The Johnson & Johnson pitch is shaping up to be an interesting one. With $3 billion of billings at stake, Interpublic agencies hold much of the business, and really can't afford another big account loss. Ambitious timescale targets have been set and the client wants to make an appointment by the end of June.
And maybe this isn't just to have the process concluded before the summer vacation season kicks off in the US. Apparently, J&J has had the management consultancy McKinsey all over its business since the $16.6 billion acquisition of Pfizer's consumer business last year. J&J is under pressure to deliver $600 million cost savings from the deal and deliver them quickly. Media has been identified as a key area of focus.
The process hasn't been a smooth one for everyone, though. Last week, WPP's MindShare pulled out of the process, leaving IPG's Initiative and Universal McCann to compete against Omnicom's OMD for the business. Conflict may have played a big role in this (what with MindShare being a big Unilever agency and sister network MediaCom holding much of the Procter & Gamble business). However, WPP sources suggest MindShare was also concerned with the emphasis on cost savings and that driving efficiencies would lead to networks competing to win the business on a margin of next to nothing.
This seems to be a recurring theme: that clients are driven simply by cost and not necessarily looking for the best media thinking. Nick Emery, the chief strategy officer at Group M, wrote recently in an article in Campaign: "The old media model of buying cheap space for clients who then fire you after three years for someone else's cheap space is not sustainable."
Yet there is some evidence that the more progressive clients are not just running global new-business pitches to hit savings targets.
1. At least two other global reviews are up and running. Compared with J&J, however, Visa and Estee Lauder are relative minnows in terms of media spend. Visa, which spends around $400 million, is exploring the benefits of consolidation. Its account is currently split between OMD - for North America and Asia - and WPP's Mediaedge:cia for Europe. Estee Lauder has apparently similar motives - its media arrangements are run on a market-by-market basis and one possibility is a move of the $140 million business into a global network.
2. The recent crop of pitches are welcome for new-business directors, even if they are being driven by reasons of efficiency. The global new-business scene has been relatively quiet since the Fox pitch was concluded in January with Publicis' ZenithOptimedia capturing the US business and Aegis' Vizeum landing its largest account to date with the European Fox business.
3. The glut of international pitches held for savings reasons reached its peak with the European Unilever pitch in 2004 (held as part of a rolling global process that had also seen reviews in Asia and the US). The process, which resulted in the EUR1 billion account moving from Initiative to MindShare, was dubbed "Project 40" because Unilever wanted to deliver EUR40 million cost savings as a result.
4. Last year's Adidas/Reebok consolidation provided a clue as to the future direction of international media pitches. Digital media had been on the agenda for some time, but it emerged as a vital, clinching factor in this pitch with the input of Aegis' digital arm Isobar proving instrumental in Carat's capturing of the business.
5. The changing nature of the communications and media market, with clients considering the impact of digital and search marketing on their business, is an important factor driving global pitches. This was also a factor in the Fox pitch. As Nikki Mendonca, the business development director at Omnicom Media Group, says: "With the rise of digital and the power of search we are seeing clients asking, 'Are we really doing what we should be doing as the landscape has changed so much? Are we playing the right game?'"
6. It is becoming increasingly important for media networks to offer strength in emerging media and, especially, in new forms of advertising-funded content. Agencies demonstrating a range of content solutions now have a competitive advantage, though they now face the issue of winning fair remuneration for it.
WHAT IT MEANS FOR ...
- Agencies are improving and streamlining their services in new and emerging markets as clients increasingly demand consistency across the globe. As a consequence, strong operations in Asia and Central and Eastern Europe are becoming more vital.
- Client-procurement departments tend to play a big role in international media pitches. Dealing with this is central to winning the large pitches.
- The global new-business process does have significant upsides for competing agencies. As Nikki Mendonca at Omnicom Media Group says: "Every single time you pitch globally, you really put your organisation through it - it's important to be in regular pitch mode as the quality of your product is sustained."
- While many pitches are driven by the need for efficiencies, clients are also wanting insights into emerging media and content. Agencies that evolve a strong presence in these areas are well placed.
- Savings and efficiencies as business becomes increasingly global. Many global companies now have consistent brands across markets, so arguably it makes sense to introduce consistency in a media approach by reviewing media globally or by region.
- A chance to access the best media brains every three or four years to get a view of the changing communications market.