WPP finally gave up on Enfatico, the agency they set up solely to support Dell and have effectively folded it in to C&W. Enfatico joins a long list of single client agencies to fail. Why do these agencies fail when, on the surface at least, they offer such obvious benefits to a client? Before I get in to the reasons why they fail, let me first list the potential benefits of these firms:
1. These agencies can REALLY get to understand a client’s business
2. These agencies are not distracted by other clients or new business
3. These agencies can hire the team that best suits the client’s challenges
4. These agencies can easily run a single methodology across the globe
5. These agencies are easy to measure as there’s only one thing to build the measurement around
So with all these benefits why do they fail? Here are the reasons:
1. Staff who work at agencies don’t want to just work on one client forever so you are bound to get high turnover at all levels
2. One of the key advantages of agencies is that they get to bring fresh perspective and insight BECAUSE they work with multiple clients. In about a year sole client agencies become stale
3. Sole client agencies are essentially just an in-house team that has been outsourced. Why bother?
4. Sole client agencies only work if the budgets are huge. Otherwise you have staff on the account that are either underutilized or are forced to work on tasks they’re not ideally suited to, to fill their time.
I think it’s a shame these agencies don’t work as I can see the appeal and like to see innovation in our industry. So far though the cons always seem to outway the pros. Enfatico RIP.
Enfatico is Italian for emphatic or pompous. Just over 18 months ago WPP won the contract to build a global marketing agency from scratch to service Dell and named it Enfatico. The firm was meant to bring all of Dell’s marketing, advertising and PR under one roof, cutting costs and eliminating the problems others have had when trying to offer an integrated service. It was a bold, ambitious plan. At the time WPP said Enfatico would use the model to win other clients in time. Well, at this stage Dell is the only major client Enfatico ever had (they did have one other client: Progress Software) and Enfatico itself has been rolled into Y&R. So does that mean the experiment failed? Officially Dell will deny any failure but it clearly hasn’t been a roaring success. If it had, then Dell would be one of many clients for the agency and Enfatico would be growing like a weed.
So why has Enfatico not been an emphatic success and instead been something of a pompous failure? From the start the agency had a significant problem that was meant to be its main asset – namely that it had only one client. Hiring top talent to work on just one account was always gong to be a challenge. It’s also not a great business model. After all, does a client truly want to buy 100% of the time of all the people in the firm?
The other great problem for Enfatico is that it didn’t appear to have total buy in from the client side. Rumors constantly circulated that different departments liked their old agency partners and wanted to go back to the way things were before. This makes it really tough to keep a client. Agencies and clients have to be a team, this is especially true with larger clients where there are so many moving parts.
Does all this mean the days of a single global agency are over? I very much doubt it. I think it simply means the Enfatico model didn’t work. That said, I’m sure WPP will try the model again.
The two largest marketing services companies in the world, Omnicom and WPP, posted poor results this week for their first quarter activities. Both saw some significant declines in revenues and both pointed to weakness in their PR businesses. In normal times I’d take some pleasure in such results but in these times I don’t. I’d prefer to see an industry that is proving resilient in this economy. Of course you could argue that the drop in PR sales is to be expected given the overall slump in the economy. You could also argue that PR is doing relatively well. Unfortunately in both cases, they made the opposite point – namely that PR was actually doing worse than some other disciplines such as advertising. This really makes me scratch my head. When marketing budgets are tight it doesn’t make sense to spend on advertising versus PR. Every piece of data I’ve seen says PR is more cost effective than advertising. So why are some companies doing this? Here are the reasons I can think of:
1. Ad agencies are doing a better job of showing their digital credentials
2. Ad agencies are doing a better job of using metrics to show the effectiveness of their campaigns
3. Ad spend may have been committed in Q1 and therefore harder to cut than discretionary PR projects
4. Some businesses may have already cut advertising out of their mix, thus leaving PR as the only real choice
5. Of course it could also say something about their PR agencies versus their ad firms
Put another way I wonder whether the Q2 sales of these groups will be more revealing in terms of real trends in PR versus advertising. I guess we’ll see.
Last week WPP‘s CEO talked about the ‘real economy’ and how it’s actually holding up quite well. The same day, IPG also put out some positive statements following good results. Indeed if you look at the business news in recent weeks there have been a string of relatively positive statements made, albeit with some caveats attached. The only sectors that have continued to spew out bad news have been banking, housing and the some parts of the auto industry. Even retail has seemed pretty robust which lead a Forbes columnist to pick Target as a stock worth buying now that its PE has dropped to around 16. All this suggests that there are two economies playing out right now. Unfortunately only one of them seems to be getting any attention. The ‘real economy’ as Sir Martin called it seems to get a passing mention, whereas the the mean, ugly one that the banks are wrapped up in seems to get a mountain of coverage. It sounds to me like the real economy needs some marketing support.