Arun Sudhaman 23 Jun 2017 // 3:28PM GMT
CANNES — WPP CEO Sir Martin Sorrell hit the headlines at Cannes this week when he suggested that his giant holding company will rethink its involvement in the "costly" advertising festival. Coming shortly after Publicis CEO Arthur Sadoun announced a pullout from award shows, Sorrell's high-profile comments preceded a drop in the share price of Cannes Lions owner Ascential, and the announcement of an advisory committee to rethink the Festival's future.
In a wide-ranging interview yesterday with the Holmes Report, Sorrell elaborated on his concerns about the Festival, at a time when clients are expecting agencies to "do more with less." He also discussed the progress of his PR firms, the Trump era, the agency collaboration challenge and lessons from emerging market brands.
You said in the latest trading update that public relations and public affairs continue to be WPP's strongest sector, as in the first quarter of this year. And in the past you have mentioned data, content and creativity as the three drivers of that. Is that still the case?
Well we’ve talked about four things. We’ve talked about horizontality, fast-growth markets, digital and data, and around data it’s been technology, data and content. I would say if you go through them, horizontality plays a part, because I think PR agencies — when we’ve won business through integrated pitches or whatever — I think they’ve made a difference. So that’s one.
Fast-growth markets, obviously if the markets are quicker, particularly the BRICS and Next 11 — I mean public relations and public affairs are probably the most developed in the mature markets and therefore, by definition, the growth rates tend to be stronger in the markets that are developing. Digital, obviously they have been impacted by digital and data. And then if you add on technology and content yes, so I think most of those boxes if you like, the public relations, the public affairs area would tick. I mean they’ve benefited from increased use of data, they’ve benefited from increased use of content. So, broadly, yes.
And when we talked a year ago you said that the consumer PR side was more vibrant, along with pharmaceuticals.
I think that’s probably true. Yes. I think consumer and pharmaceuticals tends to be. Obviously deals, crises, where pricing tends to be a little bit more flexible...I’m trying to find that phrase that they use. Is it dynamic pricing? That’s what they call it, more dynamic pricing.
Isn’t it surge pricing?
Well surge pricing is I think what Uber talk about. Dynamic is a politer way of putting it. Dynamic or surge pricing is what we see here at Cannes.
So, you wouldn't characterise corporate and financial as underperforming?
No, they’ve done well. Finsbury, Hering Schuppener, Glover Park have all done well.
Is that all driven by deals per se?
It's driven by corporate communications, to some extent deals, and crisis.
Have you seen an impact on your revenues from the uncertain political and economic climate? We haven’t seen, for example, 'Trumponomics' really deliver much.
When I interviewed [News Corp CEO] Robert Thompson he was quite bullish.
So were you I think?
If and when it’s implemented.
Have you changed your forecast on Trump?
Well Robert [Thomson] was saying how important this congressional election was and the fact the Republicans won takes the heat off, and therefore it may be much more important than people think. As a result of that you might get in that amount of tax changes.
OK. You talked about horizontality and you mentioned that as something that’s benefiting PR firms. Do you find that clients are increasingly wanting to buy their public relations alongside or with their advertising, media and so forth.
It varies and I think generally they are looking for better work and more efficiency so probably the answer is yes. But you know it does vary. For every case that you can find where people wanted more integration you could probably find a case where you can make an argument for the opposite. But I think, overall, that people are looking for greater and greater integration of their communications. They want the best people working on their business. They like them to co-locate or to integrate more effectively.
And obviously we’ve seen Ogilvy integrating its brands more, or at least removing the sub-brands.
Well I think what John [Seifert] found was that they had a multiplicity of brands and he wanted to bring the Ogilvy brand back as one Ogilvy. We've got a one Kantar doing the same, we’re doing the same with WPP Health and Wellness for the first time — using WPP as a brand name for our healthcare businesses. So that approach of simplification if you want, which I think is important, is becoming more and more important.
And when I interviewed John Seifert he said it was a response to clients. With that in mind could you see perhaps a Cohn & Wolfe, for example, working more closely with a Y&R?
That would be up to [Cohn & Wolfe CEO] Donna Imperato at the end of the day to figure out. If she thinks it’s beneficial to her business. But that’s one level. Another level, if a client says I’d like to integrate my advertising and public relations, then Donna — as an example — could say, 'well I can do that' and if she can’t achieve it, fine, but more likely she couldn’t. So she has to link up and most of our big pieces of business don’t come in a pure form, if I can call it that, or one dimensional, they are becoming multi-dimensional forms and are linked, integrated.
So they require collaboration.
The clients want the best people working at their business.
And how hard is it to get good people, the best people, to collaborate?
I often say the better the people the more difficult it is to get them to cooperate. Good people find it very difficult but there are some exceptional people who do. But maybe good people are insecure and therefore feel they don’t want to depend on [others] or maybe even share the credit. But, increasingly that’s becoming more and more important — team playing.
We’ve got a session with Bob Kraft tomorrow and when you think about what he’s done with the Patriots – when he took over the Patriots they were nowhere, they hadn’t won anything for many, many years and it almost instantly changed the dynamic and now of course they are phenomenally successful, five Superbowls etc. And if you ask him why he says because everybody plays as a team. When he talks about big companies, quite interestingly, he talks about how they pit functions against one another or regions against one another.
How do you encourage that kind of collaboration?
Well I think we’ve always been market-driven. We do try and encourage it and we have two horizontal integrators. One is at a country level and the other is at a client level. We’ve got 50 or so now and then we cover about half the countries that we operate in, with country managers or regional managers. So you have the verticals and then you’ve got the horizontals. But the best way of encouraging it, I mean our best examples of integration are where the client makes it quite clear that he or she wants it. And that this integration or whatever the opposite of horizontality is, it will not be tolerated.
