JAN 11, 2024

Big Agency Consolidation Doesn’t Serve the Marketing Majority


The marketing majority needs to re-examine agency models in the consolidation era.

Only 11% of marketers believe their agency model is fit for the future, while the rest crave simplification, specialization and integration, according to a World Federation of Advertising report from October

Holding companies are answering with consolidation. It’s striking that several announced major reorganizations right around the report’s release. 

Most notably, WPP merged Wunderman Thompson and VMLY&R and put all GroupM agencies on a single platform, to “simplify” the business. Similarly, IPG consolidated its performance and technology divisions, while Dentsu continues its winnowing down to six agencies. And the trend is gaining speed.

The well-promoted reasons for this consolidation amount to the same pitch: We’re getting our premier skill sets unified so we can deliver an integrated solution more easily.

The essential question is: who benefits?

Shareholders win with the cost-cutting inherent in consolidation. And the top 100 advertisers spend enough money for holding companies to put their best players on the field at the same time when and where those clients need them.

That’s not true for the majority of clients – let’s call them the marketing majority – which operate with middle-market budgets of $10 million to $100 million. If I’m running a holding company agency with more than $1 billion in billings, I can occasionally send my stars to a strategy meeting for a $30 million account – but they won’t be making the real-time plays that determine that brand’s performance.

The marketing majority needs to re-examine agency models in the consolidation era.

Prioritize fit

Agency greatness isn’t an arbitrary or universal concept. It’s determined by the right fit. Yet just like golfers who forgo getting fitted for equipment – 99% by one golf pro’s estimation – many clients simply buy the big names that dominate the headlines. They show the board their new agency’s press, scale and capabilities menu and proclaim they’ve bought the best. Later, they can’t answer why “the best” didn’t put them ahead in the marketplace.

Two things really matter in assessing fit: Whether an agency has demonstrable success with clients in your category, situation and size, and whether they operate like you do. Entrepreneurial companies work and win more often with entrepreneurial agencies.

Self-reflect regularly

Who are you and what are you up against? Are you a category leader defending share with complex internal systems – wherein an institutional approach built for incrementalism and a board that demands the promise of scale may be adequate? Or do you need to outthink and outmaneuver formidable competitors in dynamic marketplaces?

Prioritize access to people, not platforms

Upgrading the backend of the business – systems and technologies – can streamline advertising. But all the magic happens on the front end, where people with complementary skills and shared values create breakthrough work. The question isn’t whether a consolidated holding company agency has great people; it’s whether you can get the best people for your situation working on your account day-to-day and aligned on one agenda: your growth.

Calculate the real media math

It’s undeniable that holding companies get the biggest upfront media discounts, so media clout lures many smaller advertisers seeking an edge. The question is whether you qualify to take advantage of the preferred rates, which go to the clients with the biggest budgets. In biddable media, which is becoming a principal investment, performance depends more on agility, accountability, creativity and team optimization.

Redefine simplicity

The marketing majority need special attention. Their challenges are more complex and they lack the internal resources to play integrator. Coordinating specialists powerfully comes down to team alignment and cohesion, not corporate ownership. When indies combine on an account, they’re free to put aside competing P&Ls, whereas financial incentives and organizational mandates for collaboration tend to exaggerate inherent conflicts within holding companies.  

Independent agencies are banding together more often and more formally to meet clients’ individual needs for sophistication and integration at scale. As they do more, they set up a dividing line between two models – consolidation that emphasizes process to reward shareholders, and collaboration that prioritizes people to serve stakeholders.

The world’s biggest agencies will keep knocking on the marketing majority’s doors because they need volume – the biggest advertisers represent only a baseline – but their systems aren’t set up to deliver to those marketers the best of what they have. 

Many in the marketing majority may come to realize that they can get the coverage, creativity and collaboration they need more reliably from independent agencies working in concert.

First published in Campaign, January 11, 2024. Read original article here

Written By:
John Harris