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
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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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