The unravelling of part of WPP Group’s global arrangement with Samsung, and the recent successes of BBH in securing strategic tie-ups with big brands, have cast doubt over the future of holding company mega-deals. David Benady asks what has made clients restive
Two of the world’s top marketing directors last week vowed to radically shake up their relationships with global advertising agencies in what could be a foretaste of a new era for worldwide brand-building.
The marketing chiefs of electronics giant Samsung and mobile handset maker Motorola both poured cold water on the idea of working exclusively with a single global ad agency or holding company. They claimed that they can get superior creative work by keeping an open mind and using the best ideas and resources from any source available.
Samsung chief marketing officer Gregory Lee said this was behind his decision to wrench some global advertising responsibilities, worth $200m (&£110m), out of WPP Group-owned agencies and put them into the Leo Burnett network. WPP was appointed only a year ago (MW November 18, 2004) to handle global advertising, direct marketing and media buying duties, but in a statement, Samsung says Leo Burnett will now create advertising to support Samsung’s sponsorship of the 2006 Turin Winter Olympics. The statement goes on to say that Samsung will transfer “certain account planning and creative responsibilities” for its global brand campaign to Leo Burnett, while media and other marketing services will remain at WPP.
“This is really about trying to balance the strengths of the agencies and not having an exclusive relationship. We didn’t think it was beneficial for us,” Lee said in an interview.
A scale model
The comments appear to be an astonishing turnaround. Samsung’s exclusive deal with WPP was one of a new breed of worldwide contracts, whereby brands reap economies of scale on their global marketing operations by using a single holding company’s capabilities in a number of disciplines.
Traditionally, brand owners have run “beauty parades” involving separate agencies for global work. But these new mega-deals pit holding company bosses against each other.
In the mega-pitch for HSBC’s &£600m global business last year, the first round of pitches involved WPP’s Sir Martin Sorrell, Publicis Groupe’s Maurice LÃ©vy, Omnicom’s John Wren and Interpublic Group’s then chief executive David Bell. It was reported that WPP had 700 ad executives working on the pitch, which may have been a decisive factor in it winning the business. In another holding company deal, this autumn, Omnicom beat WPP and incumbent IPG to the $600m (&£340m) marketing services business of Bank of America.
But Lee has decided that having a one-stop shop for marketing services does not necessarily lead to the best creative work. “You can’t have great ideas for every single thing you’re trying to do,” he said.
Samsung’s account shift is a blow for WPP-owned JWT and Berlin Cameron, which were the creative leaders for WPP’s Team Samsung. Observers say the two agencies were unable to come up with acceptable campaigns for the conservative Korean company. However, Leo Burnett will continue work on Berlin Cameron’s “Imagine” theme to create a campaign for the Winter Olympics. At a regional level, Cheil Communications – part-owned by Samsung – will share local briefs with FCB and JWT. WPP’s other Samsung business, with media bought through Group M and Wunderman handling direct marketing, is unaffected.
A radical combination
Meanwhile, in an exclusive interview with Marketing Week, Motorola chief marketing officer Geoffrey Frost has used remarkably similar language to Lee in describing the failings of global agency relationships.
“Even the so-called quality creative agencies are not brilliant everywhere. I’ve never seen an agency that’s brilliant at everything. If you want to be a truly innovative brand, you have to be innovative with media. I think a combination of some of the more radical agencies is the future,” he says.
Frost, a former ad director at Nike, has already ended Motorola’s long-term relationship with WPP’s Ogilvy & Mather, and has started hiring separate agencies for different tasks. He sees this as a way round the general conservatism he perceives in the industry, particularly at an international level. “The economics of the business a global network, but really one office does all the world’s work and keeps the money,” he says. Motorola will do it differently, he claims, but counters reports that he has shifted the entire account into Omnicom’s BBDO network. “We’ve decided to retire from the media circus of agency pitches. I don’t believe in them. We’re working with various agencies on a test-drive basis to see how their work is,” he says.
A new world order
His comments come as a number of other recent global account realignments seem to have undermined the established structures of global marketing services groups. Earlier this month, micro-network Bartle Bogle Hegarty – with just five offices around the globe – won international assignments for British Airways (MW October 13) and snatched the Persil (known globally as Omo) account from JWT. The agency will supply the strategic input, while other offices will be responsible for implementation. On Persil/Omo, BBH will develop the “Dirt is good” strategy created by Lowe.
According to Marketing Services Intelligence editor Bob Willott, these moves demonstrate that in advertising, the message is more important than the medium. “If you have a global agency offering fantastic global coverage and buying power, that’s valuable, but only if it delivers the message,” he says.
He adds that clients are realising that getting the right creative idea is more important than being able to shave costs. As Jonathan Mildenhall, who oversees strategy and business development at agency Mother, observes: “Holding company deals make sense on paper, but the relationship is owned by the accountants and finance directors, not the people developing the marketing strategy.”
As WPP last week unveiled strong third-quarter profits, rivals outlined what they believe could be a weakness in deals struck by Sorrell. One says that drawing executives from across the holding company’s subsidiaries to form a team often creates a sense of displacement and alienation among those staff. Sorrell’s charisma may help in winning the pitch, but he will not be working on the business day to day. This requires the team executives to reconsider their loyalties. “Who do you work for, the holding company or the ad agency? That’s the question. It comes down to people-management, being sure what motivates people and keeping them in the game. Sorrell isn’t great at that,” says the source. He also criticises holding company deals struck mainly on the basis of price as threatening to “commoditise” the advertising industry.
The rise of mega-deals has come in tandem with the increased use of procurement officers by brand owners seeking to strike the best value deals and increase investor transparency. In truth, one-stop deals may be right for commodity marketing services such as media buying, direct mail or promotions. But when it comes to the all-important task of using creativity to project a brand globally, it is questionable whether brand owners can rely on a single company to provide this vision and inventiveness. If more holding company deals begin to unravel, agency bosses will need to seek new models to win global branding tasks.â¢