Exhibit A: WPP Group and Sears. WPP's Martin Sorrell years back bought Sears' two shops, Ogilvy & Mather and Y&R, giving him a lock on the business. Less than a month after Kmart cost-cutter Eddie Lampert bought Sears in March, Sears renegotiated with the agencies for lower fees. End of story? Hardly. WPP's Martin Sorrell, intent on retaining the business, was instrumental in Mr. Lampert's decision this month to consolidate.
Sears loses the benefit of having two roster agencies to play off one another for the best work. But the cost savings and accountability of putting one shop in charge makes up for that. And Sir Martin surely knows Y&R will get whacked if it doesn't perform.
Agencies must use all tools available to deliver an improved product at a lower price. (Easy as Dell.) Omnicom's BBDO now is managing its West Coast operations from New York, a move that will save money. Publicis may fold Chemistri, a shop dedicated to General Motors, into Leo Burnett to cut costs for the client. Interpublic this year merged two regional shops in Atlanta and sold an unneeded office in Chicago, small steps in the right direction.
Advertising in the end is not about costs. It's not about the work. It's about results. But it's possible to produce better results and work by cutting costs and improving processes. Agencies must eliminate petty internal bickering and little-but costly-fiefdoms that get in the way of serving the marketer.
Agencies and holding companies face daunting business challenges: maturing of traditional media, empowerment of tech-enabled consumers, continual demands to cut more costs for clients competing in a world market. There are questions big and small: Is there a better business model? Do agencies need all those branch offices? Can the back office move to Bangalore? There's no reason to wait for big answers. Agencies and holding companies can do plenty today to offer clients more ... for less.