Tag Archives: efficiency

The agency network model is designed for investors, not clients.

Almost every agency pitch involves some bragging points about capabilities in which a list of sister companies demonstrates the agency’s ability to provide expertise in every marketing function known to civilization.  Inevitably, it is positioned as a way for clients to tap into whatever services they need while maintaining an integrated brand approach.

The Omnicom/WPP/Interpublic/Publicis model of accumulating multiple marketing agencies across different fields has little to do with integrated marketing and everything to do with market share. As different marketing fields developed over time, agencies saw revenue going out the door. First it was promotions, then it was direct marketing, then interactive, then social media,  and so on.  Publicly-held holding companies rightly decided that if you can’t  beat them, buy them.  Revenues must grow to grow stockholder value, so why not capture the revenue that is going elsewhere? Holding companies can capture a greater share of their clients’ total marketing spend if they have a broad range of companies to funnel work to.

But when a client works with a “sister company” within an agency network, there is no inherent financial or strategic efficiency.  For example, when a traditional agency brings in an interactive agency in their network, there is no staffing efficiency. The interactive agency doesn’t put less people on the account because they are working with another agency in the network.  Revenues are not shared between network companies, so there is no incentive for any agency to suggest that a client would get a better return by shifting money outside  of what that specific agency does.

As for strategic integration, try asking a few agencies within the same network to share their brand positioning models. Not only are the models rarely the same, even the vocabulary is different.  What one calls a Brand Position, another calls a Brand Proposition, and another calls a Brand Promise.  It’s unlikely a client will get a higher level of strategic integration among companies that don’t even share a common brand language. There is an advantage in working with companies that are used to working together. But you don’t have to be part of the same corporation to work together, and being in the same corporation doesn’t mean you have worked together. Any agency veteran will tell you they often meet their “integrated agency partners” for the first time a day or two before a pitch.

There are two potential advantages for a client working with a holding company network of agencies. There may be some comfort for a client in having what some call “one point of contact” and others call “one throat to choke.”  There also may be some financial benefit for very large marketers with big budgets in several channels.  In this case, a holding company may be willing to cut their overall margins across several agencies in order to capture more total revenue. But that is a by-product of clout, not of efficiency.

Until holding companies really work to integrate their companies financially and strategically, marketers would be well-served to find the fit that is best for them regardless of any shared corporate structure.