Shahnoor Ahmed on how the merger between VML and Y&R is set to drive his agency into new directions.
AYESHA SHAIKH: What lead to the VML and Y&R merger?
SHANOOR AHMED: At the end of last year, WPP’s management came to the conclusion that in order to stay relevant, they had to adopt a digital mindset. This realisation was based on the belief that the traditional role of advertising agencies has to change drastically in order to survive in a world where data and digital have taken centre stage. Y&R is a 90-year plus old advertising agency with headquarters in New York, enjoying global client relationships and knowledge capabilities accumulated over the years. In Pakistan, we established a digital arm in addition to the traditional services we were offering. However, this was a stop-gap arrangement and more needed to be done. More importantly, WPP are moving towards consolidating their vast network in order to streamline operations and become more agile. WPP considered VML and Y&R to be a good fit because although VML has been in existence for only about 25 years, their size, volume of billings and number of employees are comparable to Y&R’s. Also, the digital expertise of VML and the client base of Y&R complement each other and this realisation led to the creation of VMLY&R, which in Pakistan, became Spectrum VMLY&R.
AS: How will the merger be implemented?
SA: The roll out started from the US, where VML and Y&R have their headquarters, followed by Europe and then Asia. A meeting was held at the end of January this year in Singapore where the heads of all VML and Y&R companies in Asia came together for the signing of the merger agreement. Both VML and Y&R have a presence in markets such as China, India and Singapore and in those countries, a physical amalgamation took place and people working in different disciplines and offices at VML and Y&R joined forces. Duplication of resources was rationalised and the two companies became one entity. However, in countries like Thailand and Pakistan where VML does not have a presence, implementing the post-merger plan is more complicated.
I think the new services we are looking to offer will be beneficial to the agency bottom-line because some of these solutions are cost-effective in terms of achieving consumer exposure, reach and engagement. For instance, even with reduced media budgets, it is possible to integrate and execute innovative content ideas for a brand that create virality and therefore, make the client appreciate the value of the agency input.
Although Spectrum Y&R have their own digital arm like every other agency office in the VMLY&R network, we are undergoing a thorough training programme whereby employees have to participate in webinars and workshops and complete a specified number of courses every week to get up to speed with global changes. Of the required learning objectives for Spectrum VMLY&R, there are six core disciplines – Advisory, Experience & Technology, Commerce, Data & Insights, Content & Media Innovation and Brand Stewardship. It is important to remember that our role as a traditional full-service agency is not ending simply because these changes are taking place. The idea is to identify areas where there are business opportunities we can capitalise on, add new revenue streams by attracting new clients and gradually build up a portfolio in the six disciplines.
AS: Of the six disciplines, which are the most challenging to implement and what changes are taking place at Spectrum because of the merger?
SA: It is important to categorise the disciplines into short- and long-term objectives. Spectrum Y&R were already offering a few of those services and they will be less challenging to implement. Brand Stewardship for instance, has been part of our service umbrella since the start, but there are new aspects of it we must look into and adopt. The Content & Media Innovation unit is important because we want to enter the content business and we have already amassed considerable experience there. Commerce relates to the e-commerce needs/opportunities that our clients have but this will involve a steep learning curve. As for Advisory, I look at it as a longer-term objective. At present, every local VMLY&R office is connected to a ‘Champion’ in a regional office who offers advisory expertise while working on client projects. There are a lot of unknowns and we are in the process of learning what the advisory role of an agency entails. Areas such as Experience & Technology and Data & Insights will be more challenging because of the lack of documentation and availability of consolidated data in Pakistan. As a result of these changes, you will soon see the face of the conventional advertising agency change, because they are now competing for business with companies like Accenture and Deloitte that have been involved with consultancy and advisory for a long time and are now offering communication services to help them add more value to their clients’ businesses. Since they are cutting into our share of the pie, we have to diversify into different disciplines as well. These changes will take time but we have a blueprint for how to achieve these milestones as well as the help of a Country Integrator placed at a regional office who will help in this transition. The WPP world is clubbing together to offer the best capabilities to their clients under one roof. As part of this strategy, you have already seen JWT coming together with Grey in Pakistan and similar changes are taking place in every country where WPP has a presence.
AS: Will this consolidation help Spectrum VMLY&R at a time when agencies are struggling with shrinking margins?
SA: We are going through an economic downturn that is making profitability difficult for agencies. Spectrum Y&R was never involved with government advertising; therefore, when the government cut back on their media spending, it did not affect us unlike agencies that only had government accounts. However, even the marketing budgets of FMCGs have been rolled back. I think the new services we are looking to offer will be beneficial to the agency bottom-line because some of these solutions are cost-effective in terms of achieving consumer exposure, reach and engagement. For instance, even with reduced media budgets, it is possible to integrate and execute innovative content ideas for a brand that create virality and therefore, make the client appreciate the value of the agency input. In my view, smaller brands with limited marketing budgets are quicker to realise the credibility, authenticity and effectiveness of digital media. The bigger brands will take more time to move their budgets away from traditional media towards digital but we are already seeing this change take place. Problems start when clients start squeezing agency margins without realising that talented HR and quality work involves costs. In some cases, an agency may choose to work on cost and forego profits because a particular campaign will boost their profile or provide a chance to gain valuable experience that will serve as a foundation to earn massive cash flows in future.
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