The big talk on Madison Avenue last week was about Dell, which announced that it will consolidate its $1.5 billion yearly account into a new 1,000-person entity code-named “Da Vinci”, that will be built out in the next few months from within the giant WPP holding company.
It was a big win for WPP, which succeeded over the big holding companies for Dell’s business, and, at least on a surface level, seems to be a win for Dell as well; there’s no doubt that having more than 850 ad agencies servicing different parts of its account produce major inefficiencies. But there are big hazards to Dell’s move as well, and I’m not sure that they’re apparent to its current management. These perils relate to what happens every day in the field of search, where large accounts, because they’ve signed a big agency of record deal with a conglomerate, are saddled with the conglomerate’s search engine marketing subsidiaries, which may or may not be stellar performers in their own right.
A very simple analogy illustrating this quandary is drawn from the world of high fidelity audio. True audiophiles know that the only way to assemble a world-class sound system is to choose best-of-breed components at each stage in the signal chain, including tuner/pre-amp, amplifier and loudspeaker. The “component approach” to building an audio system works so well because the buyer is never locked into the choices (and compromises) provided by a given manufacturer, who may know a lot about building pre-amps but nothing about building loudspeakers.
Of course, most people don’t buy stereo systems this way. They shop around for awhile, scan a few reviews, and then buy whatever bundle of components Sony, Panasonic or Philips decided to throw into the box. And most of them are happy with the results, because the system “sounds good enough.” But no one who takes sonic fidelity seriously would think of buying a system this way.
Listening to music is one thing. Running a business, especially in the hyper-competitive personal computer systems field, is quite another. Dell’s marketing model is inherently more complex than it was back in the good old days of running ads in Computer Shopper and taking orders by phone. There are a multitude of components that vary per marketing channel, via region, and per product line. Never have the challenges to Dell been greater (given the encroachments of HP and Apple on its core consumer business), and consequently the need to choose top-performing marketing components.
But Dell, instead of pursuing a component approach and tackling its waste on a case-by-case basis, is taking a giant leap this time around. It’s putting all its marketing eggs into the WPP basket.