Adapt or die: Agencies embrace integration to drive success

PR agencies are tossing aside single-discipline nomenclatures and further adopting integration in the ever-evolving communications landscape

The phrase "year in transition" is hackneyed and overused, but for once it sums up what was going on in the PR agency world in the past 18 months and leading into 2017.

Publicis is embedding MSLGroup more deeply within the French holding company’s creative firms. Omnicom set up a PR group to get its agencies working more closely together and with its siblings in the overall network.

Ogilvy dumped single-discipline nomenclatures and is going to market in an increasingly integrated way. Its holding company, WPP, is doubling down on the Team WPP global cross-group solutions that won it new clients in 2016 such as Walgreens Boots Alliance. Havas has completely reworked its agencies around a "village" structure.

Even Richard Edelman, president and CEO of the world’s largest and most high-profile PR agency, explains his firm is in the third year of a five-year transition plan and says: "We had to reinvent our business and make it fit for purpose."

He cites work on pasta brand Barilla as an example of integrated PR services in action, compared to the era of his father when the agency survived on Dan Edelman-style product PR at around $1 million a year, interviews with women’s magazines, and guest appearances on Good Morning America.

"Now we’re doing things such as While the Water Boils for Barilla, and it’s allowed us to go into marketing money — and that budget is four times PR," explains Edelman.

Sales were declining, especially among millennials, and Edelman created a video series hosted by YouTube influencer Hannah Hart in segments as long as it takes to prepare pasta.

The videos received more than 11 million views at an average of 2.5 minutes and, for the first time in years, the pasta category and Barilla saw year-over-year sales growth in 2016.

"Barilla was talking to five ad agencies, and its advertising approach wasn’t working," notes Edelman. "We had the CCO business and pitched the CMO for a portion of the marketing pie."

Bold moves
Each player in the market is approaching the evolved landscape differently. Omnicom made a bold move in February last year when it established Omnicom Public Relations Group (OPRG), overseen by CEO Karen van Bergen.

In August, van Bergen brought over Omnicom firm Ketchum’s European CEO David Gallagher to become OPRG international president for growth and development, but she expects the umbrella group to remain lean and mean.

"There will be one or two additions, but I don’t want a vast, centralized organization," she explains. "It’s a bit of a roller coaster when you start some-thing from scratch, but it’s particularly helped with talent, talent mobility, client collaboration, acquisitions, and innovation."

The increase in client collaboration facilitated by the setting up of OPRG led to especially good growth in the second half of 2016, often aided by close cooperation on big assignments working with Omnicom’s Analect data and insights unit.

In 2016, OPRG clients including Procter & Gamble, AT&T, and McDonald’s all represented examples of connectivity in action. Van Bergen dubs the approach "collective brilliance."

"Everybody does it in their own way," she adds. "We operate as a collaborative, with collective brilliance and the best talent, but we also keep our individual PR agency brands strong and alive."

Those individual brands will continue to include Porter Novelli, which this February folded fellow Omnicom firm Cone under its aegis.

"Porter Novelli is doing very well, so we’ll keep on loving them," says van Bergen, who used to be the agency’s CEO. "We’re not going to fold it into FleishmanHillard or Ketchum."

Edelman talks holding companies

The leader of the world’s largest — and independent — PR firm, Richard Edelman, opines on the go-to-market strategies of his holding company competitors:

"The advertising holding companies have concluded the PR business needs to be consolidated, and three models are being explored.

At Omnicom, it had too small a base in some markets [in Europe], so it’s consolidating under one head. It already did this in Canada with its advertising offer. The holding company is looking to get rid of general managers in those regions — it has one person running 60 people, rather than three people running 20.

Over at Publicis Groupe, there is no market where the MSL person runs it [the integrated operation]. The company has taken the Omnicom model for PR and extrapolated it across all of its marketing services: advertising, PR, and direct. If Saatchi’s is the biggest in Brazil, they all report to Saatchi. If Leo [Burnett] is the biggest in Canada, they all report to it. So MSL becomes a vertical in-country. It becomes Publicis Brazil or Canada offering a full suite of services to national clients.

In the Ogilvy model, the PR leader has a job in the advertising company. Its goal is to sell the whole egg, like Peter Georgescu at Young & Rubicam 25 years ago when he bought Wunderman and Burson-Marsteller.

In none of those models is PR or communications marketing the lead play. The head is always an ad person. It’s very margin-driven and advertising-driven.

