Earlier this week, AgencySpy reported that Publicis Groupe’s biggest client, Procter & Gamble (P&G,) held an executive meeting with the advertising agency holding group to discuss slashing its fees.
AgencySpy reported that some staffers at Publicis Groupe had already been axed as a result.
Speaking to Business Insider at the World Economic Forum in Davos, Publicis Groupe CEO Maurice Lévy said of the report: “You can put in my mouth that this is pure b——-.”
P&G — the world’s largest advertiser, spending some $2.6 billion on advertising in 2014, according to Kantar Media — has already made some radical moves to trim its advertising costs. The packaged goods company cut the number of agencies it works with by 40% in the last fiscal year and said it had cut agency costs by $300 million (15%,) AdAge reported.
Part of the company’s cost saving move included a huge media agency review — a process where companies ask the incumbent agencies that buy and plan their advertising spend to pitch again for the business, versus their rivals. Publicis Groupe lost a huge chunk of that business, with P&G shifting is North American media planning and buying account to US advertising group Omnicom. The Financial Times estimated the account was worth anywhere between $50 million to $100 million to Publicis Groupe.
Publicis Groupe still remains P&G’s biggest client and is the largest partner (in terms of fees) of P&G, as it still retains its media buying accounts outside the US and recently picked up other accounts, such as some of its public relations business.
But we also put to Lévy that we had heard rumours that by retaining many of those P&G accounts, Publicis Groupe was also subject to the aforementioned cost savings and was forced to reduce its fees drastically in order to undercut its competitors, which could have a big impact on the company in the long-run.
He said there’s a little more to it than that:
There are many aspects. One is there has been this review, and the outcome is clear. Many elements have been part of it including, obviously, the cost and the price of media. That’s clear. And it was part of the decision.
P&G is trying to get the best out of that investment, it’s perfectly fair, and all the agencies are always — including ourselves — trying to bring to P&G the best of their services and improving the conditions in which they are working,
The third aspect is P&G reducing the number of partners, so what we are losing on one hand we are winning on the other hand, for example.
For example, the announcement last week regarding PR, and we have won big chunk of the PR business. And you can expect more reviews and I do hope that within those reviews you can also expect to see Publicis winning those. I would say this is business as usual.
I don’t know one single advertiser who would like to spend more, pay more fees, and make the agency more profitable. I don’t know anyone.
Speaking specifically on Publicis’ media buying agency Starcom Mediavest Group losing the P&G North America account, Lévy thinks his group was “punished unfairly”:
Starcom was named “agency of the year” [by trade publication MediaPost,] which was a little bit awkward: agency of the year while losing its largest client is something which is raising some smiles. But the reality is it is a very, very, very good agency. A great agency. And it has been punished unfairly simply because of circumstances. You know, you don’t win all the time. You find a situation where somebody else is coming up with a better proposal and you lose but you win on some other occasions. I personally feel extremely confident.
We also spoke to Lévy about a range of other subjects — from China and the Brexit, to the current tensions within the agency and client relationship. More posts on those parts of our conversation are on the way.
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