GroupM global president Dominic Proctor talks procurement, growth in India and how his company will avoid a race to the bottom

GroupM global president Dominic Proctor made a fleeting visit to Singapore where he spoke exclusively to Mumbrella chief reporter Steve Jones about the market environment, growth potential in India and the pros and cons of dealing with procurement.

Let’s start with a look at the global market conditions. WPP chairman Martin Sorrell painted a bleak picture last week, despite a pretty strong financial result, suggesting there is misplaced optimism, tepid economic growth and a risk-averse client. Do you agree with that less than upbeat outlook?

Yes I do, not that I have to, but I do. We are cautious, typically we are cautious in how we set our budgets and how we set our plans, we are careful not to be too extravagant and stretchy, that’s the culture.

No one is sure what the recent corrections coming out of China will mean, but probably more caution.

If you talk about all the big pitches going on, some of those – a lot of those – are to do with procurement and cost control. It’s by no means all of them, but there is a lot more pressure on cost through procurement.

We do worry generally, not for our company but for marketing, that despite having strong balance sheets companies are tempted to cut their way out of the problem rather than spend their way out of it.

Can you provide an overview of GroupM’s performance?

Overall we are doing pretty well.

If you look at the standard RECMA definitions we have a market share of 31 per cent, a share of all their qualitative measures of around 35 per cent and a share of all growth in the last three years of 40 per cent. So from that perspective we are doing fine around the world.

We don’t have any geographic black holes thankfully. Of course we have some geographies which are stronger than others in terms of market share, but we don’t have disasters or black spots.

Functionally we are broadening our footprint. For example, right now we are launching a sports marketing business called ESB Properties where we are developing a business that represents sports rights owners to clients. It’s taking their IP and trying to link that with the most appropriate brands.

We’ve also recently started a business called Gain Theory which is more ROI and econonometrics are we are developing our content business, Groupm Entertainment.

They are examples where we are broadening our footprint basically in line with what the clients’ demands.

You mention cost pressure through procurement. They are responsible for the emphasis on price, as outlined by Martin Sorrell?

It’s partly procurement controlling costs and it’s partly CEOs being worried about the medium term business environment…there’s just a high degree of uncertainty.

Are you finding procurement is playing an increasingly involved role in negotiations?

It’s definitely a trend but I don’t want to suggest that it’s always a particularly bad trend.

We are strong believers in procurement partly because what we do for a living is measurable to some extent and procurement teams measure things.

So the more effective we are, and the more we can prove effectiveness or spending money efficiently or things you can measure, potentially the better it is.

When we work with well briefed procurement people it’s often good for business. It’s not always a threat. People often raise the subject of procurement as though they are raising some massive evil or illness, but that’s often not the case at all.

But what happens when procurement teams are not well briefed?

That’s where we take issue. We take issue where procurement people, either external procurement people employed by clients or people within companies, don’t know enough about the intricacies of media and maybe apply learnings from other procurement activities.

What we try to avoid as a business and an industry is a race to the bottom.

And how often are they poorly briefed?

It’s the minority of cases, but we still need and want to spend a lot of time really trying to educate people on what it is that we do. And I am sure that’s the same for any supplier that is selling services to procurement teams. Not so much product, but services.

Where does that misunderstanding lie?

The value of things. It could be too easy in our business to buy the wrong thing well. By that I mean…if we become totally led by achieving a price, that price is often achievable by buying the wrong thing.

What role do marketers have in this? Do they feel their hands are tied and decision-making is being taken out of their hands?

No, not completely, I don’t think so. There’s normally a team which involves marketing and procurement management. There’s a different emphasis on that in different companies of course, but I don’t think marketing feel powerless.

If I was a CMO I’d love to work with a really good procurement director to make sure we were getting the right thing at the right price and not the wrong thing cheaply.

You said earlier that GroupM, and the industry, is trying to avoid a race to the bottom. But the reality is, you are operating in a cost-conscious environment and have to price accordingly?

We’ve got a lot of big pitches going on all around the world and I fully expect us not to be the low cost provider in all of those pitches.

We properly quantify the value of what we are talking about. We try and have a position where we are comparing apples with apples, we demonstrate through our credentials and our history and our other clients – and old fashioned virtues like trust – that we will deliver what we say.

Our overall position as the market leader is we certainly won’t always appear to be the cheapest in a pitch but our position is that we will always deliver what we say.

So GroupM agencies will categorically refuse to get dragged into a price war?

I can categorically say that we won’t always be the lowest cost provider in a price driven pitch. We are not desperate. Why would we take on contracts that we can’t fulfil in a business that is growing and being well managed for the benefit of clients?

What we expect is that clients look at these pitches in a broader way than just cost. The implication is that these are all driven only by cost but that is not the case. Some are more price driven than others and they are clear about that and proud about that, and that’s fine.

