Agency A-List 2008

Lowe Lives: How an Agency Left Deathbed for Profits

Ad Age Names the Interpublic Network Comeback Agency of the Year

By Published on .

When Steve Gatfield was named CEO of Lowe Worldwide in March 2006, there was real doubt about the network's survival. "I had a charter from [parent company] Interpublic to determine whether or not Lowe as a business could prosper," Mr. Gatfield said. By the end of 2008, the death spiral was broken as the network returned to profitability and gained new confidence around the world.

Mark Wnek, Lowe
Illustration: Robin Eley

Mark Wnek, Lowe New York's chairman, has been a key part of the agency network's turnaround.

Even if the network's London office is still a mess, New York has turned around under the leadership of Mark Wnek, and Lowe's hubs in emerging markets are booming. It became clear the turnaround had taken root when Interpublic announced that Lowe turned a profit in 2008, helped by new business from Unilever, Johnson & Johnson, Nestlé, Thai Airways, the Spanish bank Caixa and China Mobile, which, with other business, adds up to about $650 million in billings, according to Mr. Gatfield. The network is already well ahead of its three-year plan, which runs until 2010.

In its New York office, Lowe finally has a competitive agency in the U.S. after years of being an industry joke here. The New York office, in the words of its chairman, Mr. Wnek, "bounced back" in 2008. It added work from an impressive, diverse list of new clients last year,including PricewaterhouseCoopers, Outback, Snuggle, Aruba Tourism and Johnson & Johnson's pharmaceutical arm. It also moved into new digs in Manhattan's SoHo neighborhood.

"The fire and belief is back at Lowe," said Alexander Darwazeh, who awarded Electrolux's European business to Lowe in June. "They have always served as an extension of brand management, and there is a real culture of ownership, accountability and pride in their work. Even the senior guys have two feet in the business at all times."

The new Lowe now has a much flatter structure than the old one. It's been cut back from 80 offices to about 30. Of those, 10 are "hubs" capable of leading global campaigns.

Paring back
"Lowe was structured like bigger networks," said Lowe Worldwide Chairman Tony Wright, with global management teams, wine cellars, corner offices and assistants with assistants. "It was stressful, but we took out an entire layer of management."

Some of the savings from having a leaner network have been reinvested in the form of channel-planning tools, digital talent, and project-management and collaborative software. And with parent Interpublic's fortunes improving in 2007, Lowe had greater access to investment capital and was able to acquire control of its offices in India (helped by relaxation of foreign-ownership rules). There have also been acquisitions in Germany, Brazil and Mexico and restructuring in China, although 75% of the agency's growth in 2008 has been organic. Last year Lowe was able to build up diversified services, acquiring Huge (e-business and e-commerce) in the U.S. and One (customer-relationship management and activation) in France.

It helps in no small way that the Lowe network, whatever years of tough times has done to its rep, has votes of confidence from some of the biggest marketers in the world. "Lowe is our biggest agency, and it's our biggest agency on merit," said Unilever Chief Marketing Officer Simon Clift. "There's no warring between offices, and it doesn't matter to us where they draw their resources. Good work is not culturally specific unless there is a culturally specific brief. Lowe is strong where we have big business: Developing and emerging markets are half our turnover and three quarters of our profit."

Lowe, Bangkok, is Thailand's biggest agency. India (where Unilever accounts for 25% of business) is Lowe's biggest agency, with a network of offices in five cities. Latin America has always been strong creative territory for Lowe, and the January 2008 opening of Lola (short for Lowe Latina) in Madrid was a prime example of Lowe's mission to "Think culturally, not geographically" as it established an agency to service the Spanish-speaking world. But Lola's chairman, Fernando Vega Olmos, departed in November, to JWT.

Lowe may have moved away from the Anglo-American agency model, but it still needs strength in those markets. "New York is on a good trajectory," Mr. Wright said. "London is not doing well at a local level, although it is still important as a worldwide center. The cultural issues that dogged the original merger have never been resolved. We have the worst, most advanced case of the disease that every multinational agency in London has, in a market which likes individual entrepreneurs and start-ups."

In 2008, London split with InBev's Stella Artois after 26 years and lost much of its domestic business, including department-store chain John Lewis, as well as Innocent Drinks and Twinings teas. Lowe also lost the $150 million Nokia N-Series account run from London.

London's bad year seemed to mark the nadir of a nasty run that began in 2006, when founder Frank Lowe left to set up his own agency and took with him Lowe's biggest account. Plans are afoot to re-engineer the London agency and build a culture not rooted in the '80s glory days of Frank Lowe.

With Mr. Gatfield's contract finishing in the spring, the focus is on finding a successor with a truly international pedigree to build on his work. Mr. Wright said he expects to make an announcement early in 2009.

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