The claim by M&C Saatchi's Lord Maurice Saatchi that the global multi-agency networks are trying to commoditise the marketing communications business, including the creative process, amply underlines the difficulties facing small, independent operators today.
In today's 'think global, act local' world, agencies without the breadth of global operations are understandly at a disadvantage.
Clearly, Lord Saatchi's assertion is borne out of his agency's size and its limited network, which makes it difficult for M&C Saatchi to compete against the big boys for plum global assignments.
But that is not to say that commoditisation isn't an issue. Going by clients who say they can barely differentiate one agency product from another, it is.
The main agency networks have similar tools, processes and best practice benchmarks. The differentiator as it currently stands is how they use their skills, knowledge and people to help build their clients' businesses through strategy, ideas and creative execution.
However, the agencies are also coming under increasing pressure to not only come up with impactful campaigns but also deliver a return on advertising investment. Clients are also increasingly using procurement executives to quantify all aspects of operational costs, including advertising and marketing.
This is where Lord Saatchi's "unspoken conspiracy" theory among the big publicly-listed networks comes into its own. He says that in order for these networks to create shareholder value, they have come to the conclusion that the most efficient way is to fuel growth by squeezing out the smaller networks so that in the end there would only be four or five major groups with little else to speak about. "You can see how they would act on the perspective they have. They would feel that the best thing that could happen would be that creativity be downgraded (along with the associated costs) and sell bundled services at a discount. Then they would be the winners," Saatchi says.
He added that people generally welcome lower prices but that in the advertising business ideas and creativity were the bread and butter of the agencies.
"I would agree (that lower prices were better) provided you were prepared to overlook the fact there is a difference between a good salesman and an average salesman in terms of the results delivered."
WPP chairman Sir Martin Sorrell, who was Lord Saatchi's chief financial officer in the late '70s and early '80s at Saatchi & Saatchi, strongly disagreed.
While he accepted that clients are closely scrutinising costs, highlighted by the rise of the procurement function, he insists their prime objective in hiring an agency is to develop ideas. Coordination is second and price is third.
Sir Martin denied that agency networks were "clubbing together" to form a price cartel and said that Lord Saatchi had got the argument the wrong way round.
"If clients have decided they want to put pressure on their costs and procurement functions put pressure on fees as a result of that, that forces the consolidation of the industry.
"At the same time clients are consolidating. At the same time media is consolidating. At the same time retail is consolidating. So the agencies are consolidating as well."
Sir Martin said agencies only have one way to cope with the situation: ensure they have the necessary talent, structure and incentives in place.
Agency chiefs in Asia-Pacific also brushed aside the commoditised observation.
TBWA regional chairman, Keith Smith, says: "We spend most of our time trying to build distinctive brands for our clients. We tell them that their long-term future is all about long-term brand equity. We would be crazy to reduce our own value to some sort of pile-it-high, sell-it-cheap thinking."
Grey Global Group Asia-Pacific president Eric Rosenkranz said that in the creative business, quality talent commands a premium price. "Look at Hollywood, sports or the music industry. Anyone simply differentiating on price will have their income and profits cut drastically and not be able to compete for talent with companies offering a superior product at a premium price.
"Eventually, it is a strategy that will cause the practitioner to lose all serious clients and end up with a grab bag of clients who are not loyal since they are only price driven and will leave the moment they find something cheaper."
Rosenkranz also disputed the notion that commoditisation would drive out the single-brand networks.
Adds Greg Paull, principal of client/agency consultant R3: "Price is one differentiation. But it's also the quality of the idea, which cannot be commoditised."
Marketers strongly agree with this point. Darren Chan, adidas' head of regional brand communications, retail marketing, said that the main role of an agency was to "come up with concept ideas that can be translated over a variety of media - television, interactive, print, retail, point of sale".
But if a full-scale commoditisation of the advertising industry was not on the cards, marketers believe that agencies should focus on generating ideas rather than trying to be a one-stop-shop.
"Agencies talk a good game. They position themselves as a total communications consultant. They push integration, but I haven't seen an agency yet that can deliver on integration. Agencies want to take ownership of the strategy but that's wrong. Strategy belongs to the client. They are confused about their role," adds Chan.
"We give the agencies the canvas to paint on. They can add to the strategy but they should be single-minded in creativity and ideas."
Carlsberg Hong Kong is a case in point. Until earlier this year, its main agency was Grey. Now it is local hotshop Chan Tsang Wong Chu & Mee with the arrangement being on a project basis.
The company's sales and marketing manager Terry Yu notes: "We now prefer to cherry pick. Some agencies are good at PR, or advertising or event management. But we haven't found one that is good in all areas.
"Also big agencies try to sell many products from different departments, but the problem is that there is little synergy between those departments so it's like talking to different companies anyway," Yu observes.
The point is supported by a recent client/agency relationship survey conducted by Orc International which found that of all agency services, effective media buying was most valued by marketers. The next was quality creative work and advertising production. The study also revealed that the one-stop-shop concept had limited appeal among clients.
Price, therefore, isn't the prime consideration of major clients at the moment, however, the fact that these same clients are increasingly extending the procurement director's remit to include advertising would suggest otherwise.
TBWA global chief marketing officer Laurie Coots said that big clients want a master contract and universal invoicing.
"With huge corporations, one of the biggest line items is advertising and they are trying to apply the same cost efficiency rules as they would with pencils and copy machines. If we are not careful, our industry could be commoditised," she warns.
Coots said that some agencies have attempted to counter this by hiring "tough negotiators" but she described this as being the beginning of the end.
"We have to look at this proactively. It's about learning the language of procurement and really being able to understand their aims. This is going to be a huge challenge, but the point will be to demonstrate that there is no unit cost per TVC or full-page ad. If we even try to go there, we will end up in a supplier and not a partner situation."
Coots also revealed that clients are trying to get confidential information from agencies - the cost of producing a specific TVC or employing a talent.
"This is unethical because we would be divulging confidential information of other clients but the expectation is that agencies will give more and more of this type of information to win or keep business," she said.
But Coots said that agencies might indulge the client's requests because of the pressure of meeting business objectives.
"That includes tacking on so-called value-added items such as ideas. That will haunt us all."
Orc International summed up the problem by saying that having been spoilt in the past, clients are now unwilling to pay for valuable services such as strategic advice.
Orc managing director John Dickson says: "During the boom time of the '90s, agencies were flush with money and in order to maintain accounts they started to give away things, including strategic planning advice. This is one of the premium services that they are now finding difficulty to get paid for."
However, there appears to be light at the end of the tunnel. A report by business consultant McKinsey recently indicated that companies are starting to shift away from the cost-containment mode they have been in since the dotcom bust in 2000 to a growth phase.
Sir Martin said that if McKinsey is correct then "the behaviour of clients will change. They will become more obsessed with differentiation".