WPP sets new conflict model

Now that Sir Martin Sorrell has fastened on his prey, expect a fresh round of consolidation among leading advertising and marketing services networks. And with it, some trenchant criticism from the sidelines about the greed and ambition which are, allegedly, its only driving force. Granted, neither quality is alien to the advertising business. But it is disingenuous to suggest, as some do, that mergers and acquisitions never benefit the clients, only the agency personnel who participate in them.

The idea of housing rival agency networks within a single holding company is by no means new. It was the brainchild of Marion Harper, who forged Interpublic during the early sixties. Harper, however, was widely viewed as a megalomaniac; his idea failed to fire the imagination of the rest of Madison Avenue because at the time it lacked compelling commercial logic.

Sure, there were administrative savings, even synergies, to be had. But the ramifications of conflict policy ruled it out as a viable proposition. A bank was a bank and a grocer a grocer, and as such they had a right to sector confidentiality within whichever agency group they placed their business. Conversely, agencies played along with the confidentiality game because it was a useful means of browbeating clients into ‘alignment’ across international markets.

What has happened in the intervening time is that the client has changed beyond recognition. Nowadays, a bank might just as easily be a grocer, and in the interests of developing global scale, will have greatly increased the reach of its leading brands. But those brands are likely to be far fewer than in the past. All of which severely tests the traditional conflict model. A good example of the reconstructed client is Unilever which, as a result of severe pressure on margins in the food business, is drastically whittling down its minor brands to create a handful of global master brands, like (it hopes) Wall’s. Indeed, such is its commitment to global branding that, where there are gaps, it is embarking upon an aggressive acquisitions policy that may, for example, result in it buying Bestfoods, which owns among others the Knorr and Hellmann’s brands.

The result of this consolidation, and others like it, will be fewer clients, fewer brands and a reduction in opportunities for marketing services groups, unless they themselves have developed the scale to compete effectively on cost as well as service. This polarisation, and its consequences, is as true of financial services, cars and drink, say, as it is of food.

The proposed acquisition of Y&R by WPP will undoubtedly create a fascinating benchmark for the conflict issue. Ford has already signalled, indirectly, that it will not be changing its conservative policy, so scuppering any possibility of a deal between Y&R and Publicis, which handles Renault. But what, in the case of the WPP/Y&R axis, of Colgate-Palmolive’s attitude to Unilever on the toiletries side, or Kraft’s to Unilever on the food side?

One thing is for certain. If clients prove by their inaction that they are prepared to tolerate conventional conflict, Grey, Saatchi, Bates and FCB need to prepare themselves for a less independent future. Omnicom, for one, will not feel terrific about being number two in the world.

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