Just looking at the acquisition market, are you seeing any particular trends as they relate to acquisitions for your public relations agencies? I think the last time we spoke you mentioned it has tended to favour social media.
Yes I think that’s still the case. Digital, maybe a little bit of data although that’s few and far between. But I think yes, the emphasis being more content-driven, social content-driven.
You have also said in the past that you think the PR industry should just be a bit more confident about what it does and I wondered whether you still feel that is the case. Have you noticed a shift at all?
Oh yes, but I think the emphasis on digital and data has made them more confident because they can see that they are progressing well. So, yes I think that has helped, and as they become more integrated or generalist agencies they have felt that they could cope, rightly or wrongly, they felt they could cope more easily with what was being demanded of them.
Do you think their improved performance in Cannes helps?
I don’t think it can hurt. It’s either neutral or positive. That’s why I disagree with what Publicis have done. I don’t think you gain anything by boycotting. It’s rather like Havas didn’t gain anything by boycotting YouTube in the UK. If you’ve got a problem of that nature try and work with whoever it is to improve it. So if we think Cannes is not the right place or not doing it in the right way then you should work with Ascential or whoever it is to improve it and get it right and then move on.
I think Publicis is probably coming here every year and ending up third or fourth or whatever it is. And they’ve unified the brand to a large degree so they should benefit from that, but they’re not getting the benefit. My sense is it was done as a cost reduction move, at least for year.
I mean there are arguments about Cannes and whether creative awards help sell. I notice the organisers here say there’s a McKinsey study that shows that creative awards help sales — they finally discovered that. Well we’ve known that for about 25, 30 years.
You'd say that's the value of long term branding.
Yes, but that’s not what people are objecting to, they’re objecting to being gouged or ripped off and that they don’t like. But I think to answer your question I think yes, I think it helps the PR industry and it was nice to see the PR agencies winning PR awards, rather than advertising agencies submitting pieces of work with a PR component that gets them into the PR category.
What we have seen this year is now there’s a PR credit and there’s idea creation credit. So it almost feels like they have separated PR from idea creation. How important do you think it is for your PR firms to actually be creating the ideas?
Well I think there’s always controversy. Whenever one of our PR agencies wins an award and it’s a mixed award they will claim, if they didn’t get sufficient credit, they will claim more credit. We’ve had instances where the PR input of a campaign hasn’t even been acknowledged to the agency. And obviously that is wrong. So when you are splitting the hairs it’s a bit like success has many fathers and failure has none. So if there’s a good idea some people will claim it and it might not be the right person who’s claiming it.
You were pretty unequivocal in terms of your views on Cannes yesterday at the FT interview. Do you plan to work with them or talk to them about this?
Well they’ve not reached out at all other than we have an appointment arranged on Saturday. We’ll see what comes. We’ll see. My view is that they should look at how the festival is run and operated and its scope. I have to say I like the enhanced scope covering healthcare and PR — there was a time when we didn’t cover PR at all or data, creativity etc...so I like that. Maybe out of self-interest but I do like it.
The question in my mind is whether this is the right place, whether it’s structured right and it’s too expensive at a time when we are having to deal as an industry with greater effectiveness and efficiency which means better work. [Unilever CMO] Keith Weed and his interview, you know, more for less. That was the headline. So Cannes should take that motto: more for less. Not less for more.
What do you think the marketing services world can learn from the innovation that you’ve seen from Chinese brands?
Well you know, whether you just say Chinese brands but it could be Indian brands, it could be Brazilian brands, it could be Russian brands, in those countries they’ve got very broad populations. These populations have been exposed to technological change, whether it be laptops, mobiles, smartphones. So, I think what you’re seeing is these are companies that because of the technological disruption, the pace of change in China, in Japan is enormous.
There was an organic shampoo for pregnant women launched in China and it adds sales of RMB7.5bn within 18 months. They move very, very quickly so what you are seeing is smaller brands that are marketed in different ways. Maybe don’t use traditional media at all, use social media, use search, online stuff and then it develops in that way. So totally different approaches. As multinationals have come under pressure, they have pushed zero-based budgeting or in response to activist investors, have been very short term in their focus. [Western MNCs] don't differentiate, necessarily, between markets and so if there’s a plea for cost reduction it affects even the growth markets, and in the growth markets you have the local companies.
Who have no such pressures.
That’s right. And if they are Chinese may take a longer term view. I asked Robert Thomson what he thought about Nikkei and the Financial Times. Basically, they take a longer-term view.
So, you’ve got zero-based budgeting, activist investors, technological disruption, driving short-term thinking.
The technological disruption is the one that's long term — it has short term effects obviously, but the other two are much more short term in nature.
And they drive short term thinking on the client side. So, in that climate where clients are looking for more with less, what is the best way to demonstrate the value of marketing and communications
Well innovation and branding is key but so is integration. I think it comes back to that point. Differentiation. How do you differentiate your offer sufficiently so that it makes a difference when you pitch for business or try and develop a relationship with a client. And, stepping back from it, stressing the importance of innovation and branding. Without that you become a commodity or you can only charge or price at commodity prices.
But it’s really to emphasise the importance of innovation and branding and we know from our brand survey that the top 100 brands are outperforming the S&P 500 by 60% over 12 years and there’s no active fund manager who could point to that performance.
And you have said you are seeing commodity prices in some of the big reviews of marketing and communications?
What we’re seeing is people being very aggressive [in their pricing] because they want the Holmes Report to report [the win] — so you're the problem.
Surely it’s not our fault.
It’s not sustainable.