4 things you need to know about WPP’s growth strategy for a post-Covid world
The aggressive blueprint follows on from Read’s crusade to turn the business around by refocusing energies on digital transformation, creativity and consolidation.
Here, we outline the gist of WPP’s new strategy in four key areas.
1. WPP expects its net sales to return to pre-pandemic levels by 2022
- WPP expects present disruptions to have run their course by 2022 when it has forecast a rebound in net sales to pre-pandemic levels, a full year earlier than expected courtesy of a surge in e-commerce and digital services.
- Annual revenues are projected to decline by 8.4% in 2020 before growing in the low single digits next year.
- The slow road to recovery was set out to investors personally by Mark Read in a video call and follows emergency spending cuts that have slashed budgets across the WPP family, including the likes of Ogilvy, Grey and GroupM.
- Since hitting that nadir, WPP has been successful in winning new work by focussing on assisting clients, such as Wallgreens, Intel and Unilever, that are scrabbling to scale their e-commerce operations.
- Read said: “It has been two years since we set out our strategy to return WPP to growth. We can see the results in our industry-leading new business performance, with $5.6bn won in the first nine months including Alibaba, HSBC, Intel, Uber and Unilever.
- “The actions that we have taken have positioned us well, and we are already working with 76 of our top 100 clients on e-commerce. There are significant new growth opportunities for WPP as clients demand simple, integrated solutions that combine creativity with technology and data expertise.“
2. The company wants to cut costs to the tune of £600m by 2025
- WPP is targetting £600m of gross annual savings by 2025, which it hopes to hit by simplifying operations and trimming the fat from its procurement and real estate budgets.
- Migration towards shared services in finance, human resources and information technology is expected to generate £250m of savings alone.
- WPP will find another £150m down the back of the couch by introducing new ways of working driven by the Covid-19 pandemic.
- This is expected to lower its travel and hotel costs to the tune of £200m, with operations in smaller countries also likely to be scaled back.
3. This money will be reinvested back into the business
- A newly confident WPP now expects revenue growth of between 4% and 5% through 2021 and 2022.
- Around £400m of any cash saved will be reinvested in talent, technology and incentives to promote growth – a policy that could add 10,000 new employees over the next five years.
- WPP will also prioritise investment in digital technologies, e-commerce and new customer experiences in response to shifting consumer behaviours.
4. Finally, it plans to keep pursuing a ‘focused’ M&A strategy
- The London headquartered advertising major expects to spend between £200m and £400m every year on high growth tech acquisitions, increasing the revenue share of e-commerce and marketing technology from 25% to 40% by 2025.
- This extends a pattern of aggressive expansion observed through this year alone from the purchase of data science specialist Sandtable through to the addition of marketing technology consultancy XumaK and customer experience consultancy Velvet.
This article first appeared in www.thedrum.com