INTEGRATED: INTEGRATED ISSUES; Flexibility in billing is a prerequisite for client satisfaction

By DOMINIC MILLS, campaignlive.co.uk, Friday, 08 December 1995 12:00AM

Dominic Mills reports that a single bottom line is key for a fully integrated shop

Dominic Mills reports that a single bottom line is key for a fully

integrated shop



If ever there was an issue that put money fairly and squarely in the

frame, it is integration. And it is an argument that focuses on a number

of levels. First, are integrated agencies more profitable than those

that aren’t? If so, should more agencies think of jumping on the

bandwagon?



Evidence from Companies House suggests they should at least consider it.

Two of the big multi-disciplined groups that can offer an integrated

service, Abbott Mead Vickers and D’Arcy Masius Benton and Bowles, are

among the more profitable, while regionally-based groups that have long

considered integration as the norm, also do well. Equally, independent

single agencies, such as Howell Henry Chaldecott Lury and Clark and

Taylor, score well.



Certainly, every agency in town seems to want to claim to be integrated

these days. Simon Clark, the chief executive of one of the first

integrated agencies, Clark and Taylor, says that being integrated today

is no longer a sufficient point of difference on its own. ‘Now it’s down

to how good you are, how good your creative product is and how you

operate as an integrated agency.’



That in turn raises questions of how agencies structure themselves

internally, which then leads to discussion of profit centres and the

like. After all, it is difficult for an agency to claim that it is

integrated if the various divisions that it offers to clients - above

the line, sales promotion, direct marketing, incentives, events and

public relations - operate as different profit centres. As one agency

group boss points out: ‘How can you be sure that you’re giving the

client the best advice if each of the parts of the agency or group he’s

working with has their own profit agenda?



‘Having different agency profit centres puts up barriers within the

agency and integration is all about breaking down those barriers to work

together.’



For John Farrell, the chairman of the DMB&B Group, the man whose job

this year has been to bring together the various parts of the DMB&B

empire under one roof, this point is an article of faith: ‘A single

bottom line is absolutely critical if different disciplines are to work

together successfully.



‘Equally, this can’t be a cumulative accounting exercise - it has to be

something that also has a direct impact on the personal pockets of the

key executives in each discipline.’



Farrell concedes that this may be radical, but adds: ‘It underpins a

requirement that different agencies from different disciplines come to

business marketing issues with a mutual respect.’



But Jan Hall, the chief executive of GGT Europe, is not so convinced.

‘It’s too simplistic to think in terms of a single profit centre. The

truth is that many clients still buy the individual companies, not the

bottom line. And if you take away individual profit centres, you take

away accountability and profit responsibility from those companies.



‘In the end it all depends on what the client wants. Some say they want

one price for the integrated service; others want prices that are broken

down by individual company service. You have to be flexible.’



But Farrell doesn’t just stop there, saying that fees rather than

commission must come with integration. He argues that a fee-based

structure makes it easier to break down agency barriers and encourage

the agency to think openly about the client’s marketing strategy.

‘Inevitably, commission-based remuneration will drive more broadcast

recommendations,’ he warns.



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How integrated agencies performed

------------------------------------------------------------------------

Name                  Operating       Operating     Output     Operating

                      profit          profit        per head   profit

                      (pounds         margin        (gross     per head

                      000)            %(i)          income     (pounds)

                                                    (pounds)

Muti-disciplined groups not necessarily offering an integrated service

Abbott Mead Vickers    7,617          15.61         86,847     13,553

DMB&B Holdings         5,579          11.99         71,575      8,583

Gold Greenlees Trott   5,403           9.41         63,171      5,944

Diversified Ag         3,674           5.9          18,960      1,118

Svcs (ii)                                           (iii)

Fallowbush*            1,773          12.23         87,836     10,745

Agencies offering an integrated service (in London area)

Howell Henry           1,171          24.97         82,281     20,544

Arc International        357          10.17         68,863      7,000

Clark and Taylor         211           8.15         50,745      4,137

Kevin Morley             -90          -1.38         97,597     -1,343

Regional agencies with clients generally requiring an integrated service

Cogent Elliott Group     861          14.19         50,975      7,235

Brahm                    617          15.45         44,876      6,933

Randotte (No 204) ^      564          17.86         39,975      7,139

Quadrant Ad & Mktg       478          17.4          47,362      8,241

Golley Slater Group      354           6.76         40,285      2,723

(i) As percentage of gross income; (ii) Diversified Agency Services,

Omnicom-owned group of below-the-line subsidiaries; (iii) number of

employees inflated by part-timers; *includes BST-BDDP, Tequila, Lynne

Franks, Financial Dynamics; ^parent company of Faulds Advertising,

Edinburgh

Source: Willott Kingston Smith from Companies House filings

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This article was first published on campaignlive.co.uk

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