technology, similar to North America

Maturity of Buyers

  • Due to availability of resources and innovation capabilities, buyer maturity is high in the European market
  • The maturity of buyers is very high in Europe, and services need to be customized as per local culture

Porter’s Analysis

Buyer Power

  • High Negotiation Power : Since the market is highly competitive and supplier base is fragmented, the buyers have upper hand in negotiations with agencies

Threat of Substitutes

  • Availability of Freelancers: With market becoming more matured, many professionals after gaining considerable expertise transform themselves as freelancers. Nearly, 17% of workforce are freelancers in the UK. One more advantage of freelancers is that they can be easily hired from market when the demand for creative service arise and can be freed post the completion of work

Intensity of Rivalry

  • Matured and Fragmented Market : The creative agency market in the UK is matured with each player competing to hold their market shares and hence, the industry is highly competitive in nature
  • Digital Gains Importance : With a slow economy and lot of uncertainties around the market, marketers are switching to digital medium, and traditional agencies are imposed to provide digital service to retain their clients

Supplier Power

  • The supply power in this industry is low, since buyers have multiple opportunities and the need for winning high-volume buyers forces the suppliers to reduce the overall engagement cost

Barriers to New Entrants

  • Low Investment Cost : The investment cost for setting up a new agency is comparatively less. This advantage of low investment cost encourages the senior creative people to start their new agencies. In last two years, there is a considerable amount of rise (2,000 agencies) in the total number of creative agencies in the UK. This shows that threat of new entrants is high in the UK market

 Key Creative Advertising Trends

  • Production Decoupling : Unbundling production services out of creative will provide workflow visibility improves the lead time and also provides an opportunity to work with best-in-class production crew/management for every engagement.
  •  Credit Period Extension : Cash-strapped clients in the advertising space are looking for opportunities to avail credit facility from their creative agents. The creative agencies will be soon be forced to provide credit period for payment by result model to ensure the clients get the benefit of their creative works and for client retention.
  • Customization : Initially, most ads were designed to cater to mass audience rather than target specific ads, due to the cost involved in making separate creative. Now multiple creative can be designed from a single template to cater to the target audience and reduce cost and size of the ads using various collaborative tools.
  • Global Planning Strategy  : With the increase in more clients going global, focus has shifted from engaging in regional planning to emphasising on global strategies. Creative advertising agencies are also increasing their global services to serve their clients better across all geographic areas.
  • Dedicated Agency Model : WPP has set up an agency called, The Reality Shop, to serve the Pfizer’s account in the UK. In order to overcome the competitors’ conflict, WPP has come up with this model. Similar to this, WPP also formed a dedicate agency called RedFuse for the CPG giant Colgate-Palmolive.