Ever since agencies went public and were forced to run their businesses with an eagle-eye on the bottom line, the agencies' role
|Rance Crain, editor in chief, 'Advertising Age'
Too busy pleasing investors
To make their numbers and earn the respect of investors, agencies were forced to fatten their margins by eliminating layers of people servicing their accounts. And often the head guys at the newly minted public agencies were so busy cutting costs and trying to keep their stock prices up that they had precious little time to maintain close ties to key client management. (Of course, top people at client companies were experiencing similar problems of their own.)
Back in the mid-'80s, when agencies were in the throes of consolidation -- an inevitable consequence of agencies going public because they had to keep growing at any cost -- we noted in an editorial that "The 1980s have been a whirlwind, marked by a parade of mergers and acquisitions among clients and agencies, changes that have affected the careers of thousands of people -- positively and negatively -- at all levels.
"Grand strategies don't always work as envisioned, of course, and their architects either adjust or see their empires crumble. ... As the inevitable lay-offs occur, what will be the impact on the agency business as a whole? When giant agencies like those under the Saatchi umbrella or the JWT Group struggle, can the business go on expecting to attract and keep the talented people it needs to ensure its future?"
After we ran our editorial, I received a hand-written
|'Grand strategies don't always work as envisioned,' Bob Goldstein warned us.
Those prophetic words were Bob's last to me. He died a couple of months later in a white-water rafting accident.
The hard line that Bob mentioned happened in the fall of 1986, when P&G switched $86 million in billings from Saatchi to Procter agencies untouched by mergers and acquisitions. One of the big winners was Grey Advertising.
Now let's look at today's auction of Grey from the perspective of the mid-'80s. How do you think P&G is taking the possible sale of Grey to WPP, the holding company that counts Unilever as one of its major clients?
When P&G dropped Saatchi in 1986, we quoted a spokesman as saying that P&G doesn't believe holding companies are a way of avoiding conflicts. Does Martin Sorrell really believe things have changed when it comes to P&G and its chief rival?
Cutting back client amenities
So here's the Catch-22 the big agencies find themselves ensnarled in: Grey won the loyalty of longtime clients like P&G because of its superior (and costly to the agency) account service. But any buyer of Grey will make its first order of business fattening up margins by cutting back on such amenities, thereby diminishing the loyalty of clients and further driving the agency to supplier status.
Is this "the shape of the world that might come" Bob Goldstein envisioned almost 20 years ago?