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1 Interpublic Group of Companies: A Case Study by Lauren Malarkey & Chris Helming Media Industry Analysis February 15, 2006

2 Interpublic Group of Companies: A Case Study Compiled by Lauren Malarkey & Chris Helming 2006 All Rights Reserved Produced by Lauren Malarkey & Chris Helming for Media Industry Analysis Printed in Rochester, NY at Rochester Institute of Technology DPC

3 Table of Contents Industry Overview Interpublic Group of Companies Company Overview Markets Served & Services Offered Product Examples Key Clients Competition Financial Information Success Story Summary References

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5 Industry Overview Advertising can be defined as the process of highlighting or featuring a product, service or company through the use of various media for the purposes of making it known to a specific market or group. Basically, the goal of advertising is to make consumers aware of a product, service, or company in an effort to make the respective item or company profitable. Most companies chose to use advertising as a means to promote their products and therefore support their sales staff, as well as to maintain the market presence they have already built. The advertising industry itself is made up of firms that prepare advertisements for other companies and organizations and design campaigns to promote the interests and image of their clients ( Although there are several facets to this industry, most of the firms within the advertising industry are involved with advertising, marketing, market research, or public relations. While there are over 47,000 companies that fall within the advertising industry, competition for positions is often tough because there are many more job seekers than there are jobs ( The key players in the advertising industry are the four major holding companies, Interpublic Group, WPP, Publicis, and Omnicom, which are all comprised of hundreds of firms. Foote, Cone, & Belding (Interpublic), Carter Ryley Thomas, and Grey Advertising (WPP) are some examples of top firms within the advertising industry. Interpublic Group of Companies Company Overview Interpublic Group itself was founded in 1961, however several of it s agencies have been around much longer. Firms like Foote Cone & Belding and McCann have been around since the 19th and early 20th centuries respectively, and are some of the most integral parts of Interpublic Group. Interpublic is the third largest holding company in the industry, behind only Omnicom and WPP, and has over fifty subsidiaries under their name. They are based in New York City, New York, however their subsidiaries are found in over 130 countries worldwide. It is also interesting to note that Interpublic has coined several terms that are used in today s advertising industry, like creative boutique, global brand, and integrated marketing ( Interpublic was started by Marion Harper, who at the time was President of McCann-Erickson Company. When he was became President of McCann-Erickson he slowly began acquiring companies until he had over twenty in 1961, and came up with the idea to form the holding company we know today as Interpublic Group of Companies ( David Bell, Co-Chairman of Interpublic, states The company s mission, from the outset, has been to grow client businesses and brands, with a special emphasis on building global brands through both local and coordinated marketing programs. Interpublic pioneered the concept of integrated marketing communications, and we literally created the concept of a marketing communications management company ( 1

6 Markets Served & Services Offered Our research has shown that it appears that IPG deals with all companies that require advertising or marketing services. The business services offered by IPG include advertising and marketing services. The main types of business that they perform are direct marketing, market research, public relations, and sales promotion and specialized marketing services. Their largest service being advertising and marketing made up 84 percent of IPG s sales in Public relations and corporate communications made up 15% and other services made up the last one percent ( INTERPUBLIC GROUP OF COMPANIES A CASE STUDY The services available for clients are shown in the following table. Advertising / Full Service Barter Branding / Product Design Corporate Communications Custom Publishing Direct / Database Marketing Government Relations Healthcare Interactive Licensing Market Research / Consulting Media Services Meetings & Events Multicultural Marketing Newspaper Services Outdoors Advertising Product Placement Promotion Public Relations Recruitment / Motivation Retail Marketing Sports & Entertainment Sweepstakes Talent Women s Marketing Yellow Pages Youth Marketing Interpublic customizes the approach by which it deals with its client. Not all clients have the same needs, and some clients require more work and may even need to work with many Interpublic Companies to meet their global needs. The relationship models offered by Interpublic are as follows: Virtual Network model When a client requires work that will be across multiple disciplines and geographies they work with Interpublic at the holding company level. This allows them to work with multiple companies in multiple countries or across different disciplines. ( Lead Company Model When clients require work that will be across a few disciplines and geographies they work with a few Interpublic companies directly. ( Integrated Agency-of-Record Model This model lets clients work across multiple disciplines but with only one agency. The agency divides the work up in house to different teams. ( 2

