NEWS19 April 2016
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NEWS19 April 2016
Martin Sorrell, CEO of WPP, covered all the big issues at Ad Week Europe in London yesterday – 18th April – from the state of the economy and how that may or may not be affected by Brexit, to the US election and today’s media landscape – saving his controversial pay packet to last.
"To survive in our business you have to be optimistic so everything is always wonderful. But it’s a low growth environment – that’s the new normal," said Sorrell as he talked about today’s business landscape and how it impacts on WPP’s business.
He talked about adjusting to a low growth, and very low inflation environment, and how that meant everything focused on cost. "The biggest function we deal with in our client base is procurement – I'm not moaning about it, clients have to be low cost."
With the world economy growing at about 3 – 3.5%, Sorrell said it was about looking at the variation within that, as there are sectors growing 6% and others at 0% – "so it’s about picking countries and sectors where growth is".
"What I worry most about is client short-termism, no criticism, it’s just a fact of life. And marketing budgets remain under pressure," he added.
But he said it’s vital for businesses to continue to invest in brands as those with the highest value brands – as demonstrated by its annual Brand Valuation survey – consistently perform the best. "So investing in brands, which is building top line revenues, will win."
Business caution
Sorrell said he felt a direct result of the collapse of Lehman Brothers in 2008 was an increased caution among business leaders. "Corporates were battered and bruised and psychologically affected... There has been a steady increase in buy backs and dividends which shows they think the money is better in the hands of shareholders than in the hands of the business. People are scared on making mistakes; CEO tenure is 5 – 6 years so they're almost on a political cycle."
In terms of WPP’s businesses he said he had urged the more traditional business to move into digital as fast as they can; for his digital businesses to globalise as fast they can and not be afraid of business cannibalisation. "If we don't eat our own children someone else will. We have to invest in areas that will dis-intermediate and disrupt. So we invest in tech, data and content."
During questions about media use and where consumers spent time, along with which media they were most engaged in, Sorrell admitted mobile was the area that was under-invested in. "We haven't contextualised mobile as much as we should. We don't target as well as we should and we don't do creative as well as we should."
Brexit
When it comes to the Brexit vote Sorrell admitted he was worried. He said there were "three buckets to consider" and when those were looked at the balance was in favour of staying in the EU.
He also predicted Hillary Clinton would win the US election. "The economy is in a good shape and don't underestimate the power of the first female president." And he saw Donald Trump as representing the popular end of the vote in the same way Farrage has in the UK but added that the Republican party was "out of touch with the change in demographics in the US whereas the Democrats understand that."
Compensation
And finally the question of compensation arose. While at no point did Sorrell explain why £63m was justified, in general terms he argued that it was "philosophical" because he'd established the business as a 40 year old when he invested his own money in WPP and that it had been an entrepreneurial enterprise where he'd taken all the risk.
He said in five years the share price had risen from 665p to 1645p – "we have been successful, it’s reward for performance with risk attached."
1 Comment
Anthony McAllister
9 years ago | 1 like
So in a lower growth environment companies concentrate on low cost procurement. Should that apply to executives, Mr Sorrell?
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