Clash of the creative titans
As advertising giants fight over the world's big accounts, Richard
Wachman asks whether it's good to go global Sunday February 27 2005
The Observer
A skinhead walks into a kitchen with his clothes covered in mud after
playing football. His mother looks horrified, but just before she loses
her cool, the camera alights on a box of Persil strategically placed on
a washing machine. You can guess the rest.
But if you played the same television commercial, made in the 1980s,
somewhere in South America, in a country where skinheads and washing
machines were rarities, the advert would be devoid of meaning. No
wonder advertisers hired different agencies in different places to do
different things.
But the landscape has changed in the last 20 years - the world has got
smaller, multinationals have got bigger and so have the advertising
companies. Global footprint has become a business mantra.
In the old days, a company would often give its creative work to one
agency and the job of buying media slots - on television, radio,
posters or in the newspapers - to someone else.
At the very least, different agencies would be retained in different
countries, primarily because the industry was so fragmented - agencies
had a limited geographical presence, and couldn't do a 'soup-to-nuts'
service.
Today, multinationals are consolidating their accounts, and the giants
of the advertising industry - Omnicom of the US, Britain's WPP,
Publicis of France and Interpublic, another American firm - have grown
into organisations as big as the clients they serve.
The competition between them is intense: they are currently battling
for the account of US chip-maker Intel, which has put its $300 million
global advertising business out to tender.
WPP recently won international mandates from HSBC and the South Korean
electronics company Samsung. The victories appeared to vindicate chief
executive Sir Martin Sorrell's strategy of building a titan that can
offer clients a one-stop shop. 'We are trying to build a full-service
agency for the 21st century,' he says. Now there is a new battle, and
Sorrell is in the thick of it.
Unilever, the Anglo-Dutch household products group, has decided that it
wants only one agency to handle the creative side for its premium
detergent laundry brands, which include Persil. The work, worth
£140m, is split between WPP and Interpublic.
Analysts say that it would be 'a crippling loss, both financially and
in terms of prestige', if Interpublic's creative agency, Lowe, lost the
mandate to WPP's J Walter Thompson. Last year, Interpublic, headed by
Michael Roth, suffered a major setback when Sorrell snatched Unilever's
£700m media buying account in Western Europe.
Winning lucrative, international mandates helps to justify the
existence of big advertising groups. But the way the industry operates
is as much driven by the advertisers. The multinationals can save money
by contracting out all their advertising and marketing operations to a
single group.
Another important factor is that the
middle class is expanding
rapidly in countries that not long ago were labelled as Third World Brazil, India and China come to mind. That makes it easier for
multinationals to come up with a single, global marketing message.
Rationalising and outsourcing a firm's advertising and marketing oper
ations makes for efficiency. Having to deal with many agencies is timeconsuming and expensive. It is simpler to manage and co-ordinate
messages that are broadly similar for each product or service.
At the same time, companies like Unilever and spirits group Diageo have
been reducing their brand portfolios, partly because there is a limit
to how many you can promote effectively and efficiently. Five years
ago, Unilever owned 1,500 brands, but many have been amalgamated, sold
or discontinued. Now, the bulk of Unilever's advertising budget is
reserved for just two dozen. Similarly, Diageo, which has slimmed down
its portfolio of 300 brands, earmarks 75 per cent of all its marketing
for just eight 'priority' lines.
The full-service model is not without its difficulties. HSBC's slogan,
'the world's local bank', created by Interpublic's Lowe agency (before
it lost the account to WPP) works well enough,
but easy catchphrases
are more difficult in the world of consumer goods.
Unilever's spokesman Trevor Gorin says: 'There is always a risk when
you go for a uniform approach. Changing the name of a product which is
called one thing in Britain and something else overseas can be
problematic. Persil is called Omo everywhere but the UK, but scrapping
the Persil brand name in favour of Omo could confuse our UK customers,
and we could lose business.'
Changing a name can be done, if it is easy to explain to the target
audience. 'Small changes, such as amending the name of a cleaning
product from Jif to Cif, which we did in Britain a few years ago, is
easier to pull off,' says Gorin.
Problems can crop up where a single agency manages everything. Steve
Russell, the former chief executive of Boots, called in WPP to handle
all the group's communications in 2000. But the relationship broke down
when Russell left; analysts said that the extent of the brief
exposed
some weakness in WPP's systems. However, the lessons learnt from the
Boots mandate have forced WPP to overhaul and refine its services enabling Sorrell to emerge on top in some of the big international
pitches of the last 18 months.
It is too early to predict the shape of the industry in 20 years. The
big question about large advertising conglomerates such as Omnicom and
WPP is whether they are forums where creativity can flourish. If the
answer is no, shareholders could force them to 'unbundle' their
creative subsidiaries, although that seems unlikely for now.
Analysts say that the real squeeze is on medium-sized advertisers,
which cannot offer a global footprint, but fall outside the orbit of
the smaller, niche players where there is demand for the young,
creative whizz-kids who are only now making a name for themselves. But
in a global advertising market worth over £60bn, there is
everything to play for.
Big spenders
World's top 10 advertisers by spending, $bn
1. Procter & Gamble
2. Unilever
5.76
3.54
3. General Motors 3.41
4. Toyota
2.67
5. Ford
2.56
6. Time Warner
2.38
7. Daimler Chrysler
8. L'Oréal
2.23
2.18
9. Nestlé 1.74
10. Sony
1.68
Sources: Nielsen Media Services/INS Media Intelligence/CMR/ Ibope
Copyright Guardian Newspapers Limited