New Wave Advertising Business - Local Strategies and Technologies
By : Senden Kaigi Magazine
Published : July 2014
Original article : PDF (Japanese)


Sir Martin Sorrell (WPP CEO) × Michael R Payne (WPP Special Adviser)

The WPP Group has been expanding by dealing with global-scale changes surrounding the new markets and new media. It is now the biggest advertising group in the world. CEO Sir Martin Sorrell addresses to Japanese marketers that they should start preparations toward the Olympics scheduled in Tokyo. We are speaking to Mr. Sorrell and Mr. Michael R Payne, Special Advisor to WPP.

Shift to emerging countries advances

--How do you view the world trend surrounding the advertising business?

Sir Martin Sorrell:

Looking back the past five to 10 years, we have gotten through many storms such as emergence of new powers including companies like Google, and the prolonged recession, but the advertising industry has managed to prosper.

If you look at WPP’s business today in comparison to 2000, it is a very different picture today. Our strategy now has four objectives:

Firstly, it is “new markets.” The business has been gradually shifting to the rapidly growing markets, such as BRICs and NEXT11, consisting of China, Southeastern Asia, Latin America, Africa as well as East Europe. Looking at the ratio that these areas account for in the WPP Group sales, it now stands at surprising 31% from only 15% in the year 2000.

The second is “new media,” i.e. digital. The digital domain was virtually zero around the year 2000, but it currently occupies about 35% of WPP revenues. With the growing economies mentioned above and the digital combined, our objective is to make it 40-45% in the total sales of the Group.

The third point is the expanding “investments for data.” Although this was part of our business including a quantitative research, it has grown along with the digital expansion, which now accounts for 25%.

The fourth is an importance of “horizontality” or encouraging greater collaboration across the companies and countries in WPP.WPP is operating in 110 countries and regions in the world with employees as many as 175,000. The key issue is how to get these human resources work together to address our clients’ challenges, because the clients want to work with the best people in the world, not just an agency or another.

Expectations on “Abenomics”

As far as Japan is concerned, it is critical that Prime Minister Abe succeed with his “three arrows” economic strategies. For the past year, major Japanese globalized companies have posted positive financial numbers. A stronger competitive edge due to weaker yen has been in favour as well. I expect the government’s policies will usher structural changes into the Japanese economy for its further growth.

Japan is still the third largest advertising market in the world (after the US and China). For WPP, Japan ranks sixth or seventh within , the country still remains an important market for WPP with 4,000 people generating around 600 million dollar-revenue.

 

--What advice would you give to marketers for Japanese companies operating globally?

Sir Martin Sorrell:

Japanese multinationals have globalized for many years. It is their strength to have a massive powerful domestic market, but at the same time, it holds a risk that they tend to focus on the domestic market rather than the world market.

One of the advantages of the Japanese companies is their technological base. Japan is a very sophisticated digital internet-based economy, and a very scientific based economy. This gives Japanese companies a very good IT infrastructure and internet basis to build their companies around the world.

Ten world current trends we see in the world are as follows:

1. Shift to the East, South, South-East : The Western nations used to be the center of the power in the world. The geographical change is occurring to the emerging nations, such as China, India, ASEAN, Africa, Middle East as well as Latin America.

2. Overcapacity and talent shortage : While the international economy will see oversupply due to enhanced production capabilities, it will suffers from shortage of human resources chronically because of the aging society.

3. Rise and rise of the web : It will keep taking lead of environmental changes in media.

4. Growth of retail power : With the rise of e-commerce, the power balance between manufacturers and retailers is changing.

5. Importance of internal (in-house) communications : It becomes an important theme equal to external communication.

6. Global and local structure : For global companies, while they will move toward power centralization by HQ, initiatives focusing local activities will grow more and more important.

7. Relative power of finance and procurement : Triggered by the organizational cost reduction efforts after the Lehman shock, marketers cannot ignore these two departments.

8. Growth government : Governments have come to introduce active stimulus packages toward various economic issues.

9. The acceptance of social responsibility : Concepts, such as CSR and sustainability, are penetrating into companies. They have come to take a more positive attitude, thinking that fulfilling social responsibilities will contribute to their business as well.

