Creating a new agency for one big client's marketing needs is all the rage. But is it the right approach? Anita Chabria examines the trend, and weighs its assets and liabilities.
Last week, The Wall Street Journal reported that advertising giant Publicis Groupe was creating an "executive board" to help streamline one of its largest accounts, Procter & Gamble. The new group will have representatives from each of the Publicis agencies that service the multinational company (whose advertising and marketing budget is $3.7 billion), and reportedly will be headed by Saatchi & Saatchi CEO Kevin Roberts. It seems that after years of talk about the benefit of synergistic approaches to communications, economic necessity is pushing integrated marketing in new directions. "I'm looking for systemic changes I can make in terms of our relationships with agencies," P&G chief marketing officer James Stengel told the Journal in a recent interview. "I think we can use them better than we do now to grow the business." While Publicis declined to comment on how the new entity will help P&G or itself, industry insiders were quick to position the deal as part of the growing trend toward an integrated and personalized approach for clients with enough clout to demand superior attention. With the economic forecast remaining bleak and earnings estimates on a downward trajectory, the communications industry continues to suffer. The ad slump is still in effect, and communications budgets continue to decline. Even the holiday retail season looks grim. But corporations are still seeking innovative ways to make those thin budgets stretch further. And agencies that want to keep those big-billing clients are finding ways to accommodate them. For communications conglomerates with multi-brand clients, that often means pitching the efficiency and economy that their worldwide networks can offer. The tactic promises both savings and simplicity for clients, and much-needed organic growth for agencies - in theory. A single company handling accounts across products, brands, and disciplines seems to offer a uniform message and an increased ability to integrate. It also offers leverage for negotiating big-ticket items such as media buys or celebrity endorsements. The ultimate example of that integrated approach, which Publicis has long-championed with its "holistic" model, is the one-client agency. While Publicis' P&G arrangement shies away from labeling itself as such, it is not the first company to set up a separate business structure for an important account. In fact, its not even the first time Publicis has done it. Only a few weeks ago, following the shareholder approval of Publicis Groupe's takeover of Bcom3, the newly enlarged holding company announced the creation of a new global network dedicated solely to General Motors' business. "We were looking at opportunities with these new global resources, and what was the best way to use this as an opportunity," explains GM director of regional and marketing communications Peg Holmes. "Traditionally, when you look at an agency, the main focus is on advertising. We wanted an integrated approach to the whole scope of marketing services." They got it by culling the ranks of Publicis' holdings, and pulling out what amounts to a dedicated, external marketing department, including resources from former Bcom3 PR firm and GM stalwart MS&L. Other companies in on the act And Publicis isn't the only communications giant to marry itself off and change names. Chicago-based Element 79, named for the periodic table classification for gold, was created by Omnicom to focus on $400 million worth of business from PepsiCo. The 120-person agency promised to take on other clients from the start, but made it clear that its Pepsi accounts - including Quaker Oats, Life cereals, Aquafina, and Tropicana - would be the main focus. "We want to make sure all our existing clients are buckled down, until we make sure every brand is handled," Element 79 president and CEO Brian Williams told a reporter of the new venture's immediate plans when it opened shop. Another example is Omnicom's creation of PentaMark Worldwide, dedicated solely to handling DaimlerChrysler. Even if a client doesn't demand a new, discrete agency, many are demanding seamless integration. Recently, Bank of America (BofA) reviewed its $170 million ad business, shifting it to agencies under Interpublic Group. The review had an unusual twist, however: BofA was on the hunt for a consolidated approach, and asked the parent companies of existing advertising firms to pitch combinations of their networks across communications disciplines - it wasn't only interested in a standard array of ad agencies. "Talking with one voice, one message, one idea is incredibly challenging to orchestrate," BofA brand and ad executive Dan Roselli told The New York Times of the move to IPG. "The only way to do that is by going to the holding-company model." Perhaps the next step is to give BofA its own personal IPG outlet. But do personalized agencies offer the best deal? Or do they just sound seductive? Across-the-board alignment also has its limitations. Traditionally, for example, P&G - widely considered as exemplary in the way it manages its marketing agencies - has centralized big-ticket tasks such as TV advertising and media buying into network alignments, but will use boutique firms for smaller, local (and arguably, more creatively cutting-edge) PR and direct-marketing outreach. "We've got to be honest," says Phil Sheldon, MD of New York-based creative PR shop Lippe Taylor Marketing Public Relations, which counts P&G among its clients. "It's an interesting concept, and I think some companies will take a look at it. Sometimes you're able to integrate, and you can do that one-two punch. But the bigger the resource that you're trying to put together, the more difficult it is to make it work." Daunting logistics aside, the idea of consolidation is largely sound. As marketers continue to look for creative routes of reaching consumers outside of traditional advertising, the importance of integration grows. One of the clearest examples of this is corporate America's increasing interest in entertainment as a promotional tool. Managing complicated sales efforts that combine Hollywood productions with more mainstream efforts means extra attention to messaging and branding. Whether that involves streamlining existing contacts between vendors, moving all accounts to a network, or creating a new agency, the need for clear lines of communication grows with the complexity of marketing. Coupled with closer attention to profits, the allure of Publicis' holistic idea is easy to see. But there are drawbacks. The myopic focus of a one-client agency could make it harder to stay fresh and alert. "You learn so much from a diverse client base," points out Lippe Taylor's Maureen Lippe. "The problem is having enough experience to manage multiple brands." The multi-client advantage Ultimately, dealing with a range of clients provides more insight and a larger breadth of knowledge. It allows for cross-pollination between accounts, and exposes agencies to more successes and failures. And while working with several firms can be more complicated, it can also pay off with the quick innovation often found in small shops. "When you get down to some of these activities, you're talking about the realm of creativity and ideas," says Martin Block, professor of integrated marketing and communications at Northwestern University. "Economy of scale doesn't help with that." And the communications giants run a risk as well. The pain of losing a P&G from a network created solely to handle its business could be greater than simply losing a client, albeit a very important one. Even with good relationships, businesses change. Despite those risks, it's clear that the trend to consolidate will continue, and customized agencies and networks will be offered to lure top accounts. But such entities are works in progress, and simply figuring out how to function efficiently will be the first task for any venture like the Publicis-GM agreement. "It's new territory for everybody," admits GM's Holmes. "But we think it'll work for us."
