Companies that invest in ‘brand’ will succeed: WPP’s Martin Sorrell
In the face of the China crisis, troubled waters in various other markets including Brazil and Russia, the dialling down of optimism in India, amongst all other challenges of the global economy, WPP’s Sir Martin Sorrell advises brands to stay the course. The pace of change in the media landscape in the last five years has been faster than what the industry witnessed in the past five decades, much of which can be contributed to the impact of technology, emergence of digital media and newer markets.
“In 2000, around 10 per cent of our business revenue came from emerging markets and about nothing from digital media. Today, nearly half of our revenues are coming from areas that Don Draper would not even recognise,” remarked Mr Sorrell. Digital, media investment and data investment are contributing USD 16 billion to the revenue of USD 27 billion that WPP sees from a combination of businesses that it owns, is affiliated with or has investments in.
Horizontality – the future, but still the biggest challenge
Mr Sorrell reminded the four pillars that form WPP’s key strategy, which has over a period of time contributed to the scale that WPP has built today. “At a market cap of USD 31 billion, we are still behind technology companies that are at USD 200 billion or even USD 600-700 billion, but still twice the size of our nearest competitor,” Mr Sorrell commented.
On top of WPP’s growth strategy is the focus on fast growth markets that contribute 31 per cent to its revenues today. The company’s ambition is to grow this to 40-45 per cent. Digital, the second point of this strategy, is contributing 36 per cent to WPP’s revenues. “We want digital as well to contribute 40-45 per cent even though the differentiation with traditional is becoming difficult as increasingly it is all converging,” explained Mr Sorrell. The third area of focus is data investments management and finally, a term coined by Mr Sorrell, horizontality.
“Horizontality essentially means getting the 180,000-190,000 people working for WPP, in the 112 countries that we are present in, to work together in the same direction for the benefit of our clients,” Mr Sorrell said, adding that the company has achieved this for a significant number of its clients but the objective was to grow it even further.
Top trends that continue to impact
Mr Sorrell has voiced his opinion on 10 trends that he believes are indicate the pace and nature of change that the industry is witnessing. The shift in power to South, East and South East reiterating the importance of markets such as China, India, Africa and the Middle East leads these trends. The second area of significance is talent. For Mr Sorrell, production still generally outstrips demand despite the events that followed the collapse of the Lehman Brothers in 2008 but the supply of talent is still a challenge, which is only getting tougher. He spoke of disintermediation becoming important. He reminded that retail was still significant but there are implications on the manufacturer with e-tail and the threat of the likes of Amazon becoming the new Walmart, establishing direct relationship with the consumer.
The importance of internal communication, and the growth of global & local and regional structures being squeezed in the process, also continue to the trends impacting change.
Invest in the brand
The importance placed on finance and procurement is further highlighted in the year that witnessed a slew of media contracts up for review. Reportedly USD 25-30 billion of business was up for the taking in the year – some of which are still underway. Mr Sorrell reminded that procurement was an important function of the business but recent history reiterates that investing in ‘brand’ is critical. “Companies that have invested in brands have shown growth. Some companies are failing to recognise this with eyes on short term gains but that is not wise,” Mr Sorrell cautioned.
From the role that government is playing and its impact on the marketing and advertising business to the fact that sustainability has grown beyond just good advice to understanding that doing good is good business to expecting further consolidation in the industry form the final points of Mr Sorrell’s 10-point agenda defining the future of the ad business.
