On the 2 March 2011, Harold Mitchell, CEO and founder of Mitchell Media Communication Group, addressed WSBC members on the future of media and advertising in business.


It is great to be back in the region that hosted the extraordinary 2001 Olympics, the home to the Western Giants and hosts the NRL Grand final every year.
I really appreciate the opportunity to be able to address you, the leaders of what is Australia’s largest manufacturing region and our fourth most populous region, with a cultural diversity second to none. 
Given the scale and diversity of your business interests I am going to focus today on the national picture which I believe has important implications for all of us no matter whether our businesses are local, national or global.  

For me business success has always been underpinned by forward planning, (trying to anticipate the market), acting, and seizing the competitive advantage. I am an undying optimist and as far as I’m concerned there is an opportunity in every set of economic circumstances, no matter how depressed the so called forecasting experts, journalists and politicians may be.
It’s all a matter of your personal interpretation of the facts or as they say, perception is reality.
So today I want to take you on a journey through tow key areas:
Firstly the economic context. How I see things in the short to medium term. 
The digital communications revolution, the significant changes and the opportunities for marketers.  

My message throughout is simple:
Read and interpret the signs, formulate your future plan, and act upon it. This is the way to win advantage in this incredibly competitive world that we live in.
It’s an important yet little known fact that Australia is the most competitive advertising market in the developed world.  
For every year since 1999 with the exception of 2006, Australia has been world leader in the ratio of advertising expenditure to GDP, and in 2008 for the first time, Australia also took the title for highest advertising spending per capita.
Judging from the current business outlook locally there is every reason to believe that our world leading position will continue into the foreseeable future. The European and US markets are stagnant and it is the 6 hour time zone in which we live, which includes India, China and Indonesia where most of the growth is concentrated.  What an opportunity!
It is often said that Australia is the lucky country, but I believe that in business, you make your own luck.
My first message of the day is that there are huge opportunies for Australian business and at the same time it is no reason for complacency. 
Since we managed to defy the rest of the world and glide through the GFC relatively unscathed it could be all too easy to slip back into our old ways, and think that “she’ll be right mate”.

Lets set the scene by looking at the prospects for the economy and business for the next year or two which are in the main very positive.
Business Confidence: recovered strongly in mid-2009 from the very low levels touched briefly during the GFC and this is good for adspending, employment growth, and business investment including new vehicles. Confidence has been volatile since May 2010 but mostly positive.  Business was nervous a few months ago about sovereign debt in Europe and more recently in the wake of the democracy tidal wave in the Middle East.  Recent floods have also temporarily affected confidence but it was still positive in January.
Consumer Confidence: The index of consumer sentiment is positive as at February despite recent floods and our economic forecasters, foreseechange tell us that willingness and ability to spend is good.  There has been an increase in the priority attached to saving during 2010.  While this is not so good for retailers in the short-term it is good news in the medium-term because consumers will have more savings to buy what they want and will not be getting into too much debt by spending on credit cards.
Consumer spending: is expected to be strong although there has been a shift in spending priorities – private new vehicles sales are booming as are overseas trips and this has created a difficult environment for local retailers.  Current weakness in annual retail sales growth (annual growth is currently running at about 2%) is expected to be short-lived as almost full employment and income growth boost discretionary income and the high savings rate provides cash availability for spending.  Some of the recent softness can be attributed to flooding in eastern states.  Retail sales growth is expected to recover to an annual rate of 5% as the year progresses.
New vehicle sales: are at near-record levels and the fastest growing segment is the private buyer.
Interest rates are rising slowly now but are still historically low. They are well down from the peak of early 2008.
Petrol prices were also well down from the 2008 peak until middle eastern democracy protests shocked oil traders into bidding up prices.  This spike is expected to be temporary.  Prices will probably return to previous lower levels until there is a sustainable recovery in the major advanced economies.
House prices have risen strongly over the past two years.  While prices may now have peaked in the short-term there is little chance of a fall in prices like that experienced in the USA and parts of Europe as we still have a major housing shortage. 
Employment is 3% higher than a year ago and unemployment is falling.
Business investment is expected to pick up strongly, according to surveys.  With buoyant commodity prices, mining investment in particular will increase strongly.
Exports and export incomes are very positive due to high commodity prices.  And it’s not just coal and iron ore.  Wheat prices have shot up due to poor harvests in Russia and elsewhere.  In Australia, good rains have laid the foundation for a bumper crop in 2011, especially in eastern states.
Not all good news of course because commodity prices are pushing the dollar up, which is not so good for other exports – primary produce, manufacturing, tourism, and education. 
Conditions can never be perfect!
But overall we have very good signs for the next 18 months at least. There are plenty of opportunities for those that want to see them. 
The drought in the eastern states has broken. While there has been too much rain in some parts of the country, groundwater has been recharged and this has brought a strong agricultural outlook and a wonderful green countryside for tourism. 
For us in Australia it could be very easy to lapse back into our old ways and presume that all will be well in the lucky country.
But there are economic challenges further ahead.   

