Organic Growth Eludes Ad Agency Holding Companies

existing clients 2

Recently Omnicom, Publicis and IPG all reported disappointing results for the first half of 2009. Each one’ revealed that significant declines in organic revenues exacerbated the situation. Could this issue have been predicted and minimized? I think so.

The amount of time and effort that is spent on existing client relationships by agencies pales into insignificance when contrasted against their new business efforts. During my career, I have spent time working at agencies within three of the top five holding companies, and I can tell you that I never came across a Key Client/Account Plan.

Yes, there were key client leaders and dedicated client teams etc. There were also client strategic plans, media plans, communications plans etc. But never any Key Client Plans. In fact, once the client was “on-boarded”, the agency soon moved from the proactive courtship mode to reactive do only what needs to be done mode. Is it any wonder that over 50% of current agency/client relationships don’t last more than 2 years?

To be realistic, there is no doubt at all that every downturn in the economy negatively impacts the advertising and marketing fraternity. Client budgets get cut, decision timelines grow longer, and certain initiatives are delayed or cancelled. But the real impact does not necessarily need to be as bad as is reflected in these numbers: 

Omnicom reported an 11% drop in organic revenue. Publicis reported an 8.6% decline. IPG reported that viewed in organic terms, revenue plummeted 14.5% during the second quarter. IPG went on to state that they were “actually in a negative position in net new business compared to the year-earlier quarter”. Even more surprising is that most of them are predicting that the full year drop in organic revenue will be comparable to the year to date decline.

As I read through each of the reports, I looked for editorial commentary about existing clients and what was being done to keep them in the first instance and curb the revenue decline in the second. There is no mention of it. Michael Roth, IPG’s CEO, did say and I quote, “IPG execs at the operating units continue to be maniacally focused on cost controls.” While cost controls are imperative while in survival mode, service levels and key client satisfaction is even more important.

In my opinion, they may not have suffered such large declines in organic revenue if those same execs also had a “maniacal focus” on their key clients from the start of the relationship. In the end, it all goes back to my five pillar agency growth strategy, of which minimizing client churn and driving organic revenue growth are the first two pillars.

 

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