How are Hong Kong agencies coping with the shrinking economy (and possible recession)?

The outbreak of the COVID-19 pandemic since the start of 2020 has dealt a severe blow to global and local economic activities, with Hong Kong’s economy shrinking by 1.4% in the second quarter of 2022, compared to the same period last year. The continued impact of the fifth wave of coronavirus has pushed the city into a recession, according to preliminary data released by the Census and Statistics Department on August 1, 2022.

Preliminary estimates also showed Hong Kong’s domestic product (GDP) growth fell 1.4% in real terms in the second quarter of 2022 from a year earlier, compared to a 3.9% decline in the first. trimester. The decline of GDP mainly attributable to the weak performance of foreign trade during the quarter. A recession is defined as a contraction in GDP for two or more successive quarters. The last time Hong Kong fell into recession was in 2020 during the initial stages of the Covid-19 pandemic.

Looking ahead, the deteriorating global economic outlook will continue to weigh on Hong Kong’s export performance for the rest of the year, with high inflation in advanced economies amid supply disruptions and tensions. persistent in Ukraine. Intensified monetary policy tightening by many major central banks in response is expected to significantly dampen economic growth, a government spokesman said.

But this is not the first time that the city has gone through an economic crisis. We don’t have to go back too far to remember the experiences of The Asian financial crisis that hit Hong Kong hard in mid-1997 as well as the hardest years during SARS from 2002 to 2003.

Simone Tam, CEO of dentsu International HK, said that there are visibly budget increases and decreases in different business areas, including marketing. “As expected, traditional media is down slightly, but we’ve seen strong growth in areas such as performance marketing, data analytics and e-commerce,” Tam added.

Tam added that there have been “recurring conversations” around adjusting marketing spend since the pandemic began, and it’s part of the new normal. “More than ever before, as business partners of our customers, it is our duty to make their budgets work harder through solid strategic thinking, great creativity, channel planning, content creation, customer experience, performance marketing,” said Tam.

Echoing Tam, Terry Tsang, director of Narrow Door, said that Customers’ budget has drastically decreased since 2020 due to the pandemic, “It came back in 2022 but did not return to the previous level,” Tsang added.

How do agency leaders plan for economic downturns?

Narrow Door director Tsang suggested agencies need to keep a very lean structure and work with clients with good credibility. “We hire freelancers as much as possible because most clients assign us projects on a project basis. We also insist on getting a deposit before starting production. For new clients looking to introduce, we will charge an introduction fee,” Tsang added.

As different business sectors are under heavy economic pressure, it is important to understand customers’ KPIs and be empathetic, explained Tam of Densu International HK.

With any economic downturn comes uncertainty that affects staff morale. “We understand that our staff may be worried, so at the agency we are communicating our vision and plans for growth with practical actions in place,” added Tam. people know there is nothing to worry about because our numbers are absolutely on track.”

But with every challenge comes opportunity, and agencies would be better off if they had a positive attitude, shared Prizm Group Principal and Senior Account Manager Jeffrey Hau. Kelvin Wang. For example, Prizm saw its strongest growth for its eCommerce division in the past two years amid lockdowns and struggles.

“To prepare for the future, agencies need to build teams that have an agile mindset and are eager to learn technical skills and industry domain knowledge. This is undoubtedly crucial. sometimes is not just for survival, but also for a paradigm shift,” Wong added.

Agreeing with Wong, Jarvis Wong, Director of Omelette Digital, said, “Be optimistic, accept the unpredictability rather than worry about it. With the advantage of being a local agency, we enjoy the freedom to keep our talented team lean and flexible, focusing all of our efforts on finding bespoke business solutions for brands.”

Precautionary measures to take beforehand

As branch manager, Tsang said he was always aware of changing client needs and his company would be flexible for any scaling up and downscaling of the project during the planning phase. . “To maintain a stable income, we only retain customers with reasonable profit margins and constantly seek out promising new customers. As for internal financial control, we will retain one-year operating costs as cash flow. cash and we will never lay off staff due to layoff,” Tsang added.

On the other hand, Tam from Densu International HK said that an agency’s day-to-day operations should always be ready to respond to the ever-changing climate instead of relying on specific short-term programs. “So I wouldn’t say [these are] precautionary measures, but rather an agile state of mind. We need to clearly understand where our business can grow in the future instead of chasing instant trends, but at the same time be able to understand what is happening around us so we can reset our pace,” added Tam.

Omelette Digital’s Wong said it was better pPerform a SWOT (strengths, weaknesses, opportunities and threats) analysis for the team and stay humble to determine where improvements can be made. “By doing so, we can remain ready to seize opportunities whenever they arise,” Wong added.

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