WPP has triumphed over IPG in the seven-month holding-company shootout for Dell's highly sought-after, 3-year, $4.5 billion account and will be tasked to build a new agency staffed by 1,000-plus to serve the computer-maker's global marketing needs.
Dell and WPP will "jointly develop what we hope is the greatest agency in the world," Casey Jones, VP-Global Marketing at Dell, said in an interview. "This will be a nontraditional relationship and the purpose of it is to achieve marketing objectives of Dell's that are simply not achievable either with our current roster of agencies or with a patchwork quilt of shops stitched together."
The Dell Agency
That Dell agency, yet to be given its own name, will have its own profit-and-loss statement and will handle marketing functions from creative to media-planning to CRM and PR. Only media-buying duties will handled separately, to continue to allow Dell to take advantage of the economies of scale that come from working with a buyer that handles many large media budgets. The new agency will even be able to work for other marketers.
"We're delighted by the appointment and we think it's an endorsement of our geographic and functional strategy," WPP CEO Martin Sorrell said in an interview. "Dell's needs are very much in line with our capabilities." (Representatives for Interpublic could not be reached on Sunday as the news broke.)
$150 Million a Year in Revenue
Round Rock, Texas-based Dell's marketing account is one of the most coveted pieces of business to go up for grabs in years. The three-year contract has a total billings tag of about $4.5 billion, around $1.5 billion being spent every year, with annual revenues of around $150 million going to WPP.
The pitch was so big, in fact, that Dell gave it its own moniker: Project DaVinci. "We have been looking for an agency that is both an artist and a scientist," Dell CMO Mark Jarvis said.
Dell, Jarvis and Jones Oversaw Review
The seven-month review process began with an email from the computer-maker's Chairman-CEO Michael S. Dell personally reaching out to the heads of various marketing organizations. Thereafter the search was championed by the company's new marketing leadership: Mr. Jarvis, Dell's first-ever CMO who previously spent 14 years at Oracle, and Mr. Jones, onetime exec VP-global strategy director at McCann Erickson Worldgroup.
Dell this summer parted ways with Omnicom Group's BBDO, which handled its U.S. consumer advertising. A number of agencies were also on Dell's roster, including independent Mother, Aegis' Carat, DDB, Chicago, Omnicom media shop Prometheus and Interpublic's MRM.
Simpler Marketing Solution
On a global basis, Dell was working with more than 800 different marketing firms, and realized a simpler marketing solution that integrated various marketing disciplines was necessary.
The new strategy would also help the PC-maker turnaround after a tumultuous period -- which included a massive battery recall, top management changes and delayed filings with the Securities & Exchange Commission.
As far as holding-company pitches go, Dell's wasn't typical.
For one thing, there weren't only holding companies involved. While some of the biggest marketing organizations in the world vied for the account—including Omnicom Group, Publicis Groupe and Havas—smaller, independent agencies such as Mother also participated in the review. (Mother, which handles creative for Dell's Inspiron laptops, today launches the first campaign for Dell's new all-in-one desktop, XPS One, featuring model Karolina Kurkova).
There was also the fact that familiar elements of an agency search, like requests-for-proposal and the presentation of "spec creative" were absent. Agencies were instead invited to devise a strategy for the creation of all-in marketing entity to serve Dell's needs.
Jarvis: Analytics Are Vital
"Our interest was much more in the science and the analytics behind the agency...we expect every agency to be creative, but the analytics was extremely important to us," Mr. Jarvis said. "Shareholder value to us is far more important to us than winning awards in marketing."
That shareholder value will have to become an immediate priority. Once a tech-stock darling, Dell has in recent years fallen on hard times, a symbol of which was the loss of the mantle of the world's largest computer-maker last year to Hewlett-Packard. It also suffered a marketing-communications embarrassment when high-profile blogger Jeff Jarvis (no relation to Mark) chronicled his nightmare with the company's customer service in his "Dell Hell" posts.
Since founder Michael Dell in late January reassumed his post as CEO, the company has rolled out a few important social-media efforts to help it better listen to consumers. Among them, the Direct2Dell customer service and product blog, and the IdeaStorm website, where Dell fans and critics alike can post suggestions for improvements. The latter almost immediately yielded changes in how the company's line of desktops and PCs are designed.
Even Jeff Jarvis relented in a largely positive BusinessWeek article that chronicled Dell's change of tune when it comes to dealing with customers.
But none of that yet has translated into financial performance. In an earnings call last week, Dell reported that its profit margins are being squeezed prompting many to questions whether the Mr. Dell-driven turnaround is taking too long to come together. Investors responded by driving the share price down almost 13% on Friday.
For WPP the celebratory party will be a shortlived affair. The new agency must be up and running on March 1, 2008. That's the date by which Dell expects the agency to handle all of its marketing across the globe.
Wanted: 1,000 Staff
A hefty talent search will also be on WPP's to-do list, as the marketer estimates its new agency will be staffed by more than 1,000 planners, creatives and other marketing experts.
Surprisingly, Dell isn't demanding exclusivity from the new agency that's being created to handle its account. Other marketers (provided they're not in the same category) will be free to tap the new shop to work on their accounts. Mr. Jones even described the newly-formed agency as a chance for the holding company to develop a "new SKU."
The agency will also be allowed to contract with other entities. So, for instance, it is possible that Mother, an independent, remains on Dell's roster.
By September, it was clear that Dell had narrowed the field to WPP and Interpublic for the final round. But, for the past two months, the ultimate winner was anybody's guess.
The win justifies WPP's long-touted belief that all of a marketer's needs can be served under a single marketing conglomerate's umbrella. These kinds of holding company-based structures are still controversial within the ad agency world, as they subjugate the agency brands to the conglomerate's brand--and make clear the fact that those operations once termed "holding" companies are far from simply financial vehicles today.
Reward and Risk
Marketers that demand them typically do so to get best-in-class services and to drive cost efficiencies. However, some agency and holding-company executives believe they can have negative effects since they often involve upsetting existing agency structures in the quest to create sort-of all-star team. Another risk, of course, is that the agency created is dependent on one marketer, and marketers, as everyone in the industry knows, are prone to changing their minds about agency relationships, particularly when senior personnel change.
An example of a marriage that didn't work: Bank of America recently announced it's decision not to renew its contract with Omnicom Group, citing a desire for more flexibility in the agencies it works with.
For Interpublic, the loss is a major disappointment. Scoring Dell's business would have been a boost to its sagging earnings and might even have provided a lift to its stock price.