Risks include:  
The Reserve Bank being too aggressive in raising interest rates – the lags are long but variable so we should be OK for eighteen months and we should remember that many people want rates to rise especially with the new found penchant for saving.
China will inevitably have another temporary stumble on its upward path.
The retirement of the boomer generation and rising health costs could slow discretionary income.
The cost of dealing with global warming will increase the longer we delay effective action.
Finally we should add the matter of sovereign debt in much of Europe, UK, USA, and Japan.  This is not a problem in Australia.  But in those other countries, there will be a need to raise taxes and cut government spending at some stage soon.
When two or three of these threats hit at the same time, that is when we are most at risk.  And we can’t rule that out!
It happened in 2008. 
But relatively speaking, from a global perspective, Australia is a great place to be right now.  
The US is struggling, and it will take a decade for UK and Europe to recover from the GFC, Japan has been in the doldrums for two decades with little prospect of a sustainable recovery.
Right now all the traditional growth engines of the world are in hibernation and it is Asia where all the growth is occurring. 
Australia is very well positioned geographically, economically, and resource wise to take advantage of this situation.
Australia also represents an attractive place to live and get employment for many clever people who are currently suffering in the traditional growth regions of US, UK and Europe.
From a short to medium term perspective at least, things are looking good for Australia. We can, rest assured that we will be moving back into growth after the flood-affected March quarter and the future is rosy for the national and state economies and for advertising.
So my message is simply, don’t be foxed by any gloomy reports you may read in the papers by politicians and the like, the economic climate of Australia right now affords many opportunities for those who choose to see them.
I want to end this section by giving you an example from my own experience that underpins my unswerving belief in the importance of informed crystal ball gazing, applying that in forward planning, and having the courage to act on what you see.   This is a formula I have applied all my life and has worked for me.

Adlib section about the success formula of the Mitchell businesses since 1976:
The founding of M&P in 1976 and seeing the opportunity for a whole new sector within the advertising industry – companies that specialized in Media planning and buying. Getting in on a new trend while everyone else wasn’t looking. Pooling the media funds of many smaller agencies and advertisers – beating the market leaders.
Since 2000 foresaw the digital revolution started emitch which has stayed in the #! Position in digital planning since then.
During the noughties continued evolution of M&P and emitch into MCU with its 23 separate business units reflecting our foresight that world would fragment and become more complex.
How we were ahead of the pack in all these developments and this is what has kept us market leaders (verified by Nielsen) for the last 5 years in a row.
Our most recent step in merging MCU into the global resource of Aegis, to transfer our market leading skills from national to an international stage. This is our next big challenge.  To become a market leader in what is the new frontier of consumerism, fastest growing and developing region of the world – and its on our doorstep. This is the plan for our success into the long term future.
 
The reason for this example is simply to underscore the importance of having an informed opinion about the future, long term planning and acting upon these plans. 
As marketers you need to have an informed opinion about this and to be shaping your future marketing communications with this in mind. 
So now I want to talk a little about the digital communications revolution, the changes that are occurring and the business opportunities that it is producing.
My second message today is simply: respect the customer as you have never done before, make a point of listening to them, and engaging with them. 
There is absolutely no doubt that digital technology has changed and is continuing to change social and business fabric of the world. It transcends geographic boundaries and cultures and of particular interest to us, is that it the dramatic changes it is making to the marketing of goods and services.
Already many industries have been transformed – travel, telecommunications, banking and finance, entertainment- movies and music, and advertising are the main ones so far. 
It would seem that the next one to be feel its effects will be retailing. 
The concerns about online retailing became very public late last year when prominent retailers like Gerry Harvey and others raised the alarm that at least 3% of their business had leaked onto the internet.  They were calling out for government assistance via taxation to help discourage consumers from shopping online, particularly for apparel and small electrical goods.   
One of our retail clients, a market leader, told me recently that within 18 months, they expect 50% of their store traffic will be online.  This doesn’t mean that 50% will buy online, but what it does mean is that the way that people shop for goods and services has already changed inexorably and forever.
The pattern in the past when this kind of change has hit other industries has been to run for their old levers of influence to try to fix the problem and these have almost always failed.  We saw how the recording industry tried to deal with illegal downloading of music through the force of law, shutting down sites like Napster at great expense, and how forward thinkers like Steve Jobs and Apple simply capitalized on the situation and iTunes was born.
A business acquaintance of mine recently returned from South Korea and told me that people who shop online in Seoul get the goods delivered faster than they can go to the shop, purchase them and carry them home.  There is a highly competitive courier industry into their main cities and towns running 24/7. 
Even when you shop in-store, you don’t have to lug the goods around, they can be delivered left at the counter, and delivered to your home at whatever time you nominate – no extra charge!  They seem to have it covered from both ends – for shoppers online and for those who like to browse and buy in store.
Clearly this change in the retailing environment is here to stay.  No amount of new taxes or wielding of influence will wind back the clock. The consumer is all powerful, and the way to respond to it is like Steve Jobs has done, like South Korean retailing, and like we have done in our own business at Mitchells. 
The winners in this world are those who recognize the signs, re-invent themselves and take advantage of the changed conditions.
Another very recent example of the power of the consumer,  very close to home, is how one unhappy customer of Hutchisson  Vodafone, 23 year old university student, Adam Brimo created Vodafail.com when he began experiencing network problems shortly after signing up to a two-year contract with the company.
Vodafail.com was launched on December 12 last year and has already attracted over 150,000 visitors.  It has led to a public apology by the CEO of Vodafone and a major revamping of the companies infrastructure priorities and expenditures. 
The point about this of course is that this could be your company, it could be our company, it could be anyone that fails to understand the dynamics of the digital communications landscape.  A place where the consumer is in control and just beginning to realise the power they have to influence the way things are run. 
Welcome to the new world of communications, the world in which the consumer is king.
Way back in December 2006 time magazine came out and named the person of the year “You” and AdAge, America’s leading advertising magazine, gave its ad agency of the year award to “The Consumer”.
At the time, to many of us here in Australia, it must have seemed a bit farfetched, but now it has arrived, well and truly and it is up to you to think about this change in relation to your own businesses. To build marketing and communications strategies that respect this new dynamic in marketing and that more importantly take advantage of these conditions advantage you over your competitors.

I wish you well on this journey and of course it is communications companies such as our own that are here to help you.

Thankyou

Harold Mitchell AC