McDonald’s and Omnicom

Returning from a short break it seems from reading the various reports on the Omnicom win of McDonald’s in the USA that a recalibration of the agency/client business model has snuck up on us.

There is a certain irony in the fact that even though industry commentators have for years been calling for a re-imagining of the business relationship between agency and client, as soon as someone does something about it the ink is barely dry on the contract before many of these self-same commentators are rubbishing the main planks of the arrangement.

Of course it is true that no-one outside McDonald’s, Omnicom and Flock Associates (the consultancy who worked on putting the deal together) can possibly know the details of the deal.

But naturally that doesn’t stop us smart-alecs pontificating on why this is either a deal that points the way to a sunlit future, or takes us back to the workhouse with agencies failing to turn a fair profit for the brilliant work they do.

For those of you who’ve missed this story due to being either on another planet, or (like me) in Devon the bare facts are that McDonald’s in the US has hired Omnicom in place of Leo Burnett; that Omnicom will set up a dedicated agency shaped to meet McDonald’s needs; and that the agency’s compensation will be based on a mix of fee (to cover basic costs) and performance-related bonus (to cover profit).

The unusual bit comes from the bonus being linked directly not to some advertising metric but very specifically to McDonald’s business results.

The critics say that dedicated single-client agencies ‘don’t work’ (top talent isn’t attracted to this sort of arrangement); and that working for ‘zero profit’ is a backward step and unfair.

Saying the single-client-agency approach doesn’t work is reminiscent of the argument that was always advanced about Procter and Gamble – allegedly no-one talented wanted to work on the business because the work was formulaic (code for ‘they know what works’); and the media negotiations were done in house (code for ‘we can’t get away with deals designed to benefit us’).

Although P&G uses multi-client agencies they have always been a proponent of the agency-within-an-agency approach. They stand as a shining example of a client that has always put their money where their mouth is and who have always seen advertising as a key element in building their business.

Somehow despite ‘no-one talented’ wanting anything to do with their brands, advertising over the years has worked for them.

It was a rubbish argument then; and it’s a rubbish argument now.

So what might possibly be good about the McDeal? To begin with we all know that the whole industry remains in a state of flux.

I think if I was a client in these fast-changing times I would pick a partner with the size to create a team around my particular needs, and the flexibility to refine it as technology and the market evolves.

As to performance-based profits, this is hardly a new idea although the link to business metrics is rare.

Yes, there is always the counter that the client can ruin what the agency is convinced is a brilliant campaign idea thus in their eyes decimating future sales and destroying the agency’s profit, but surely a partnership is all about agreeing common goals and working through these tactical issues to arrive at a strategically sound place?

Speaking as an outsider with zero access to the facts I think both McDonald’s and Omnicom (and Flock) should be congratulated. I think they’ve seen the future – now we’ll see how it works.

It also seems to me that the key thought behind this win is Omnicom’s preparedness to listen to the prospect’s needs and to build a solution around them.

Which is different from listening with half-an-ear to the prospect and then selling them an off-the-shelf solution, however well wrapped that might be in bespoke packaging.

  1. Brian, wise and erudite as ever, especially compared to some of the poorly informed and judge “expert witness” comment! Sadly, confidentially prevents much more comment from us but we can say that McDonald’s and Omnicom do believe this to be the Agency Of The Future. Both believe that the operating system with data at its heart, and content in its veins, is going to bring great results. And, as such, both are committing in partnership to make this work. And, at the end of the day once the peanut gallery has its say, that’s what is important; client and agency working in partnership. We’re proud of our role and our work with other leading advertisers to find their own unique Agency Ecosystem Of The Future (along with the structures, training, processes, technologies etc that make for a success). Simon

  2. Oh… the story’s I could tell. You are absolutely right that nobody can know true nature and details of the model we developed, other than those who are party in it. Even this post is not accurate in it’s assumptions.

    Having said that, I very much appreciate your take on it. I truly believe that Wendy Clarke, with her background as a marketer, has truly grasped what we were after and if we can pull it of there will be a new agency, based on a new/evolved set of ideas on what an agency is, including how it makes money.

    I have been fascinated by the fixation on the financial model. To be honest, I am far more interested in the “how” of this agency. Marketers need better marketing, and agencies need to deliver better agencies that work to today’s consumer realities. Marketers are prepared to pay for those that can help, and I do not mean just cover their cost but allow them to benefit and profit from the work they deliver.

    I also doubt Omnicom would have accepted a deal that, according to some, was so terrible. Omnicom is run by some extremely smart people who know how to make money and drive shareholder value. I am pretty sure they would have walked away if the proposed model was so awful.

    What little we can reveal, we have written about in two posts ourselves, links are here:

  3. Agree with the fact that an off the shelf solution is not the best answer and often, the only answer regardless of the question. But a bespoke agency structure means that it is entirely subservient to the client for its survival as such it must not have an opposite opinion making the Advertiser CMO the defacto MD. The challenge is to somehow create an environment that delivers dedication and accepts dissenting opinions without the risk of being fired at every turn..

  4. This is the best ever summary based on no-facts and your conclusion is spot on.

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