Separate P&L’s Have Always Been a Bad Idea, But In This Economy, They’re Toxic

I love competing against the holding companies in this current economy.

The big agency model has its pluses and minuses even in good times. But, when clients are singing the blues and cutting costs at Mach speed, the big agency model is an albatross, or worse. And, as Dan Orsborn points out in his PRWeek column, the big agency, multi-office, separate profit & loss strategy, in particular, is a gigantic lose-lose.Istock_000003282632small

Like Dan, I come from a big agency background and I saw, firsthand, the dysfunctional nature of separate P&L's. The agency's offices compete against one another for the client's dollars and possess little, if any, esprit d'corps. The client, meanwhile, ends up with a disjointed team that often finds itself at cross-purposes (i.e. the Oakland office will fight hard to bill for an upcoming event even though the Altoona branch is best qualified to handle it).

The current economic meltdown is having a seismic impact on the traditional advertising agency model. I've witnessed entire traditional ad campaigns wiped out in a nanosecond by a cost-conscious client. And, I'm positive some of these very same clients will wake up to the ersatz, separate P&L's model and insist on one seamless team and invoice.

Separate P&L's is a bad business practice that I could easily see the marketplace correcting in the next year or so. That said, the big guys are about as flexible as an aircraft carrier in the Panama Canal, so who knows? In the meantime, I can't wait to address the benefits of a single P&L in my next new business pitch.

5 thoughts on “Separate P&L’s Have Always Been a Bad Idea, But In This Economy, They’re Toxic

  1. I was headed toward the advertising/pr issue.
    But, yea, in the end it is their dime and their call…as foolish as they can be at times.

  2. Not sure I totally understand your question, Lunch. In this economy, agencies have little choice but to go along with lowered fees. We can suggest smarter, more cost effective ways for a client to allocate his/her budget and do so quite often. But, it’s their dime (or nickel, as the case may be).

  3. what then, would you say to a client that asks for a deal on the retainer when you know other money is being wasted elsewhere? it’s dicey in that the more we lower those retainers, the percieved value drops, too.
    interesting argument there…

  4. Repman – It’s nice to be nimble when times are tough and clients start scrutinizing the bottom line. Those firms with a straight forward pricing model that focus on delivering value and stretching the dollar are the best positioned. It’s all about . . . dollars and sense.