WPP’s newly-ensconced UK “country manager” Karen Blackett – who made her name at MediaCom – has been telling The Drum that she sees small to medium-sized businesses (SMEs) as an important and overlooked market for companies like hers. SME defined as a business valued at between £2-15m.
But she also acknowledges that charging is a problem: “We’re in the business of growth, and our remuneration should be about that growth. There’s a different way of working which isn’t about time. It’s about outcome and growth.”
Which, presumably, means some sort of commission payment, on sales or profit or both. Agencies used to charge commission on media spend and some media agencies still do, but that came from the media owner. In some cases it still does in the form of media rebates, leading to stories that some of the big holding companies have had to pay back millions in undisclosed media rebates to clients.
Anyway, Blackett (below) may be on to something here. Smaller companies are obviously going to be fearful of taking on big agencies’ hourly charges but, of course, they’re not the only ones. Big clients are revolting too, most recently with P&G saying it wants to cut agency fees by a further $400m annually along with a reduction in the number it uses.
This is usually depicted as a criticism of the agency sector – as it was when Unilever said much the same thing a while back – but actually it’s more a criticism of the likes of P&G. WTF did they think they were doing employing more agencies than needed and paying them too much? It’s not rocket science. The danger for P&G and Unilever is that they’ll end up paying less for worse advertising. Unilever is currently busily sourcing everything it can through on-site agency network Oliver, leading to ever louder squeals from its other agencies. Oliver is a formidable business but it’s yet to prove its creative credentials.
It won’t be lost on Blackett that if WPP comes up with performance related flexi-deals for smaller clients then bigger ones are going to say yes please too. And there’s clearly a risk in that. If a big campaign bombs does WPP work for nothing? Or even give money back? It’s the stuff of holding company CEO/CFO nightmares.
And it’s not just about payment, it’s what you’re actually paying for.
An agency’s most sellable property is creative talent – as wise owls Michael Farmer and Bob Hoffman wearily remind us from time to time – but they invest in anything but. Adam&eve execs tell of winning a big overseas digital pitch for DDB by doing the digital stuff and then finishing with a John Lewis commercial. All of a sudden the people in the room woke up.
Blackett is universally regarded as a Good Thing but is she in danger of re-arranging the deck chairs?