Publicis CEO Maurice Levy has taken to a tongue-in-cheek approach when asked about client procurement officers trying to drive down fees. He cracks that rarely has a client called and said: Bonjour, you guys are doing a heckuva job -- we want to increase what we owe you.
Maybe two or three times it's happened in Levy's 40-year career.
"Probably it was because they smoked something wrong," he quipped Wednesday.
At a Morgan Stanley event, Levy said that "the happiest clients have always cut fees" and he expects that to intensify and become "a little bit fiercer."
"There is a huge pressure on procurement," he said. "I have seen a few heads of procurement in 2009. And they've said it is not a job anymore. It's a mission. I am on a mission. I need to cut by X,Y,Z percent ... we are facing serious difficulties."
But Levy said the digital revolution offers a silver lining for the Paris-based owner of Digitas and Razorfish. Digital marketing provides some pinpoint metrics, and if agencies can prove effectiveness, they can be rewarded.
"There is a huge change in digital -- the fact that we can measure almost everything," Levy said. "What will happen in the future -- which could be very good news for people like us -- is that we may come to a solution where we will be paid not on service, but on value and on deliverables. And deliverables which are measurable ... which will be highly, highly positive for us."
Some "sophisticated" clients, he said, are moving in that direction.
Still, Levy said IPG won some General Motors business that Digitas handled by offering a price "hugely below" what Publicis put forward -- a figure that would not have allowed Digitas to break even.
On Razorfish, a digital agency that Publicis bought for $530 million from Microsoft, Levy said it is profitable at a 6% to 8% margin, which he views as "relatively poor," although the business is "very, very healthy."
He said the agency has a different dynamic than Digitas, with more focus on technology than creative. Levy said there will be some combination between the two with sharing of tools and practices, but the brands will remain separate.