At Edelman, it is a diametrically opposed approach. The goal is to consolidate around the creative that comes out of our line of thinking — PR — and communications marketing is the result. [The holding companies] are going to lead on advertising, and PR is a support of that.

Only Andy Polansky [at Weber Shandwick] is pursuing the pirate ship approach like us.

We have to compete on the idea — we can’t be a derivative and a commodity and a subordinate. We have to be able to go head to head with the advertising lead on the big idea. If PR is simply a line extension of the ad idea, like it was when I came into the business, then Edelman would have to be consolidated as well. But I don’t buy it."

It takes a village

Over at Havas, the French network’s village structure encompasses major hub cities including Paris, New York, and London that brings creative, media, digital, PR, design, employee engagement, and health-care disciplines into one space.

The PR discipline also has a virtual village, over-seen by James Wright out of APAC, where he is Havas PR CEO. Local leaders report through villages or regions.

Marian Salzman, CEO of Havas PR North America and chair, global collective, reports through the holding company’s Health Village into Donna Murphy, CEO of Havas Health and You. Multicultural comms specialist Havas Formula and corporate and financial firm Abernathy MacGregor report into the New York Village.

"It makes it more interesting for our people because instead of being part of a 60-person office, you’re part of a 900-person operation," says Salzman. "Culturally, it was a recognition that clients have come together over common budgets for owned, earned, and paid. They’re all looked at together to move the collective needle."

Salzman insists each discipline retains its own culture, teams, and client expectations, with different leads and accountability on each client.

"In the case of Transitions Optical, we are the global lead; our colleagues at Havas Media lead on Big Lots," she continues. "For the United Nations Foundation, we lead."

Salzman bills 2016 as a "fabulous" year with "great growth" of around 20% spread across all Havas PR offices, including new clients won such as virtual payments company Wex, Merck Millipore, Sauce Pizza & Wine, and Risas Dental and Braces.

Services provider Sodexo consolidated its global PR under Havas through the village structure, which is jointly led from Paris and New York.

Only Andy Polansky [at Weber Shandwick] is pursuing the pirate ship approach like us

Richard Edelman, Edelman

Salzman adds most of her work stems from Havas Village clients or Havas Virtual Village PR clients, and the seemingly complicated matrix structure works at Havas because it has been in place for well over a decade.

"Havas introduced the Power of One in 2003, which ironically is a brand [fellow French holding company] Publicis is also using," she says. "It wasn’t very nice in 2003 as everyone thought they were different. But we’ve been doing this for so long now it’s business as usual. We have the same culture."

Despite the rush toward integration, Salzman doesn’t envisage removing PR from her company name anytime soon.

"I’m always rendered speechless when my colleagues in the industry want to forget we do media relations and we’re in the business of public relations," she explains. "It’s what we are and what we do. If you can’t measure it, people don’t want to pay for it. I love to be the keeper of the big strategic idea, but implement it in a way that can be measured. I guess that makes us back to the future renegades."

She notes that measurement systems at Havas are bringing owned, earned, and paid media together, led principally by Havas Media.

"Our media colleagues are so awesome at that, why should we reinvent the third spoke of the wheel?" notes Salzman. "We’re moving closer to the media agencies than the ad agencies. I may be called a visionary later, or I may be called an idiot. The creative agencies have very different challenges, opportunities, and expectations on them. I’ve felt media is the future for the past five years."

Not just a single-discipline
At Interpublic Group, the integration model is well-established at both Weber Shandwick and Golin, and has contributed to strong and sustained growth, whether they are cooperating with companies inside the group or partners who might be involved in IR or a broad-based agency effort.

"I wonder whether that is dilutive to the PR discipline at a time when PR has never been more important in navigating the complex issues companies face," says Weber CEO Andy Polansky.

He feels strongly his firm stands on its own, rather than using an approach built around agency groups or particular markets, or being "subsumed by an ad agency sibling."

"That model resonates strongly with clients," he adds. "We’re a powerful global brand that reaches beyond PR and is known for its chops in digital, content marketing, and social, and specialized expertise across all the different industry sectors."

CEO Donna Imperato’s Cohn & Wolfe consistently outperforms its WPP holding company colleagues, and she has a cautionary warning for agencies that aren’t already well down the road in evolving their businesses.

"A lot of our competitors missed the boat," she explains. "If they didn’t start the transformation a long time ago, trying to break down the walls now is a whole different mindset. This was a lot of hard work, training, hiring the right people — it’s not something that happens overnight."

