Making Sense of What's Going On Out There

Insights for Every Agency in Turbulent Times

By Published on . 5

Marc Brownstein Marc Brownstein
[Editor's note: The below is taken from a memo that Mr. Brownstein sent to employees at his agency.]

Events in the financial markets in recent days and weeks have been unprecedented. Venerable names like Bear Stearns, Freddie Mac, Fannie Mae, Lehman Brothers, Merrill Lynch and AIG have been brought to their knees. Some have disappeared altogether. Others, like Wachovia, Washington Mutual and Lloyds of London are in bad shape. The failure of these financial institutions has had a major impact on the stock market, significantly reducing people's net worth overnight.

I'm writing today to help you make sense of the turmoil out there, and put it into context for you.

Why is it happening? And what is its impact on the agency business?

The problem started when financial institutions loosened their lending policies over the last five years, enabling Americans to purchase homes beyond their normal reach. Products such as adjustable-rate mortgages that offer a very low teaser rate, which lowers the initial mortgage payment for anywhere from one to five years, were the rage. Trouble is, when the ARMs adjusted to the market rates, the homeowners could no longer afford the mortgage payments, and they defaulted on their loans. That caused a wave of home foreclosures across America. And who takes the hit? Banks that lent the money in the first place. Homebuilders who built homes as fast as they could buy lumber and find land. Retailers who sold furniture and appliances for the homes. And that has a ripple effect on the stock market, and the whole economy. Add in $4-a-gallon gasoline, and that takes out yet another industry -- automotive. You get the picture.

Financial experts who've been around for many years say the collapse of global financial companies, overnight, is a first. And as I write this, no one knows when the turmoil will end. But I do know this: This country has been through tough economic times before, and come out of it in better shape. I am confident that will ultimately be the case here.

The impact on agencies is as follows: Consumers are nervous right now. Their life savings have been greatly reduced in the stock market. Many people have lost their jobs. When people stop spending, clients feel the pinch. And those companies reduce their spending as well on many expenditures, including marketing.

In addition, many of you have proposals out there with no decisions being made on them. Clients are nervous. They sit on expenditures, and that hurts your revenues. What's more, autumn is normally a very busy time for new-business opportunities. This fall is bound to be a different, more challenging story.

What can you do to help your agency?
  • Work harder to grow your clients. Now, more than ever, they need you to help them increase their revenues. Be more proactive. More inventive. More resourceful with their dollars.

  • Ask what you can do to help internally. Perhaps another colleague is buried in work, and you have some free time. Offer some assistance, as your shop needs to be as productive, internally, as possible right now.

  • Keep your ear to the ground for new business leads. That is the kind of initiative agencies need right now. You never know where the next new client will come from.
We don't know when the markets will rebound, but it has been my experience that just when everyone is most terrified, and about to jump overboard, that is the bottom. If so, perhaps that time is near, and better times lie ahead. Until then, it is imperative that you do the things I've outlined above. When you do, you'll get through this as a stronger, smarter agency.
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