7 Project-Based Collaboration Model A client may have a relationship with only one Interpublic company and do work solely with that company, but in come cases another agency may be called upon if another area of expertise is needed. ( Single Discipline Model Most clients need only one service performed for them. The single discipline model lets clients do all their work with one Interpublic company allowing for the establishment of a continuous relationship. ( As well as offering services to their clients, IPG offers many services to their network of agencies that keeps them focused on the work they do and not worrying so much about the business side of things. The services IPG offers to its subsidiaries are talent, property, procurement, information technology, knowledge sharing, legal and finance, and back-office services. The talent services are the recruitment, retention, and management of talent in each aspect of marketing. This allows the agencies to get the most qualified people for the jobs. The property services are real-estate management so if an agency needs more space for equipment, IPG will help them with this. The procurement services are the combining of buying power to gain efficiencies. The information technology services help them invest in scalable technology and large contracts mean lower prices. The knowledge sharing services are the innovative programs and publications that IPG puts out to its agencies to keep them in the know about what other agencies in the company are doing and what the company is doing as a whole. The legal and finance services offered help with taxes, investor relations, acquisitions, and intellectual property ( Product Examples The following three images are examples of advertising campaigns that were produced by Interpublic Group agencies. Web campaign created for Intel by McCann Worldwide ( 3

8 INTERPUBLIC GROUP OF COMPANIES A CASE STUDY Print campaign for Intel created by McCann Worldwide ( 4

9 Print campaign created by Deutsch Inc. for Monster.com ( 5

10 Key Clients Key clients for Interpublic have been IRS E-file, Stella Artois, Athens 2004 Olympics, and Taco Bell. The IRS worked with WeberShandwick, Foote, Cone, & Belding, and Global Hue to create an ad campaign to increase e-file awareness. They used direct marketing, advertising, and multicultural marketing to reach their audiences: individuals, businesses, and tax preparers. All goals were met and 59.7 returns were e-filed ( INTERPUBLIC GROUP OF COMPANIES A CASE STUDY Stella Artois worked with Lowe to launch an entirely new ad campaign. Lowe works with Stella Artois and represents them in 16 different countries. As well as producing print materials, Lowe created numerous television commercials for them that have won many awards including British TV commercial of the year ( In 2004, the Athens Organizing Committee worked with Jack Morton to produce the opening and closing ceremonies for the summer games. Jack Morton recruited a team of 850 workers, and had 8,500 volunteer performers participating in the ceremonies. Highlights from the ceremonies included a 500,000-gallon sea on the stadium floor and a 45,000-stalk wheat field ( Foote, Cone, & Belding (FCB), and FutureBrand teamed up to create packaging for Taco Bell that would match its current brand and vision. Since FCB had developed the brand positioning for Taco Bell and had created their branding guidelines they naturally knew what could be done with the packaging. However, FCB lacked any packaging experience and called upon their sister company FutureBrand for help. The packaging that they created caught the interest with sister companies of Taco Bell and has created more business for FutureBrand, working on other branding needs ( Competition Omnicom Group is the largest of the four major holding companies that were mentioned earlier (Interpublic, Omnicom, WPP, and Publicis), and also a main competitor of Interpublic. They currently have offices in over 100 countries, and serve over 5,000 clients. This holding company mainly deals with advertising, marketing, and public relations, but traditional media advertising accounts for more than 40% of their business. Agency.com, Organic, and Merkley Partners are all members of Omnicom Group. In the future, analysts believe that Omnicom s agencies will be seen as full-service communication firms, rather than advertising agencies. It is also worthwhile to note that the company has recently been focusing on increasing its media buying and planning operations ( WPP Group PLC is another one of Interpublic s main competitors. They are the second largest of the holding companies, and also operate in over 100 countries. Their premiere agencies are Grey Worldwide, Young & Rubicam, and JWT, and they offer campaign development and brand management services. Another one of their agencies, Kantar Group, is the one of the top leaders in market research. WPP had a major growth this past year, as they acquired Grey Global Group, a previously independent agency. This acquisition was extremely important to WPP, as acquiring Grey meant that they also potentially gained Proctor & Gamble. However, shortly after Proctor & Gamble merged with Gillette, $800 million of their advertising dollars moved over to Publicis ( 6