10. Industry consolidation : As far as the advertising business is concerned, this is occurring not only among clients’ industries, but among media and advertising agencies as well.

 

Geography and Technology are the drivers of the advertising business.

Sir Martin Sorrell

After doing his MBA at Harvard University, Sir Martin established WPP after working for an advertising agency. WPP acquired leading advertising firms such as JWT, Ogilvy & Mather and Young & Rubicam to bring them under his umbrella to make it the world’s largest advertising group. Involved in support activities in many international business schools including Harvard, he serves a board member in the F1 managing company as well.

 

To the next stage by taking advantage of the Olympics

--What fields will the WPP Group focus on from now?

Sir Martin Sorrell:

Taking a look at the 1st quarter of this year (January-March), we have focused on the four fields I have just mentioned at the beginning: (i) newly growing markets, (ii) digital, (iii) data business, and (iv) horizontal partnerships. They are boiling down to two things: “geography” and “technology.” They are the drivers of our business.

Another movement we pay attention to is the Olympics. Needless to say, this is the world’s biggest sport event. Only the FIFA World Cup and F1 can be comparable to the Olympics in terms of international appeal and influence. The 2020 Tokyo Olympics must definitely be the biggest opportunity for Japan.

Michael R Payne:

The Olympics can change the brand positioning of the country itself. The Beijing Olympics and the Sochi Winter Olympics have changed our image of China and Russia greatly. So were the first Tokyo Olympics held 50 years ago in 1964. This was the very moment Japan returned to the world’s center stage. The Tokyo Games scheduled in 2020 will be appealing globally that Japanese economy has revived, and the world will be impressed that the country is advancing to the next stage.

 

Draw up a "story" for development of Japan toward the Olympics.

Michael R. Payne

Michael R Payne joined the International Olympic Committee (IOC) in 1983, and assumed the first Marketing & Broadcast Rights Director position. He was involved in the marketing activities in 15 Summer and Winter Olympics altogether. Following resignation after the Athens Olympics in 2004, he has been active as a consultant for sport businesses and companies. Michael R Payne acts as a special advisor for the WPP now.

 

--What can you expect of the Tokyo Olympics to be held in 6 years?

Michael R Payne:

There is no doubt that it will be a magnificent event. I can tell, even just hearing the presentation for bidding to the IOC.

The challenge and opportunities will be how to take advantage of hosting olympic games and use the games to evolve the brand of Japan and the Japanese industries to next level.

A host country tends to put full focus on building game sites and progress of construction, but what those in leadership such as government officials should keep an eye on is the legacy, or the assets the Games will leave behind. Should really take your time to understand the potentials and the opportunities for the city, the country and the industry. Hosting the Olympics without fully recognizing the significances to be brought by them, Japan could let one-in-a-million chance slip by.

The same thing is applicable to companies. It is not just sponsors whom the Olympics are valuable to. I recommend that each company closely examine and appreciate the opportunity the Olympics can offer.

 

--Can we expect that the Olympics has a ripple effect throughout Japan, not confined to Tokyo?

Sir Martin Sorrell:

The Olympic torch relay will give one suggestion. The torch travels around the country over about 100 days, which will help to rejuvenate rural areas.

Michael R Payne:

The torch relay always plays well. And Japan and Japanese companies should develop a legacy story around the Game.

Everybody should study the potential of the asset you now have acquired, the potential of what the olympic games can represent.

My advise is to go back and look at the previous games and look at where they worked successful, where they fully realised the potential of the opportunity and where they missed things.

Sir Martin Sorrell:

In the 2012 London Game, under the theme of revival of the eastern region (poverty stricken area), the effort was made to develop and educate the youth by placing the main stadium in that region. Such a meaningful story-telling is needed. It should be beneficial not only for Tokyo, but for the whole country.

The London Game is said to be the first digital media-driven Olympics. Japan gains an advantageous position uniquely in the mobile phone section, for example. The 2020 Tokyo Olympics will be more sophisticated taking advantage of these technologies.

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