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2 September 2015

Stay The Course
By Richard Edelman

Written by: Richard Edelman, President and CEO at Edelman

General

The stock market reversal in China has led many to question the stated GDP growth rate of 7 percent and the strategy of moving from an investment-based economy toward a more consumption based model. At the same time, the Brazilian economy has officially moved into recession, with drop in GDP of 2 percent in the second quarter. And Russia earlier in the week decided to blacklist a few more Western brands, this time from P&G, with flimsy excuses on product safety. Meanwhile, the U.S. economy is chugging along at 3.5 percent growth in GDP in the second quarter. This may lead some in the agency business to reorient investment to the safer developed world; that would be a drastic error. We have to stay the course.

There are a few important trends to recognize that are now confirmed for PR agency managers.

First, the spending by U.S.- and UK-based multinationals will be concentrated in fewer markets. For example, in Europe, the focus is now on the UK, France and Germany, much less in Eastern Europe, especially Russia. In Asia, there is a bit of a pull back from the smaller markets in Southeast Asia (Vietnam, Myanmar).

Second, there is a gradual move by the developing market multinationals into global markets. Those developing markets that are too small to hub MNCs outwards will be more of a challenge for building a sustainable enterprise.

Third, there is room for a marketing focused business in developing markets that relies on local brands in their home bases. The local brands are going to have an advantage in the more austere economic times.

Fourth, there will be a change in the trust landscape. The reputation of government from Brazil to Mexico to China to South Africa is sinking fast. The corporate sector and brands will have to pick up the slack.

Fifth, many of these markets are ahead of developed ones in digital, having made the leap direct to mobile devices. For instance, there is much to be learned from the Unilever* mobile radio play in India which offers a certain number of free songs after an advertisement.

Sixth, all of us have work to do in incorporating senior Asian and African talent into senior management. We also have a long way to go in having creative that is led by developing markets.

I agree with Sir Martin Sorrell’s comments in the Financial Times earlier this week tied to his release of earnings. He reaffirmed his commitment to China and his confidence in the developing markets overall. We will continue to invest in talent, in growing the local MNCs into global relationships and in making a bigger play in digital. If some of the world’s biggest marketers are going to have nearly three-quarters of their revenue from developing markets by 2020, that is a good enough signal for me.

This article originally appeared on 6A.M., Richard Edelman’s blog on trends in communications, issues, lessons and insights.

*Edelman client

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