WPP plots return to growth through 'simpler offer,' refreshes brand identity
- WPP, the world's largest advertising holding group, announced Tuesday that following a strategic review, it has decided to pursue a three-year plan aimed at reaching organic growth of at least 15% — which would put it on par with agency peers — by the end of 2021.
- Through the plan, WPP will squarely focus on four business areas: experience, commerce, technology and communications, with the latter encompassing advertising, content, media, public relations, public affairs and healthcare. The reorganization won't include more major agency mergers like that of J. Walter Thompson and Wunderman or VML and Young & Rubicam, WPP CEO Mark Read told Campaign.
- A streamlined approach is part of what Read, who took the helm in September, called a "simpler offer" to clients, and comes as part of a larger push to make WPP a "creative transformation company." He told Campaign he expects WPP's workforce to decline by 3,500 over the next few years, with any new hires going toward "senior creative talent, technology and growth." WPP staffs roughly 130,000 people globally.
From a bottom-line perspective, the goal of WPP's reorganization is fairly straightforward. But for those who have watched the holding group be battered by slashed growth forecasts and account losses — including American Express, PepsiCo and Ford this year alone — simply returning to a level ground with competitors might read as bland.
Some might have expected the strategic review to yield more agency combinations following the buzzy creation of Wunderman Thompson and VMLY&R, which both saw WPP bringing together legacy creative shops with more digitally-oriented ones. But it's clear that Read wants to ramp up the streamlining of WPP's existing businesses rather than merging them, as exemplified by plans to establish an executive committee that pulls from both company and corporate leadership.
One business category that already had quite the shake up in 2018 was healthcare. In October, WPP said it would be retiring its WPP Health & Wellness sub-holding company and in turn integrate specialist health networks into major agency brands. Specifically, Sudler network combined with VMLY&R in the U.S. to create VMLY&R Health, Ogilvy CommonHealth melded with Ogilvy to create Ogilvy Health, and Wunderman took on ghg.
Additionally, WPP still intends to sell its stake in the data and market research division Kantar, with any potential transaction likely to be announced in the second quarter 2019, according to Tuesday's release.
WPP saw like-for-like organic sales slip 1.5% in the third quarter, contrasting the 0.3% growth forecasted by analysts. The company said Tuesday it expects organic net sales growth to dip by 0.5% for 2018.
Despite those challenges, WPP argued that recent account wins, such as snagging Volkswagen, are indicative that a focus on creative transformation and mixing traditional marketing duties with technology can be successful.
Volkswagen late last month put WPP in charge of its global creative business. However, the change in agencies also came during a marketing overhaul that includes heavy cost-cutting for the automaker, according to Automotive News.
An area to look out for in 2019 will be how WPP taps into technology partnerships to buoy its business and meet mounting client demands for specialties in fields like data analytics. For example, its Grey agency last week announced an exclusive partnership with Betaworks.
Under the deal, Grey is Betaworks' sole marketing partner, while the startup incubator, which has investments in firms like Twitter, Venmo and Medium, will offer the shop technology insights that it can then work into its client strategies.
As for the larger restructuring, WPP anticipates incuring cash costs of £300 million over the next three years, but also having annual savings of £275 million by the end of 2021. The company expects about half of those savings to get reinvested in the business.
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