As long as you understand the rules of the game that’s fine. I don’t think any of the current pitches are 100% driven by cost.

There are more global pitches than ever before, a trend branded ‘mediapalooza’ by the US trade press. What does this trend mean for GroupM?

Yes, there are far more [global pitches] than there ever have been in the history of our business.

It puts a lot of stress on our people and the business because to do a pitch properly and to really give it proper attention it takes a lot of time and clearly it makes zero sense to have people working so hard on a pitch that they neglect and then lose their current clients.

That being the case I am happy that on some occasions we walk away from pitches because we don’t have the capacity, or the terms don’t make it worthwhile to pitch.

What’s the market dynamic that is driving this increase in global pitches?

I think that there are two or three things that maybe overlap. There are some companies who are in their natural pitch cycle and there are some clients, maybe the majority, who are very concerned about doing the right thing in the future, about making the right choices and who are doing a sense check by holding a pitch.

And I think there are some clients who in pitches of a couple of years ago have not delivered what had been promised and are going back to the well.

It’s a combination of unfulfilled pricing expectations, market knowledge and natural pitch cycles.

There are deals in the range of $25b up for grabs. Given the potential value of them individually, how many is GroupM competing for?

The majority we will go for because for any company, a sign of life is growth so you try and grow by growing your market share.

The ones we won’t go for are the ones where we feel the terms offered would be to the detriment of our business and therefore our ability to service the other clients.

Let’s turn to Asia. How are you going in this part of the world?

Asia is going well overall. We have no issues, no blackspots.

This region always been a very big part of our company. In some ways we started in Asia. Our first agency in the group was Mindshare which launched in Asia so we have deep roots here and therefore we have grown well with those deep roots around the region.

Of the big markets I’d say India is a real stand out, both in terms of the scale and the momentum in developing a broader footprint. We are growing much quicker than India’s growth generally.

Our belief within WPP is that media investment management is really the only area of WPP that benefits massively from scale, where our clients gain massively from scale.

In India we have developed a highly scaled proposition where we have 43 per cent of the market which gives us the resources and the wherewithal to invest in broadening the footprint.

What are the challenges in a market like India?

The challenge is a market challenge which is to accelerate the growth of digital.

Digital still accounts for less than 10 per cent of media investment and there are structural things which clearly are impediments.

It is one of the things the Indian market is wrestling with in general – how to further digitalise the media economy and how to fund that process. It’s a very complex problem in a complex country

It explains why print media is thriving in some of the rural communities. There is very hyper local print, with no digital products attached because there is no digital penetration.

TV is quite strong, and still based on a very strong Bollywood product.

Is there a really a need to digitise then if traditional channels are still so strong?

It’s a fair point. The answer is no if look at India as a billion people. But the answer is yes if you look at India as nearly 200m people who consumer global brands. Then it’s a smaller country, so the need and the thirst to digitise that community is strong.

China has obviously has its problems recently, but that must be seen by the company as very much a growth market?

We start from a position in China where we have a lower market share [than India] because a lot of Chinese business is still conducted locally through brokers.

The business there is more transactional therefore our product footprint is narrower although it will certainly expand as the market develops.

As we sit here today we do think the stock market correction is a correction and not a fundamental problem. As Martin [Sorrell] said, we are still very bullish on China. Perhaps it was slightly overcooked but we think it will cook again. So we are in China for the long term. It’s a big bet for us.

What about the more establish markets, Singapore and Malaysia for example? Are they holding steady?

They are holding steady and a bit more so. When we look at the world of media communications, there are more global similarities than there are differences so I think the trends that are happening in the smaller markets, let’s say Southeast Asia, are very similar to those in the bigger ones. They just go at different paces.

One of GroupM’s former executives in Australia, Danny Bass, got into hot water by saying the TV model is broken. Do you agree with that observation?

He did get into hot water. No, not at all [agree with him]. The model is not broken. It’s more challenged, of course it is. When viewers have got so many other media types to digest you are going to have challenges for sure but we don’t see the death of TV.

OK, maybe not the death but the gentle decline?

Who knows? Viewing figures in some parts of the world and for some types of show are increasing, not decreasing. People are consuming more and more media in different ways and the distinction between viewing something on television and viewing something exactly the same thing on something which isn’t television is a blurred distinction.

Finally, it’s been well documented how tough it has been for brands and marketers in such a evolving media landscape. But it also must be tough for a company like GroupM? You too have had to evolve.

We were talking about this with some of the younger people in this company.

It’s not so tough if you really listen to the market and listen to marketers about what they want and what they expect from their agencies. You change accordingly. I think that’s the key to it.

I don’t think it’s been that difficult to adapt once we have established the direction to go in. I think some companies trip up because they find it fairly easy to get to a new strategy but then impossible to execute.

The strategies that we adopt take in mind fully how to then execute the strategies in the market.

So having the idea is one thing, getting it done is more tricky. We design one with an eye on the other.