Sir Martin Sorrell is the founder and CEO of WPP, the world’s largest communications services group.
The group employs 180,000 people in over 3,000 offices across 111 countries, spanning every discipline from advertising and media investment management to public relations and public affairs, branding, direct marketing, digital, healthcare communications and data investment management. JWT, Ogilvy, Young & Rubicam, Grey, the GroupM agencies, AKQA and Wunderman are just a few of the famous names within the group.
WPP has long focused on developing its digital and data offerings, in line with its four-pronged strategy of new markets, new media, data investment management and “horizontality”, the group’s term for getting WPP’s businesses to work together more closely and effectively for clients. It has also developed its capability in the automated trading of online advertising through its global media platform Xaxis and investments such as ad technology provider AppNexus.
CMO.com: Given that brands are increasingly seen as the sum of all customer touchpoints, and hence the scope of marketing is increasing, how do you think the role of agencies is changing?
Sir Martin: I’m not sure that what you’re suggesting is necessarily correct. Clients are more focused on cost at the moment and are taking a more short-term view. Certainly listed companies are looking very much at quarterly earnings. There’s a focus on cost because there is very little pricing power with inflation being limited or deflation being the issue. Clients are very concerned about cost and they’re looking for ways that they can do better work cheaper. They’re looking for effectiveness, which means better work, and efficiency, which means cheaper.
Generally, there is a move towards greater integration; whether that’s driven by technology or accelerated by technology, I don’t know. Clients are looking for a greater integration across function, across geography. The first thing that we’re doing to try and address that is coordinating across agency teams, so we have 46 client leaders who are leading about $8bn of revenue out of a total of $20bn, with about 35,000 people working on that, out of 180,000.
Then we’ve got country managers who are looking at three areas; the best people, the best acquisitions for us in each country, and then the client companies that will be the leaders in the future in each of those countries.
So marketing has become more important, but the short-term considerations have overwhelmed that. Finance and procurement have become more powerful, to the detriment of marketing to some extent.
CMO.com: How big a role in the kind of integration that you’re talking about do technology platforms play?
Sir Martin: They’re important if they can achieve what I’ve just talked about. It’s a bit like the spaghetti at the back of a television set. CMOs used to put their websites together and they didn’t care what the backend looked like. Now you’ve got more prominent CIOs and CTOs, and chief procurement officers and chief financial officers. People are looking at how you can integrate all this in a much more effective way. Platforms are important in that sense; if they can simplify the process or simplify the structure it’s very helpful.
CMO.com: As more clients start to embed technology into their own ways of working, is that changing the way you work with them?
Sir Martin: Yes, we are building our own platforms or applying our own platforms. We’ve done a lot on production, and we’ve done a lot on digital assets. We’ve done a lot, obviously, on media planning and buying, and targeted media planning and buying with technology and data as in the case of Xaxis. We’re either using other people’s platforms that we modify, or our own AppNexus and Xaxis platforms.
CMO.com: How is that changing the relationship that you have with clients? Are you finding that clients have a desire to pull more work back into the marketing department than they did?
Sir Martin: Clients understand that in-house capabilities have limitations either in terms of their ability to attract people or keep people, or their ability to keep up with the technological developments as those become more broadly applied and it gets more difficult to keep up with it at a micro-company level. Using outside partners is important.
CMO.com: How does that change your competitive set?
Sir Martin: It becomes broader. We have the direct competitors that you’re fully aware of, and we have our data companies so it’s also Nielsen and GFK. And now it goes much broader than that. Is Google a friend or foe? Is it a frenemy? Is Twitter, or is Facebook? Then, even companies such as Adobe or Salesforce and Accenture may be becoming part of that competitive set.
CMO.com: How does this competition affect your ability to deliver margin growth?
Sir Martin: I don’t think it affects the ability to deliver margin growth, because if you look at the margins of some of the companies we’ve just referred to, their margins are superior to ours. So if you get it right, it’s probably a margin opportunity, not a margin limiter. In fact, online generally gives us either the same margin opportunity or better.
So it’s not about margins. It’s about whether we have the capabilities to deliver in those areas. Traditionally we tend to deal with the CMOs; increasingly we’re dealing with CIOs too. Some people think there will be a big struggle, that the CMO will be more important, or that the CIO will be more important, but it’s not a struggle between them.
CMO.com: You don’t think it's true; this notion of the CMO/CIO struggle?
Sir Martin: No, I think that’s overblown. There will be some companies where one is dominant, and there will be other companies where the other is dominant and some where they’re pulled together. It’s a team of people. The range of people that we will interact with is much broader now than it was before; the CEOs, the CMOs, the CFOs, the chief procurement officers, the CIOs, CTOs.
CMO.com: You’ve talked in the past about the growth of programmatic and the increasing adoption of data. Do you think we’re moving too far towards a data-driven world?
Sir Martin: Data people can be creative. This definition of creativity where it just applies to the world of art and copy, Mad Men and Don Draper is a mistake. You can have creative data people. You get creative financial people. The only reason people feel like that is they tend to think of creativity in a very narrow sense.
CMO.com: Does that then drive a need for a greater integration between the various different functions?
Sir Martin: Yes, because as I said at the outset, while the drive towards greater integration, more effectiveness and more efficiency might be for the wrong reason, ie a cost-driven one, the ultimate result is the same. Even if the clients were all very focused on the top-line, they’d still come to the conclusion they need to get better work done, more efficiently.
CMO.com: Does that start to change what an agency network organisation starts to look like? Does it start to bring creative and media closer together?
Sir Martin: It’s not a question of creative and media. What we’ve done is create the 21st century version of the full service agency. Instead of having it inside JWT, for example, you’ve got it inside WPP and it’s a much more diverse offering. We have very strong verticals in the form of the individual agency networks, but there’s increasing demand from clients for a more horizontal approach with greater collaboration across company, functional and geographical boundaries.
CMO.com: How significant do you think the skills gap in terms of digital marketing is?
Sir Martin: There is a scarcity of talent because it is a high growth area. It’s growing much faster than the traditional media. Traditional media are trying to realign their services and their products to a more effective digital offering. I don’t know whether there’s a skills gap or not, but naturally there is a dearth of supply. There is high churn and people are bidding for talent. It’s not just by geography; it’s by function as well. That’s what you would expect, given the rapid increase in demand.
CMO.com: Whose responsibility is it to fill that gap?
Sir Martin: Well, our industry has never been very good at training talent; the conventional wisdom is that you steal it. So you have to train, like we’ve done in China. With the help of the Shanghai Municipality we’ve set up an advertising school, of which digital is a very strong part. We’re trying to do the same in India and elsewhere.
CMO.com: What sort of results are you seeing from that?
Sir Martin: From the Chinese one, it’s been very good. It’s been up and running for four years. We’ve got a hundred and fifty, two hundred students coming out. We have first dibs on all the students. We devise their curriculum, so it’s a model we can apply elsewhere. It’s a sandwich course, four years of technical college. It’s not in a university.
CMO.com: What sort of regional differences do you see in terms of how marketing is developing around the world?
Sir Martin: There isn’t one particular model. There are specialist agencies, specialist digital agencies, specialist social, search, display. Then there is a more integrated model. I don’t think that you can generalise. In the fast-growth markets people have leapfrogged the PC stage and you haven’t got what you had in Western Europe or the US where people are very focused on PCs. They’ve morphed from traditional to smartphones much more quickly. I was in China over the weekend. There are almost five hundred million smartphones there, and the smartphone market is very competitive.
I don’t think you can generalise other than that you’ve got specialist agencies, you’ve got integrated agencies. Generally, integration is becoming more and more important.