Dynamic Marketing Communiqué

WPP: From wire baskets to world leader (in communications). How to grow a small scale business into a big one? Monday Marketing Marvels

January 27, 2020

DYNAMIC MARKETING COMMUNIQUÉ
Monday Marketing Marvels

With a net worth of £368 million as of May 2019, Sir Martin Stuart Sorrell is known to be one of the highest paid executives in the UK.

Sir Martin Stuart Sorrell is a British businessman and the founder of WPP PLC.

Before WPP, he worked at Saatchi & Saatchi (a global communications and advertising agency network) in 1975. He was given the position of Group Finance Director from 1977 to 1984, where he designed and carried out many of Saatchi’s agency acquisitions.

This was when he learned and practiced the “earnout.”

Earnout = “a pricing structure in mergers and acquisitions where the sellers must ‘earn’ part of the purchase price based on the performance of the business following the acquisition”

First… Wire and Plastic Products

In 1985, Martin Sorell invested in the controlling stake of a small manufacturer of wire baskets and teapots in the UK.

This manufacturer was called Wire and Plastic Products.

He used this as the foundation. He went on to build THE international advertising and marketing services group.

Wire and Plastic Products?

Yes… WPP.

The company grew rapidly in the next 30 years.

Starting with large acquisitions down to small-scale M&A, while growing the company organically.

Today, WPP is home to the most admired and successful agency networks in the industry.

…Companies like J. Walter Thompson, Ogilvy and Mather, Young & Rubicam, and Grey.

All of which are experts in fields like advertising, marketing, public relations, digital and social media, sales, and brand identity consulting.

“The company has been a leader not only in scale but in the modernisation of the industry – pioneering the application of data and technology to communications, the consolidation of media buying to achieve the best outcomes for clients, and the seamless integration of different marketing services to provide clients with the most effective and efficient solutions.” – Our History, WPP.com

Some of their achievements:

  • 2002: First marketing services company to publish a sustainability report
  • Remains a leader in the industry – member of the FTSE4Good Index and the Dow Jones Sustainability Index
  • Most Creative Group from 2011 to 2017, Cannes Lions International Festival of Creativity
  • Most Effective Group from 2012 to 2019, Effie Index

WPP PLC’s Earning Power: Valens Research vs. As-reported numbers

WPP PLC makes for a great case study that we come back to regularly. One great reason? The firm truly has proved to be a phenomenal earning power generator.

Those are the true blue bars representing earning power (Uniform Return On Assets). The number is well over 22% for more than 20 years.

The global average of this number over the last 60 years is just 6%.

The orange bars are the as-reported financial information. If you relied on these numbers, you wouldn’t know this—you’d just see the 3% orange bar when you look at the as-reported ROA (return on assets, measure of earning power).

That’s what you’ll see in Yahoo Finance, Google Finance, and most other databases.

So, how is WPP PLC actually doing now, and how has the integration of different marketing services to effectively fulfill client needs been an effective tool in their business?

The research and results don’t lie. Earning power (the blue bars) has been up and continues to show results much higher than what traditional databases show.

The stock price performed better than the rest of the stock market (the blue line), with returns well above 1.0x the market.

WPP’s unique strategy of merging and acquiring advertising heavyweights was a clever and genius move.

It may not have been just one marketing campaign that paved the way to their success but it was definitely the collected effort of all those they’ve acquired.

Being the world leader in the communications industry, they have proven that their methods and business model work.

About The Dynamic Marketing Communiqué’s
“Monday Marketing Marvels”

Too often, industry experts and the marketing press sing the praises of some company’s marketing strategy.

…Only for the audience to later find out that their product was a flop, or worse, that the company went bankrupt.

The true ROI in marketing can’t be separated from the business as a whole.

What good is a marketing case study if one can’t prove that the company’s efforts actually paid off?

At the end of the day, either the entire business is successful or it isn’t. And the role of marketing is always paramount to that success.

Every Monday, we publish a case study that highlights the world’s greatest marketing strategies.

However, the difference between our case studies and the numerous ones out there, is that we will always make certain that the firm really did generate and demonstrate earning power worthy of study in the first place (compliments of Valens Research’s finance group).

By looking at the true earnings of a company, we can now rely on those successful businesses to get tips and insights on what they did right.

We’ll also study the greatest marketing fails and analyze what they did wrong, or what they needed to improve on. We all make our mistakes, but better we learn from others’ mistakes—and earlier, rather than later.

Hope you found this week’s marketing marvel interesting and helpful.

Stay tuned for next week’s Monday Marketing Marvels!

Cheers,

Kyle Yu and Joel Litman
Head of Marketing & President and CEO
Valens Dynamic Marketing Capabilities
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