11 Publicis Groupe S.A. is the fourth and final holding company, and it falls behind Interpublic in the market. Some of the services they offer to their clients are creative advertising, media and campaign planning, marketing, and public relations. Some of their spotlight firms are Leo Burnett Worldwide, Saatchi & Saatchi, and Publicis Worldwide. They also have two of the world s largest media planning companies, Starcom MediaVest, and Zenith Optimedia. Although Publicis currently falls fourth among the holding companies, they are the leading advertising and marketing provider in Europe. Publicis also has the largest Hispanic advertising agency in the US. Similar to the other holding companies, Publicis has been dealing with consolidations and acquisitions in the past few years ( Financial Information Interpublic is the world s third largest advertising and marketing holding company. In 2004, Interpublic had 6.4 billion dollars in sales an 8.9 percent growth over Their net income for 2004 was 538 million dollars, only 8.4% of their total sales. Interpublic currently has 12.3 billion dollars of assets and 10.6 billion dollars of liabilities and equity. Their stock price as of February 13, 2006 was $10.08 and there are currently 431 million shares outstanding ( It is important to note that in 2002, discrepancies in Interpublic s accounting documents were brought to the public s knowledge, thereby severely damaging their reputation with both shareholders and on Wall Street. Although they slowly tried to fix the misreported numbers, an announcement was made in 2005 that there were extensive bookkeeping problems with their agencies overseas, and financial statements dating back to 2000 had to be corrected and re-filed. Currently, they are attempting to try and repair their relationships with clients, although it has not been an easy task ( Success Story One of Interpublic s most important success stories is from September of 2004, when they were awarded the prestigious Mosaic Award from the American Advertising Federation. A team of Interpublic agencies, Campbell-Ewald, GlobalHue, Southfield, and Accent Marketing worked together to produce a campaign for the United States Navy that specifically targeted African Americans and Hispanic, which are two demographics previously considered difficult to recruit. The Mosaic Award is considered the premiere honor dealing with multi-cultural marketing, and it recognizes agencies that the AAF not only considers to be at the forefront of advertising to ethnic consumers but also those whose corporate philosophies incorporate these same multi-cultural beliefs ( The campaign consisted of broadcast, cable, national radio, and print advertisements, and the campaign proved to be extremely successful amongst both targets. It was found that African Americans found the Navy s job training capabilities appealing, and Hispanics found the higher education opportunities very attractive. David Bell, the CEO of Interpublic said that We are extraordinarily proud that Interpublic agencies have achieved success in the vital area of multicultural marketing. The partnership of these agencies is a wonderful example of collaboration, a key element of our successful turnaround. What s more, it demonstrates our joint effectiveness on behalf of the U.S. Navy on its key issue of diversity. ( 7

12 Summary Interpublic Group of Companies is one of the four major advertising holding companies in the world. In terms of sales, they fall in third place behind Omnicom and WPP respectively, and Publicis falls in fourth. They are based in New York City, but have representation in over 130 countries worldwide. As a whole, Interpublic has several different types of agencies, and offers such services as public relations, advertising, marketing and market research. INTERPUBLIC GROUP OF COMPANIES A CASE STUDY In our opinion, Interpublic will remain one of the top four holding companies, but depending on how they handle their mergers and acquisitions they may fall to fourth place. They have lost some extremely important accounts like Bank of America, GM, and Proctor & Gamble/Gillette and still have work to do repairing their relationships with their current clients because of their financial misrepresentations that were made public in the past few years. If they re able to fully regain their reputation, they could potentially move up in the ranking, and remain a leader in the industry. 8

13 References Bureau of Labor Statistics. 8 January 2006 < Deutsch Inc. 4 February 2006 < Hoovers Online. 31 January 2006 < Intel. 6 February 2006 < Interpublic Group. 8 January 2006 < 9