Networks have the most to gain

As the New Year unfolds, East European markets will expand, brands will turn the tables on own-label, and agency networks will be in best position to exploit these trends. John Shannon is president of Grey International.

This year will see a number of key trends emerging to reshape the European advertising and marketing industry in preparation for the millennium.

Advertising expenditure is again on the increase and this is expected to continue in most countries. Hungary, Poland and the Czech Republic should enjoy the fastest growth, but in Spain and Italy, conditions will remain tough. Many European advertisers will look to South-East Asia, where the race is on to capitalise on rapid economic growth.

An overriding feature of 1995 was the drive by many advertisers to pool multinational business in one or more agency networks, and there is little doubt that this trend will continue. Among the most recent to pursue this course is Bayer, which previously used 40 agencies to handle business worth about $250m (160m). Others include Danone, Barilla, Colgate-Palmolive and Reckitt & Colman.

Such global realignments will have a profound impact on agency structures. Specifically, networks will have to concentrate increasingly on global or regional account management, billing and co-ordination arrangements.

The losers in the globalisation shift will almost certainly the be medium-sized, local agencies whose clients are seeking to expand internationally and need the experience and resources of an established network to allow them to do so consistently and cost-effectively.

Not surprisingly, 1995 saw continuing pressure on manufacturers’ brands from own-label and discount stores. But there are signs that brands may be set for a comeback in 1996 as consumer groups increasingly regard own-label as restricting rather than enhancing choice.

Switzerland’s largest supermarket chain, Migros, has met consumer demand for a return to choice by stocking more manufacturer brands. Sainsbury’s is also moving in this direction (MW last week).

For agencies developing their clients’ brands, the key task will be to build closer consumer relationships and harness improved research tools to distinguish their products from their competitors’.

Finally, 1996 will be an important year for European advertisers and agencies to unite to defend their right to commercial freedom of speech.

They must ensure the role of advertising is better understood by the decision-makers in Brussels and that the shortcomings of lowest common denominator pan-European bans and restrictions are recognised and their threat effectively resisted.

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