A Cheaper Agency Pricing Model

London Advertising Eliminates Production Markups, Creative Orchestra Eliminates Agency Baggage

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LONDON (AdAge.com) -- "Better. Faster. Cheaper." It sounds like a line for cut-price detergent, but in fact it's the no-nonsense mission statement of London Advertising, one of a new breed of British agencies determined to find a way of working globally without the baggage and costs of an agency network.

While the global recession is certainly the occasion for their founding, these agencies are built to address what the founders see as long-term shifts in the agency business.

Ad Age explores what marketers, media and agencies are doing to survive and even thrive in the downturn.
London Advertising's selling point is that you get heavyweight creative with no markup on production costs. Marketers hungry for transparency from an agency need look no further than the London Advertising's website: It shows a rate card detailing production costs and features a "production-cost calculator" to allow potential clients to work out just how much they could save by switching to London Advertising.

So far this pitch has worked, as a global list of clients attests. London Advertising is already creating work for clients in London (Prince of Wales charity, Mosaic), the Netherlands (Nolet's Distillery), New York (Mandarin Oriental), Dubai (retail group Majid Al Futtaim) and Australia (Government of South Australia).

With production markups accounting for 40% of profits at many large agencies, London Advertising detected an erosion of trust between agency and client. Graham Hinton, chairman of London Advertising partner agency Splash, said, "Procurement specialists have had enough. They are in a constant battle with agencies. But it's hard for an agency to turn around and say production should cost 50% less. It's tough to come back from as an industry, but without trust there is nothing."

Efficiency through tech
London Advertising's founders, former Saatchi & Saatchi execs Michael Moszynski and Alan Jarvie, keep costs down while maintaining global reach by working closely with international design and production agency Splash (with whom they share an office) and translation specialist Textappeal. A big part of London Advertising's efficiency drive is a computer system devised by Splash that manages the whole supply chain.

"It cuts down on the man hours it takes to manage the process and allows everyone to concentrate on strategy and creativity," Mr. Moszynski said.

Mr. Moszynski and Mr. Jarvie founded the agency only a couple of weeks after the collapse of Lehman Brothers last fall, and they said they see the timing as serendipitous.

"We are well-positioned for the challenges of recession. But the changes in the industry are long-term and needed to happen anyway," Mr. Moszynski said. "The recession is a catalyst. When the good times roll, you don't need to make the tough decisions."

Another London-based agency, Creative Orchestra, also sees itself as a communications pioneer for our times. Also set up by ex-Saatchi & Saatchi talent -- former Integrated Creative Director Chris Arnold -- it sells itself as a full creative department without the agency baggage.

"It's perfect timing," Mr. Arnold said. "Marketers want to buy creativity direct. We are pure creativity; admin just gets in the way. Clients like magic, and they want to see the show, not send someone else in to watch and then tell them what happened."

Creative Orchestra is already working with Richard Branson for his dyslexia charity, Extraordinary People, and said it has a "very big blue-chip international client," which it declined to name. The plan is to license Creative Orchestra franchises in New York and Spain next year. "We don't want to just think London," Mr. Arnold said. "We are able to work with anyone anywhere."

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