By Marketing Week reporters
Dixons’ decision to split its £49m (Register-MEAL) business between two agencies could go down as the deal of the year for two reasons.
First, the stores group has managed to grind its two new agencies into the ground on price. Second, and more important, it will allow Dixons to continue its strategy of separate development for the relatively recent PC World and The Link brands.
Dixons is estimated to have cut over £1m from its estimated £4.5m agency bill by playing the four agencies which competed for the business, including incumbent Saatchi & Saatchi, against one another.
The winners are the New Saatchi Agency, which will handle the creative work for Dixons and Currys, and D’Arcy Masius Benton & Bowles, which has picked up creative work for PC World and The Link, as well as all the media buying.
But insiders suggest that agency commission could be lower than two per cent for the media and four per cent on the creative side. If the New Saatchi Agency’s share of the business is worth £30m, it can be calculated that it will have a revenue of £1.2m. It will also need almost to double its staff to cope.
DMB&B and its media arm, the Media Centre, will net an amount which may be lower for the creative and media work.
The rest of the estimated £3.4m bill – up to £1m – will be spent with Cordiant-owned Facilities Group, which continues to handle – for now – all production on the business. Cordiant is the renamed holding company of Saatchi & Saatchi.
At one stage, the stores group is also believed to have considered taking all the work in-house.
“Dixons is rubbing its hands,” claims one insider. But a source close to the New Saatchi Agency denies that the business has been taken as a loss leader. “It would be crazy for the agency to do the work if it were not profitable. The figures being quoted underestimate the value of the account.”
At the same time, the split will allow Dixons to continue to expand both PC World and The Link. In January, it signalled its intention by appointing separate marketing directors for Dixons and Currys, while also appointing a managing director to handle the expansion of PC World and The Link. It has split the account despite a categorical denial that this was being considered (MW March 24).
“The decision to split the accounts was something that came out of the pitches,” says a Dixons spokeswoman. “We are trying to lend distinction to the different brands.
“We are happy with the creative side of the advertising, and do not envisage this changing dramatically. We do not yet know what is practical. We moved the account from a logistics point of view, we were looking to increase efficiency,” she claims.
The stores group will demand more than a simple improvement in efficiency from its new agencies. DMB&B has the task of developing separate identities for the two smaller brands while New Saatchi will have to cope with the logistical nightmare of running an account that requires production of 30 different ads for 150 different publications every week.