Marketing Giant’s Boss Focusing on Profits
Martin Sorrell used to read the morning newspaper. But since his hostile takeover of the ad agency J. Walter Thompson 15 months ago, he’s now got his staff reading the papers for him.
“There’s just not time,” said the chairman of the British marketing giant, WPP Group PLC. His staff provides him with typed briefs on the day’s important news. And these days, the most important news to Sorrell is ideas for improving the profit picture both at WPP and at its somewhat tarnished American crown jewel, J. Walter Thompson.
Sorrell, who seldom makes public appearances, was in Scottsdale on Thursday to address a conference of advertising executives. In an interview before his speech, he said that he does not foresee, over the next year, being party to the kinds of headline-grabbing actions that put him and his company in the glare of advertising world’s spotlight over the past two years.
Attention on Marketing
That included the much-discussed 1987 purchase of Thompson and the subsequent 1988 walkout of executives and mega-client IBM from an affiliate Thompson agency, Lord, Geller, Federico, Einstein.
“I’d like to receed into anonymity again,” said the 43-year-old Sorrell, who previously spent eight years as chief financial officer at Saatchi & Saatchi, the British ad agency that grew to become the world’s largest, in part through Sorrell’s aggressive acquisition strategy. Now, Sorrell said, he wants to focus his efforts less on major acquisitions and more on improving the financial performance of WPP. He would do this, he said, in part by concentrating more on the so-called marketing services portion of the business. This includes the WPP divisions that specialize in public relations, market research, graphics and design, and sales promotion.
“Marketing service companies are primarily in the business of providing ideas for their clients,” said Sorrell. “Those ideas can only come from the minds of fallible, talented, insecure, vulnerable and quite often vain individuals. And that, perverse as it may seem, was one of the reasons that attracted me to this business.”
The other reason: big profits. Sorrell is regarded by some industry observers as an executive who would use a meat cleaver to slice a carrot. He has instituted a number of major cutbacks at Thompson. These include layoffs of hundreds of employees, the sale of some big chunks of Thompson real estate, and the introduction of a pay program based on incentives instead of automatic bonuses.
With his eye always on growth markets, Sorrell estimated that companies worldwide spend $500 billion annually on all phases of marketing services. And the rate of growth, he added, is at a 15% to 20% clip.
Sales promotion in the United States alone is an annual $100-billion industry, he said. And there is also a booming corporate identity market in the United States, he said, with nearly 2,000 sizable American firms annually changing their names and images.
Not that WPP intends to ignore the advertising end of its business. In fact, Sorrell said that WPP plans to expand its advertising business in an area where it has so far been lax--the Far East. Of WPP’s $1 billion in revenue, less than 5% is from the Far East. “That is far below what it should be,” he said. He said he expects to raise it to an amount closer to 14% of WPP’s revenue.
And while Thompson lost a number of major clients shortly after Sorrell bought the company--including Burger King, Goodyear and Ford’s European advertising business--it has since picked up additional business from such clients as Kellogg and Miller Brewing Co.
IBM Fed Up
Perhaps, however, the biggest blow to Sorrell’s firm was not so much a client loss as it was a veritable mutiny at the Thompson division of Lord Geller.
A cadre of Lord Geller executives--unhappy with Sorrell’s refusal to sell them the agency--quit the firm earlier this year and formed their own firm with a chunk of IBM’s ad business. Both agencies have since filed suit against one another.
Fed up with these bickerings, IBM has since abandoned both agencies. “I would not blame or fault them for that,” Sorrell said.
But Sorrell now says that in order to continue to operate Lord Geller as an independent ad firm, he hopes to bolster it through an acquisition within the next year.
His goals at WPP, he says, are rather simple. “We want to become the world’s major international marketing services company,” he said. “Nothing more.”
