There was a fascinating series of old vs. new school quotes in a recent WSJ article titled, PwC Acquires Design Agency Pond, Furthering Advertising Push. To me this underscores the’ vulnerability of traditional agencies even as they try to be “digital marketers” and “change agents” for their clients.
The problem, in my view, is that agencies have always been systemically misaligned with their clients’ interests. Client spends more on marketing, agency gets paid more. Regardless of results. So the agency’s incentive is for the client to always spend more.
Which, according to PwC executive’s comment below about CEOs’ desire to reduce marketing spend, doesn’t bode well as we enter a new era of scrutiny on marketing costs and ROI.
Here’s the exchange:
On WPP’s full-year earnings call in March, its chief executive, Martin Sorrell, said there had only been a couple of occasions when his agencies had been up against consultancies for substantial pieces of business. “I don’t think [the threat of consulting firms is] that significant,” Mr. Sorrell said.
Tom Puthiyamadam, global digital leader at PwC, said he agrees with Mr. Sorrell. “You know why? He’s in the wrong pitches,” Mr. Puthiyamadam said. “He’s actually solving the wrong problem. He’s solving yesterday’s problem on driving more leads, through better campaigns and better creative. Meanwhile, the CEO, his reaction is: ‘I want to take down my marketing spend, not increase it’.”
Mr. Puthiyamadam says PwC’s digital division has won plaudits from clients for looking to solve their fundamental business problems — such as customer support or logistics and distribution — in addition to focusing on marketing issues.
Mr. Puthiyamadam said PwC had only seen a “handful” of agencies compete in that space.
See the full article at https://www.wsj.com/articles/pwc-acquires-design-agency-pond-furthering-advertising-push-1496213257