Imperato believes single-discipline agencies are going to be a thing of the past and, by 2020, only firms that can deliver a holistic solution will capture the marketing spend of the C-suite. The theory is consumers need to be fully immersed in a brand as they seamlessly go about their lives, searching, shopping, participating, and sharing.

"In 2017, we will focus on the complete brand experience we’re offering to our clients to get to their customers, allied with mobile, social, paid media, and the fusion of the digital and physical," says Imperato. "This is where the big creative ideas will come from, because they’re truly interactive."

Omnicom Public Relations Group CEO Karen van Bergen says clients still want specialization and don't want agencies that are everything to everybody

Salzman doesn’t disagree with Imperato’s contention that single-discipline agencies won’t exist at some point. "We’re moving toward it," she notes. "In 10 years time if I was head of the PR department at Havas it wouldn’t bother me a bit. I haven’t grounded my career in the PR business. I’ve grounded it in working for great holding companies, so it’s made me a little different in terms of what I’m resistant to."

Clients still seek specialization
The integrated go-to-market approaches are being driven by clients, where there is a growing drive toward efficiencies and more collaboration, but OPRG’s van Bergen doesn’t think it spells the end for individual agency disciplines.

"Clients still want specialization and don’t want agencies that are everything to everybody," she explains. "The fundamental shift is that data drives the need for an integrated approach, but every discipline will still be recognized for what it does best."

Ogilvy’s worldwide chairman and CEO John Seifert consolidated all the network’s constituent firms under one P&L, again driven by client demand and a push for reduced costs and bureaucracy.

"Our most progressive clients say, ‘We do things that cost too much, and so do you. We all have to get together and figure out how to do things more efficiently,’" he says. "We don’t want to lose the best talent, but do we need 10 people at every meeting? Do we need you to operate in places with high overhead cost and we’re paying too big a share of it?"

I find good times more stressful than bad. You have to keep up with your growth

Donna Imperato, Cohn & Wolfe

Clients have been pushing back on Ogilvy and asking whether the iconic agency is adapting its business model and cost structure to work as efficiently as it can.

"The unintended consequence of trying to build expertise and a horizontal mix of capabilities is that we ended up adding cost that is not fundamentally about the expertise — it’s more management, back office support, and marketing," Seifert notes.

Future remains bright
Elsewhere in WPP, Imperato has overseen three straight years of double-digit global organic growth at Cohn & Wolfe, but she’s in no mood to rest on her laurels.

"I find good times more stressful than bad," she explains. "You have to keep up with your growth, but change is hard to manage. I’m always worried something’s going to fall through."

The opportunity to tap into larger marketing budgets is clearly huge for agencies, but it is by no means the only game in town and PR’s traditional skills are in just as high demand.

"It’s quite dynamic," says Polansky. "Historically, the entry point might have been the CCO, and we still work with a lot of those, but now there’s the marketing dimension where we’re engaging with CMOs and senior brand management people. A lot of the change management work we do directly involves the CEO and chief human resources officer. Risk management and crisis reaches into the chief counsel’s office."

But whatever direction agencies are turning in, the opportunities in 2017 and beyond are plentiful for the PR sector.

"Our discipline is held in higher regard and is providing the kind of advice companies need in this environment," concludes Polansky bullishly.

Inside the industry: systems and procurement

The integrated approach to agency activation not only requires a new suite of services, but also a new approach to budgeting and pricing.

"We have to establish a model and a financial system to make sure it’s profitable," explains Cohn & Wolfe CEO Donna Imperato. "Then we have to train everyone — the client people who do the scopes of work, the financial teams that have never worked on this kind of offering — ensuring we protect ourselves from a contract point of view."

Working with the CMO, marketing departments, and brand managers also involves more exposure to procurement, which can be a double-edged sword.

"It’s such a headache," says Imperato. "At the beginning, clients just had numbers people who didn’t understand our business, but they’re getting better."

Weber Shandwick has gone as far as employing procurement experts from the client side to work within the IPG agency.

"It doesn’t change the way we go to market," says CEO Andy Polansky. "We view procurement as another client partner. We’ve built our own small external-facing procurement department with people who’ve come out of that world and can help us engage in dialogue with clients and establish a solid relationship."

We view procurement as another client partner

Andy Polansky, Weber Shandwick

Hill+Knowlton’s global CEO Jack Martin is determined to flatten the WPP firm’s structure and get people concentrating on client work, starting with himself.

While Polansky concedes companies are always looking for efficiencies, he believes the holding company opportunities are much more about strategy and creative. "Cost is not the driver in these situations," he says.

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