Despite a windfall of advertising spending in 2017, particularly during the holiday season, the big advertising groups failed to live up to investor expectations. The proof is in the results: WPP’s share price was down 29% on the year. Publicis took a 12% hit. Interpublic saw an 11% drop while Omnicom fell 10%.
As a consequence, advertising groups have been looking mighty attractive to prospective buyers, notably the big consulting firms, some of whom have already made acquisitions or moved into marketing by building their own capability. Accenture has already stolen a march on the rest of the market by grabbing Karmarama, a creative and production agency. Deloitte has set up Deloitte Digital, but building its own practice has taken time, prompting speculation that it too will look to acquire a large agency group. Should that happen, it’s reasonable to expect others to swoop in out of fear of missing out.
Over time, the acquisition of large marketing groups by big consultants can have implications for internal marketers and procurement teams. Look no further than the results Accenture is enjoying in the aftermath of its Karmarama acquisition as to the reasons why.
Accenture has been shortcutting the sales process for its new holding company, essentially forcing Karmarama’s services onto clients, partners and companies where Accenture executives have access to the Board, have relationships with board members or hold board positions themselves. Karmarama has not had to compete in pitches, leading to a very high success rate in sales and little to no pitching costs in acquiring new clients. This has also resulted in a nice return on investment Accenture.
The Accenture example suggests that if the trend of big consultancies acquiring agencies continues, both marketing and commercial procurement departments could risk being sidelined when it comes to determining which agency partner the company will engage. And perhaps more importantly, marketers may not be able to move away from failed partner relationships too easily. Reasons to change such as “the chemistry isn’t right” are perfectly valid, but are unlikely to sway the board, which put the agency in place. Marketers will need to extensively justify why they need to break away from the consultancy deal without being implicated themselves as part of the reason for that failure – an unenviable position, to say the least.
The removal of marketing departments from the agency selection process also increases the risk for conflicts of interest. It is in the interest of any brand that the board listens to its experts in the marketing and procurement departments when entertaining a joint consultancy and marketing agency deal. However, there is a real risk that this would not happen should marketing and procurement get iced out.
In the face of this new challenge, it is incumbent on internal marketing and procurement departments to collaborate and coordinate now to ensure their voice remains heard and their respective brands can be protected. Marketers and procurement need to band together to jointly review existing behaviors and practices and take steps to remain relevant and retain their respective roles in the agency selection process. This could include:
It’s possible investors and senior staff in the big advertising groups, the ones who benefit most from a sale, are just keeping the champagne on ice for now. Should the trend of agency acquisition by large consultancies continue, marketing and procurement will be most adversely affected. It’s time to get ahead of this challenge or risk being left behind.