A string of wins has put the wind back in M&C Saatchi's sails. Tom Dery talks to Paul McIntyre about the turnaround.
Tom Dery admits the last 18 months have been close to a horror show.
M&C Saatchi has long been revered among its competitors as a dark horse in any competitive advertising pitch and most still don’t know how the agency does it. But from a standing start in 1995, the Australian operation quickly bolted to the top of the league table and stayed there. Until ANZ, that is.
Early in 2011, the bank dropped M&C Saatchi for Whybin TBWA after 13 years. Then came the snowball. After 10 years, Woolworths called a review. Qantas, a foundation client, departed after 16 years and then Optus was back in play after eight years.
Dery, executive chairman of the Australian operation and the global M&C Saatchi advertising network, describes it as “your worst nightmare come true”. “Getting three phone calls and losing half your business was a very testing period for our whole organisation,” he says. “But we’ve actually come through what is really a perfect storm much better than we were before we went in. The numbers are amazing. We’ve picked up $55 million in income from new business and we lost $33 million.”
Whatever the market might make of M&C Saatchi, it has yet again proven resilient, pulling off the win of Commonwealth Bank with much public acclaim from chief marketing officer Andy Lark.
All eyes are on the agency for CommBank work which is now in the pipeline, and Dery acknowledges the interest. “I know. Look, we’ve got a lot of experience in financial services, they’ve got a fantastic product and a new management group and we clicked.”
For Dery, the painful punt of holding onto ANZ staff and taking a hit on profits last year proved worthwhile after winning CommBank.
As for how his agency once again beat a potent line-up of rivals for the bank’s business – including an offer from the San Francisco hotshop incumbent Goodby Silverstein & Partners to open a full-service office in Australia – Dery sheds just a little bit of insight.
“We understand that winning business is not a process,” he says. “What we have is an amazing combination between [Asia Pacific regional creative director] Tom McFarlane and myself. Tom is so focused on detail and perfection and I’m more interested in the overall situation but together we’re just unbelievably determined and competitive. Every pitch we just start from scratch. We pretend this is the first pitch in the world. When a client is looking for a communications partner, they want someone who really understands them and can work with them. During a pitch you’ve got to take the opportunity to demonstrate this.”
Dery is unflinching about why his agency had its recent losing streak, although to be fair, even in losing Woolworths Supermarkets to Droga5, M&C Saatchi retained the Masters hardware account and Dick Smith.
“In all three cases it wasn’t a function of our performance,” he says. “It wasn’t a function of what we deliver or how we work with them all, it was simply a function of ANZ, Woolworths and Qantas having completely new management and a completely new environment. It was very much about new management saying it was time for a refresh, time for a change. I don’t agree with it, to be honest, but I understand it. It’s why we got a perfect storm.”
But with new clients including Etihad, Commonwealth Bank, Google and Tennis Australia, Dery is back feeling perky about the agency’s future.
“We’ve now got big clients with new relationships,” he says. “So there’s much less of a risk of losing them simply because of tenure. We still might lose them, you never know. We never take anything for granted.”
Dery also says a move to New York is permanently off the table for him. He was to have made the move to fire up M&C’s US operations three years ago but shoring up the local business took precedence. Now the US is getting traction and Dery isn’t going anywhere. “I’m here,” he says.
Crunching the numbers
Tom Dery is fired up about the criticism aimed at his company for being a low-cost ad agency.
Much of it stems from the battle royale which took place between George Patterson and M&C Saatchi over Optus eight years ago. It’s impossible to know who started the price war – Dery won’t talk about it except to say everyone has got it wrong – but what did eventuate was a ferociously low fee in order for M&C to win the high-profile advertising account.
Local rivals also point to the latest accounts out of London, which do show margin pressure in Australia. In the 2011 annual report, London-based M&C chief executive David Kershaw wrote: “Having held several very large clients for many years, Australia experienced significant client churn but also delivered one of their best new business years with CPA, Dick Smith, Eftpos, Google, Lend Lease and Masters all coming on board.”
Like-for-like revenue rose 6% across Asia and Australia but profits fell 35% across the region “depressed by Australian and Chinese decreases which left a headline operating margin of 4.7%”.
That’s the evidence that rivals say proves M&C has been heavily discounting. Dery riles at the suggestion.
“The reason for that was ANZ,” he says. “I mean you suddenly lose $10 million of income in a whack and decide not to unload people because you want to have a crack at something else, your margins go. If you look at margins this year, well, it’s end of story. Of course we’re competitive, I wouldn’t deny that. But we don’t give it away. I think our performance is pretty amazing.”
Dery, in fact, says M&C Saatchi’s operating margin is 12%-15%, apart from last year when the ANZ exit hit the balance sheet. “I can’t be specific but it’s 12%-15%,” he says.
This article first appeared in the 4 May 2012 edition of AdNews.
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