More Eggs In Fewer Baskets

NEW YORK Johnson & Johnson, Visa, Pfizer and Hewlett-Packard were among the mega advertisers that sought to consolidate significant swaths of business at fewer shops this year -- a continuation of a trend that began in 2002, when Bank of America parked all of its marketing services duties at units of Interpublic Group.Since then, HSBC has consolidated its global creative and media duties within WPP Group, BofA has shifted much of its account to Omnicom Group shops and Dell has hired WPP to create an agency to handle its global marketing services duties. Two of this year's consolidation drills -- for creative duties on the prescription drug business at Pfizer and J&J -- focused on the U.S. market, while the other two -- for HP's business solutions group and Visa's creative duties -- were global. HP's review is ongoing, with final presentations scheduled for later this month.Several factors are driving such contests, including a desire among clients for brand message consistency and a need to operate more efficiently, according to sources. Many clients, of course, are also looking to cut costs, and often turn to holding companies to put together agency teams or create new units to service their business. Sources expect the downturn in the economy to fuel more such activity in 2009."The wave is continuing," said one source. "It's a multi-year kind of thing." Added another: "We'll see a minimum of a half-dozen of these major consolidations next year."The economy is not the only factor spurring clients to act. A lot of these consolidations occurred while the market was expanding, not contracting. That said, the cost of employing scores of agencies has always been a key driver, particularly when client procurement executives are involved. Dell, for example, employed some 800 agencies around the world before consolidating with WPP, which built a new agency, Enfatico, to handle the computer giant's global account."Even before the current economic environment, people were looking to drive down costs and be efficient," said a source. Among other things, the source added, "clients are realizing they don't need multiple distribution networks."Visa, for one, employed some half-dozen networks around the world -- including Omnicom's BBDO in the Asia-Pacific region and TBWA in the U.S., WPP's Grey in Eastern and Central Europe, Africa and the Middle East and Publicis Groupe's Leo Burnett in Canada and Latin America -- before consolidating at TBWA in September.Some clients, aided by new technology, are also becoming more centralized internally, which in turn prompts them to seek similar models from outside service providers. In short, they want a marketing model that mirrors their own, in terms of efficiency, accountability and results, said sources.Clients gravitate toward holding company solutions in part because they have the clout, particularly when offering, say, $100 million in account revenue (see chart). Additionally, some clients believe they're more apt to get "best-in-breed" solutions than if they approach agency networks, whose through-the-line capabilities may be patchy, particularly on a worldwide basis, said sources. "Each holding company offers sufficient resources and types of resources," a source said. "There's not much sacrifice if you go to a holding company."The only remaining question now is, who will be next?

Brand Marketing

More Eggs In Fewer Baskets

Andrew McMains

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Andrew McMains