'Economic consequences' of COVID-19 will last a long time - Arthur Sadoun, CEO Publicis Groupe
- Top AD Giants are relying on creativity to retain brand value.
- 80% of clients will judge you by what you do during the Crisis.
- Communicating effectively with Clients will sustain business in the Long term
Arthur Sadoun the CEO Publicis Groupe has indicated that Creativity will help Digital Media companies to withstand the impact of the COVID 19 pandemic and also retain its brand value.
He has also revealed that the senior management team of the company is to take a pay cut of 30% over the coming months as it aims to cut costs across the business up to €500m.
As part of the aim to cut costs, shareholders will see a proposed dividend reduced by half and paid in September, while chief executive Sadoun and chairman Maurice Levy will take cuts to their ‘compensation’ of 30% during the second and third quarters and the management committee will reduce their salaries by 20%.
In announcing its first-quarter financial revenue for 2020, which saw organic growth slow in-line with expectations at -2.9%, the advertising holding company saw a double-digit decline in China but a 5% increase in the US before the end of February, with net revenue growing to €2,481m from €2,118m during the same period in 2019.
North American organic revenue grew during Q1 to €1,555m (+0.5%) while Europe fell significantly to €578m (-9.2%), Asia Pacific declined to €219m (-1.9%), LATAM was down to €54m (-10.9%) although Middle East & Africa climbed to €75m (+0.6%).
Hinting on the long term plan to sustain the business, he will be dissipating his energy on what can be controlled presently.
Sadoun admitted that making long-term plans around the economic uncertainty internationally was “absolutely impossible” citing the magnitude of the pandemic’s reach and the length of time that it will take to solve and cure as key issues.
“You need to focus on your priorities which, in our case are; health and safety of our employees, being closer than ever to our clients, taking strong measures to protect our people and our agencies, and then we won’t try to control the uncontrollable,” he outlined.
What is the impact of the Pandemic on the Brand value
He agreed that it was inevitable that clients would need to push their digital transformation needs forward quicker, to help escape long-term financial risks, but added creativity was key to retain brand value.
“If you are not able to justify the premium of your product, it will become very difficult to sell it, and the big difference is that they are going to have to go for something that is more personalised than it has been in the past,” he advised in supporting the need for creativity.
What will be the economic consequence of COVID19 in the Industry?
Sadoun then focused on the economic consequences, which he said would last “a long time” and would see clients look for efficiencies:
“Our ability to bring an outcome-based model that will guarantee results from their marketing spend is going to be absolutely key.”
How important is Digital transformation in scaling up excellence?
Finally, he spoke about digital transformation, citing his oft-used mantra of delivering “personalisation at scale” and stated that the move from 100 offices to 80,000 staff working at home worldwide as an example of Publicis’ own ability to pivot digitally.
“Every person is becoming even more individual than they were before, so we will have to translate the digital experience for the customer’s own experience, which we are going to have to enrich and this is what we are going to do with Sapient.”
(Publicis Sapient is a digital business transformation company. On February 6, 2015, Sapient became a fully owned division of French advertising giant Publicis, in a deal valued at $3.7bn.)
In his statement on the financial results, Sadoun admitted that he felt “slightly awkward” sharing what he felt was “a good start” to the year despite the impact of COVID-19.
“At the end of February before the pandemic started to spread, we recorded almost flat growth, despite a double-digit decline in China, mostly driven by 5% organic growth in the U.S. on our creative and media business. It is worth noting that Epsilon 2.0 was also growing at +5% growth at the end of February,” he added before admitting that March had been “seriously affected” by the spread across Europe of the virus and the resulting confinement measures.
“This strong negative impact was largely compensated by North America returning to growth, including Publicis Sapient which is slightly positive in the US. This performance demonstrates that our model is working.”
Publicis Groupe with the aid of long-running in-development artificial intelligence platform, Marcel will be adopted to help the business stay connected globally after the aftermath of the pandemic.
It's very critical that companies think about their brand perception and how they communicate to customers in the right way.
Last week, WPP chief executive Mark Read in an interview on Bloomberg TV, said that companies need to communicate more with clients, and this was based on a research that 80% of Americans will judge companies by what they do during this Crisis.
He also added that the spending habits of companies will determine how strong they can recover in the aftermath of the crisis.