The dust has now settled a little on the knockout headlines of last week regarding HSBC's plan to re-evaluate their Team WPP arrangement, some 8 years after its creation. Of course, the first thing that jumps to mind is "that's a seriously disruptive time for the business to review the whole roster as part of one plan".
HSBC's media agency relationship, likely to be the last component to be reviewed, could provide the greatest opportunity for improvements in both media cost and productivity, especially as the review is being handled by a specialist procurement consultant, efficio.
Agencies may have rolled their eyes at the prospect of a procurement led pitch, with the incumbent Mindshare likely to consider it as something of a threat (no doubt praying to avoid having to deal with the dreaded 'e-sourcing' platform).
But whilst we have little insight into the specifics of efficio's appointment, we believe that this is a very sensible approach by HSBC to managing what will undoubtedly be one of the biggest media reviews of 2013.
By entrusting handling of the review to a procurement expert that will have conducted an extensive deep dive into the specifics of their future media requirements, HSBC are ensuring that the pitch will be designed explicitly around those needs, with a focus on increasing the productivity of their media investment, rather than simply being a race to the bottom on costs, based on retrospective pool rates.
By taking a more intelligent approach to managing their media review as opposed to conducting a straightforward cost cutting exercise, HSBC will give themselves the very best chance of working with the right agency, on the right terms, to ensure that their media investment delivers maximum value to their business.
This is part of a broader shift in perception that we have seen from marketing procurement leaders in regards to media investment. Instead of seeing it as a cost to their business against which the goal is simply to deliver savings, media spend is increasingly seen as a key lever for growth that has the potential to deliver tremendous value to a business. The key focus must therefore be on ensuring that this lever is used in the most productive and effective way possible by focussing on quality parameters as well as just 'cost'.
How can this be achieved?
- Firstly by paying the right agency fairly to guarantee that your business attracts the very best talent - the individuals who can make a real difference to your business by driving innovation as well as delivering smart planning and intelligent buying strategies.
- Secondly, by taking into account the quality of media inventory as well as just the unit costs - ensuring that your brand appears in the right environments, not simply the cheapest ones.
- Thirdly by ensuring that media is governed and managed effectively. Having the right processes in place, the right briefing protocols and the right client behaviours will help to ensure that your business will be seen as a priority by your agency.
The first two areas will no doubt be the key focus for efficio when designing the HSBC media review - with the third requiring internal focus and in house expertise from HSBC to ensure that they are getting it right. But all three are crucial to ensure that HSBC realise maximum value (and a competitive advantage) from their media investment in an ever more complex communications environment.
SWOT Analysis
Strengths
- Its a big prize for the winning media agency - $400m
- This means on the face of it HSBC will always be a priority client for their agencies and get their fair share of value delivery and talent (with the right contract in place)
- For most agency groups, it's going to be a serious preoccupation to fight for HSBC
Weaknesses
- Banking is not as sexy as it was. HSBC isn't as desirable a brand to work on for the agency's top talent
- The client needs help but their comms challenge is way more complicated today than 10 years ago
- The process is happening in the shadows of an efficiency drive - they have appointed efficio (a procurement / supply chain management consultant) which might initially put agencies into defence mode
- The media contract with MindShare is probably fairly outdated - even though the overall deal is with WPP, the media relationship also needs to be at holding company, it probably isn't
Opportunities
- Instant media cost savings of 10%+ are likely
- The winning agency will probably be asked to underwrite some / all of this as a guarantee (which we would actually counsel against demanding - it damages the agency's value creation potential)
- A chance to re-evaluate the role of media and the role of an agency. The existing media agency contract is older than Facebook
- A chance to consider modern media management techniques: singular briefing, clear scopes, aligned remuneration across agencies, enough flexibility to allow innovation, digital trading, social media centric (consumer centric) structures etc.
- Cut the invite list right down early on, get to two or three key potential partners quickly and then focus on running them through their paces strategically to ensure that HSBC's specific future requirements will be met by the winning agency
Threats
- It becomes a race to the bottom on costs, lead by a procurement consultant who is being incentivised on their ability to find "efficiencies" in the roster
- The stakeholders team will have to be very broad - a serious danger is that across such a long process with so many people that agendas form and objectivity gets lost. Plus with natural churn people will leave and join the process. This takes a special skill from the consultant to protect the vision, ambition and alignment of the review
- The process needs to be well organised because if they break up or become fractious or misaligned the process will fail (see Sony consolidations ad nauseam)
- The procurement and supply chain consultant doesn't fully understand the complexities and nuances of media value and how to maximise and secure its delivery in a sustainable way. Anyone can shave 10% of the costs, but that will impact on HSBC's top line growth pretty quickly
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