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Needs must

In Advertising, Communicate, Dubai, Published journalism, Q&A on November 23, 2010 at 6:50 pm

Richard Pinder, now promoted to CEO, tells Communicate that, for Publicis, “better value” is not the same as “lower price”

Originally published in Communicate, June 2009

When Publicis Worldwide’s then chief operating officer (now CEO) Richard Pinder came to town, Communicate caught up with him to find out about the importance of value, North African creativity, and how Publicis Graphics (the regional manifestation of Publicis Worldwide, which is the lead creative agency in the Publicis Groupe holding company) should be winning more prizes.

In the financial downturn, how are consumer habits changing?
We are doing a lot of research around the world, and what we are seeing is that no one is spending because they have [money], and no one is spending because they feel it might be a nice idea. They are only spending when they need something.
What you have to do is convince people – more than ever in the whole history of our industry – that they need an item. It comes down to a value equation, convincing someone that postponing is a bad thing, that now is the right time to make an acquisition.
If we talk about televisions [for example], can you persuade someone that now is the right time to buy an LCD? They’ll never be cheaper; everyone wants HD because everyone needs to be high-definition; everyone’s digital because all analog’s being switched off. But even that doesn’t make me buy one today, because I’ve heard about this for the last two years. But if you tell me electricity prices are going through the roof, and an LCD doesn’t use any electricity on stand-by, maybe that’s enough.
Another dynamic is that of making even high-priced items look good value. In the United States, you can buy a new Hyundai on credit terms, and if you lose your job you give the car back, no further payment necessary. You have no liability. So you can buy a Hyundai – a brand new one – with no fear that if you lose your job you are in trouble. This is brilliant; it’s a value equation, it’s bringing forward a purchase that would otherwise
be postponed.
You’ve made someone feel that they need something, and that’s really what the new value equation is about. It’s bringing forward a purchase by convincing someone that it is an intelligent, rational acquisition, not an emotional one as it was in the past.

Is that happening in the Middle East and North Africa?
It’s happening some, but at the moment in this region people are deferring to price. And one of the things you quickly decide is that price is very short-term compared to value. Of course, mathematically, quantity over price equals value. However, the problem is that if you have people unwilling to spend, dropping the price 20 percent, 25 percent, or 30 percent is a bit like boiling a frog. At what point does the price fall so far that you think it’s brilliant value? The answer is probably vastly further than a manufacturer would wish.
If you think of the last day of the sales in the big retail establishments, items are priced at 30 percent of the original price. You might buy because you think, I’m paying one third, so it doesn’t matter if I buy three shirts and I hate one, because I still got a good deal.
But that’s 70 percent off. I don’t think that’s the right mentality for selling things. Telling people there’s a little bit of a discount does not bring forward an acquisition that has been frozen in their minds because they have convinced themselves that there is no need. That’s why you have to go for value, not price.

Are advertisers moving to digital?
Very strongly. We saw the number of our employees worldwide in traditional advertising fall substantially over one year because we were driving costs out, driving efficiencies, trying to be clever with the money we still had, and we could see the advertising revenues themselves flatten down depending on the country.
But digital revenues are up enormously. I mean numbers anywhere from 30 to 60 percent per annum in growth, and all at a reasonable margin. So the margin is not the challenge. The issue is actually managing growth. Managing explosive growth is actually quite hard because you have to do two things: You have got to manage the cost side of the traditional business as the revenue falls, at the same time as managing the explosive growth in a controlled fashion and not adding costs.

How is Publicis doing in the region?
Publicis Worldwide is managed by Publicis Graphics here. And Publicis Graphics is a business that has tremendous links with Nestlé and other big, established clients. It’s a business that tends to do quite well because those clients aren’t affected in the same way as others by economic slowdown. As long as you’ve convinced people that your ground coffee is better than the others, you’ve convinced them of value. They will still buy ground coffee; it’s not a huge acquisition price. So we are doing fine; last year was the best year ever – the usual story, I guess, in the region.

The agency has been quiet at awards, though.
Exactly. In the Lynx, I would like to see more Publicis in the awards show. We are in other festivals, we are moving up very fast in the Gunn Report – we are the [fastest] rising in the last 10 years, and we would like to keep that going and have the Middle East play its part.

You moderated a debate at the Dubai International Advertising Festival about creativity in North Africa. Is that a Publicis strongpoint?
I think it could be a stronger point, actually. We are good, we have no huge flaws, the business makes good money, it’s growing… All the usual things you look for in dynamics. But I think it could be stronger. Our [Publicis Groupe] chairman and chief executive [Maurice Lévy] was born in Morocco; our own chairman of Publicis Worldwide, Olivier Fleurot, was brought up in Algeria, and I reckon that’s a two-nil compared to any other holding company or network. So we should have a disproportionate interest and capability in the region. We are the one with our headquarters closest to it [in France], so I’m expecting more.

Is creativity in North Africa coming of age, or does it still have a long way to go?
A long way to go. If you talk to the guys doing their great work out of Leo Burnett Egypt [winners of the Print Grand Prix at the Lynx (see Regional News, page 14, Communicate, Apr. 2009)], they will argue that they haven’t found their voice yet. They will be very provocative and say, “Thank you for telling us we found our voice. We found a voice; we’re not sure we have found the true, deep Egyptian voice yet.” But I like it – the ambition.
It’s like Russia after the Berlin wall came down: Gorbachev took the wall down, that was the big step. The big step [in North Africa] was to stop the jingle advertising in Egypt. Now the question is evolving and working on the work until it is truly Egyptian, so the international arena, when it sees it, says, “This is Egyptian work.”

Are you going to be opening new offices in the region?

I don’t think we have any ambition now to open any more offices. We are where we need to be. I think the challenge is to make those offices even more compelling to clients, so that we are more attractive and selling more, and to be in the top tier of performance, which you measure by revenue, obviously, and profits, but equally reputation and creativity. These are the components that I want to focus on, because we have the revenue, we have the profit, we have recognition, but I am not sure we have the right balance of creativity yet in our mix. So that’s what I want to see more of.

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