Who:
Brian Fetherstonhaugh, Chairman and CEO, OgilvyOne Worldwide
Where:
Thalia, 868 Eighth Avenue, New York City, May 26, 2009
On the Menu:
Gazpacho, frittata and changing consumer attitudes
The global economic downturn may have begun in the housing market and the financial services industry, but the consumer remains the key to any economic crisis — as well as subsequent recovery. Consumption accounts for more than two-thirds of America's GDP, making it impossible for meaningful growth to return while consumption remains in the doldrums.
As a global advertising and marketing powerhouse — and part of an even larger marketing services company, London-based WPP Plc — Ogilvy & Mather tracks consumer trends closely. It was well placed to notice the current crisis before it hit the headlines.
"We began to see it exactly one year ago," says Brian Fetherstonhaugh as we lunch across the street from his company's headquarters — which, appropriately enough, is located in an office tower called Worldwide Plaza. Advertising has become a truly global industry, and Ogilvy has a global footprint. After at first manifesting itself as weakness in the U.S. consumer market, says Fetherstonhaugh, the company saw the recession spread to Britain and then all over the world.
Despite recent optimism in the stock market — and better-than-expected consumer confidence figures released on the day of our interview, showing a second straight rise in the Conference Board's confidence index in May — Fetherstonhaugh is yet to notice concrete evidence of a turnaround in consumer spending.
"I'm extremely bullish for the long run, but not for the next two or three years," he admits.
Apprehensive Consumers
Persistently high unemployment is a problem, says Fetherstonhaugh. It is exacerbated by the fact that consumers are not used to jobless rates hovering around the double digits. In the course of his career, Fetherstonhaugh notes that he has lived through a couple of major recessions — which is a source of his conviction that we'll eventually pull through this one as well. But many people who have been in the workforce for less than two decades are used to nearly uninterrupted economic growth and mild, short-lived downturns.
For consumers, at least, another dip may come after the summer, when those who were laid off in the first wave reach the end of their severance packages or unemployment insurance payments without good prospects for getting another job.
Fetherstonhaugh sees a change in consumer attitudes already being wrought by this recession. In any downturn, people turn more apprehensive about spending and become focused instead on core values, such as their family and friends. Given the severity and length of the current slump, such trends have been more pronounced and may last longer than usual.
Sluggish demand in the coming years will greatly speed up profound changes which, according to Fetherstonhaugh, new technologies are already bringing about in the advertising and marketing industry. Digitization has been the name of the game, taking the consumer away not only from traditional channels for advertising and marketing, such as newspapers and television, but also from the conventional retail shop. It is creating a buyer's market, and if consumers now feel poorer and more careful about their spending decisions, sellers will find themselves at a considerable disadvantage.
Lagging Behind the Consumer
Thanks to the Internet, consumers now come to the store well-informed as far as product and price are concerned. But this is only part of the seller's problem. Increasingly, purchases are made in cyberspace, sight unseen. To illustrate his point, Fetherstonhaugh explains that technology allows the customer to run his own auction.
"If you are planning to buy an Audi A4, for example, you can contact a dozen Audi dealers in your area with a list of options and a delivery date, and invite them to bid on the deal."
