I love my Volvo. I like how he sparkles as he waits patiently in the parking lot for me to finish my work. I like his resounding bass and ergonomic interior design. We’ve experienced some good times and some rough nights and even an ice storm. When we part, I’m going to miss my Volvo, but I’ll remember him with the pictures on my phone.
However, as—for this reason and this reason alone—Volvo’s US sales declined 10% in 2013, I am probably a part of a small and myopic group of people when it comes to waxing poetic over the joys and pains of owning an S-40. To help offset its losses, Volvo Cars has, in part, turned its attention to its business operations, including searching for greater efficiencies in its marketing agency relationships. According to Ad Age, the Swedish company has selected Grey, London for its global creative work after a six-month pitch process. Because Volvo’s creative and media planning and buying agency (Mindshare) are a part of the WPP agency network, this shift away from the incumbent creative agency, Havas’ Arnold, is a move towards consolidation in marketing spending.
And it’s not just Volvo. Recently companies such as Microsoft, Newell Rubbermaid, and GlaxoSmithKline are exploring methods to restructure and consolidate their agency relationships. Rubbermaid, for instance, shifted from having 70 agencies to just one advertising and one media agency.
From a sourcing perspective, this makes sense. By turning attention towards a select number of agencies, companies can streamline operational processes and leverage economies of scale. Companies are also at an advantage in other areas, such as being able to standardize contract terms and service-level agreements and gain greater visibility across the organization. Having fewer external agencies fragmented across departments also means that companies can spend more time and energy focusing on the crucial components of each relationship. For example, Microsoft’s CMO has cited that the shift will enable the company to “communicate more strategically and efficiently.” Additionally, Rubbermaid’s case demonstrates how proactively instituting change in an organization’s agency base allows an opportunity to open dialogue between a company and its agencies on creative strategy and vision. Rubbermaid’s CMO Richard Davies states that the companywide transformation has yielded positive results after 18 months and has even improved the quality of the creative work.
Overall, it looks like the primary challenges for companies looking to reevaluate and consolidate their marketing agencies will be striking a balance between finding a talented partner to handle creative and strategy and obtaining a desirable level of efficiency and cost savings. I, for one, will be interested in seeing if Volvo Cars’ new strategy in ad land will help bolster its sales. If not, at least they still have one happy customer.
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