Tesco’s modern advertising model

The new model Tesco have gone for with their £110m advertising account has provoked a great deal of interest; not least due to it being made public which is new news.

The combo of Wieden & Kennedy and TagWorldwide makes enormous sense as it gives Tesco the two key roles placed with people ‘fit for purpose’ for each role. On the one hand W&K can deliver leading edge thinking and creative ideas with TagWW on the other hand delivering the volume necessary to a high standard. I think it would be fair to suggest neither party would claim to be capable of doing the other parties job, it isn’t how they are set up.

What is very interesting is the emergence of a business such as TagWW capturing such large and lucrative contracts, at the expense of the traditional ad agency. It feels like a sensible and inevitable development of the wider advertising marketplace.

A quick bit of background. 20 years ago the ad agency would develop the creative ideas and a production supplier would do all of the technical work necessary to get a 48 sheet poster ready for printing and passed on to the media owner. Tag was one of several leading suppliers to ad agencies. The production supplier never worked directly with the advertiser and was regarded as a ‘below stairs’ function.

What has changed is technology, something ad agencies are not inclined to invest in; good ad agencies invest in talent that goes up and down in the lift each day. 20 years ago press ads for Absolut vodka (a TBWA client when I was chairman) would have required being handled in every country where the brand was advertised as the local requirements for mechanicals would differ. Today this can be done from one central location as is the case with Absolut with Tag. They can also handle translation, adaptations, re-touching, etc., all from one location and then supply them direct to publications around the world electronically. Saves shed loads of duplicated cost, provides consistency and the end to end task is faster.

Whilst this development might seem like a threat to ad agencies I feel it is liberating in many ways. A good ad agency should be about great thinking and outstanding creative ideas. At the end of the day clients need this in quantity if advertising is a genuine differentiator for their brand. It should not be confused with the necessary engine room required to transmit finished work to countless locations and countless media owners – as the world shrinks the volume of end product increases exponentially.

It also allows smaller, creatively driven agencies, to legitimately work for large clients as size no longer matters; it’s all about the quality of their work. Intel for example have what they call “open source creative” where the client can work with a small hot-shop in San Francisco and pass the finished work on to their distribution supplier. When Simons Palmer pitched for the launch of PlayStation I asked Chris Deering, the President, how could we win as we were a domestic agency. He reply was far-sighted as he said ” You can give us the calibre of creative work we need, the rest is purely distribution”. Ironically our solution then was to use Ogilvy as our distribution partners in the days before a Tag existed in its current form.

This new breed of partners have gone through, and will continue to do so, significant change to meet the demands of a changing world. Back in the old days they had reps who would deal with the production departments of ad agencies whereas today they have huge IT departments, language directors, graduate training schemes, staff from ad agencies, plus global client liason people who travel around the world. A massive change in a short period of time.

It would appear the Tesco initiative was driven by the client as both W&K and TagWW didn’t work together on the pitch; my contacts tell me they never met or spoke to each other. Again an interesting fact and perhaps one suggested by the intermediary on the pitch – Oystercatchers. Their know-how on the wider industry will be tuned in to all of these developments and therefore a fairly simple bit of advice to a client considering change. Putting up alternatives makes sense giving the client options to consider.

It also can work more effectively with the involvement of procurement. Procurement people find it very difficult to deal with fluffy concepts, they deal with the cost of finite deliverables. Years ago I had my first experience of procurement with BT. We had just won the consumer advertising account and the client said it was not acceptable to work on the basis of commission or fees. We thought about the procurement people who were obviously comfortable sourcing ten miles of copper cable and decided to propose a menu of items. £X for a TV commercial, £Z for a 48 sheet poster and so on. They bought the idea which turned in to a cash cow for us and removed all debate about cost.

In the Tesco example the division of labour is much easier to quantify and therefore makes it easier for their procurement team.

It feels like the Tags of this world have made the leap from ‘below stairs’ to the top table. My view is smart and talented ad agencies should see this as a good thing because it opens up a world of potential clients hitherto unavailable to a local hot-shop.

Image: http://www.flickr.com/photos/osde-info/5280679583



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