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News & Views from Alchemis

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Call us for a chat on +44 (0)20 7836 3678 or Email Jim Piper or David Newman

The Creative Sector is Thriving

In March, the London Stock Exchange published its research paper, showcasing 1000 Companies to Inspire Britain. The report covered fast growing small to medium sized businesses in the UK. As you would expect, technology featured prominently, but it was fantastic to see that advertising and marketing were on the list of top five performing sectors, with an average annual revenue growth of 144% between 2010 and 2014. Hopefully this signals the end of what has undoubtedly been a very tough period for some agencies, but also highlights the positive change and opportunities that have arisen from digital advancements within the industry.

Top 5 Performing Sectors

These figures are a bit of a curveball, as within information and technology, digital marketing and technologies related to marketing are included and the report highlights the “seismic shift toward digital”. Some of this growth, as discussed by Matt Isaacs (Founding Partner and Executive Chairman of digital marketing agency, Essence), was driven by the recession. In 2008, marketing and advertising budgets were suddenly under huge scrutiny. The industry needed to change and adapt and, whilst it was pushing ahead anyway, with developing technologies, a real opportunity arose for accountable, more cost effective and measurable marketing. This led to the diversification and proposition enhancement of traditional marketing agencies, a pattern reflected in Alchemis clients over the period, but it also proved to be a great time for digital start-ups. We Are Social are a case in point. Set up in 2008, the company now has a global team of 500, working with brands such as Adidas, Jaguar, Heinz and Heineken.

The creative industry as a whole has thrived in the past 4 years, backed up by the following statistics:

  • £8 million is generated each hour in the UK by the creative industries
  • 100,000 students graduate each year in creative subjects
  • £31 billion is the government’s target for the creative industry’s export value by 2020

The report goes on to explain that the UK’s creative industries contribute £71 billion to the economy each year. This is only possible in conjunction with a growing need for online and offline creative services from other sectors, which for the right agencies, with the right strategy, provides a great platform for business development and growth.

Aside of the very encouraging figures for the creative sector, these lists are good indicators and bellwethers of industry trends. The following chart, taken from the report, highlights certain buoyant areas:

Sectors That Shine

From an Alchemis viewpoint, these statistics have been mirrored in both client targeting and new business over the past 3 years. Manufacturing is the most interesting, as this has been a recent growth area for clients with a solid proposition in that space, and a number of wins for clients in the past 2 years have come from this sector, in particular, where there is a link with construction. The built environment has been a very positive area, with clients converting pillar accounts.

There is no doubt that financial services has taken a U-turn and the LSE report states that “cautious optimism is returning to the UK financial services sector, thanks to growing business volumes, rising profits and confidence in the longer-term economic outlook”. There is still a certain scepticism towards banks and bankers, but that in itself opens up doors for brand and marketing agencies. Technology and digital marketing have also been growing disciplines within the sector. As with creative services, the recession, combined with technology also opened up new opportunities for companies. The controversial success of payday lenders is well documented, but the rise of peer to peer lending and online trading companies has been exponential in the past 2-3 years.

Food & Drink has always been a key area for Alchemis clients as they spend heavily on research, advertising and marketing. The report confirms this, stating that, ”food and drink companies are the toast of the UK economy”, explaining that the industry:

  • Brings 16,000 new products to market each year
  • Spends £1billion annually on R&D

This has been fantastic news for our clients, and across all disciplines opportunities have been unearthed. Again, there are many new and exciting companies, but it is our knowledge of those companies who are at a stage to spend on research, branding and marketing that means we can target effectively on behalf of our clients.

Retail similarly has been a key success sector for our clients, contributing to their growth. It has been the “year of the mobile” for the past 5 years or so, but really in 2013/14, it was. To the extent that in April this year, Google will recognise this with a tightening of their rules and an algorithm change. SEO, PPC and overall, performance marketing have had to be in a phase of constant evolvement to maintain pace with the market. There are numerous statistics surrounding mobile and retail. The LSE research paper highlights that 4 in 10 visits to an e-retail website are via mobile. With increased online competition, platforms and user experience are key and this has provided opportunities for agencies in this space.

It has been a disruptive 7 years, but in its supposed wake the recession has increased entrepreneurship and as a result, shaken up a number of industries. Others that have really suffered since 2008 are showing healthy signs of growth and development. All of this is incredibly positive for the creative industry and marketing agencies and those that have the time, skills and inclination to prospect effectively, build relationships with the right people and invest in creating new business campaign equity have a huge opportunity for continued growth.

As a footnote to all of this, the growth within the LSE report focuses on turnover. It is interesting to see that of the recently published Times Profit Track 100, which ranks companies with the fastest growing profit only includes 1 company under the marketing agency banner (Design Bridge). We know it is a frustration of our clients and the industry, but converting growing turnover into increased profit is not always that straightforward and this is something that the creative world needs to work on. The opportunity is there to grow business and profit if businesses are managed effectively with a sound strategy.

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