McDonald’s new ‘zero-profit’ agreement with incoming agency Omnicom has caused it’s fair share of controversy over the last few months so it’s interesting to come across these two contrasting points of view on the deal that were shared by James Whatley in his weekly newsletter.
The nub of the controversy is around the chain allegedly insisting that it’s new agency operates at cost, with all profits tied to unnamed performance goals.
Bob Hoffman (aka. The Ad Contrarian) takes the common Ad Land stance that a deal like this sets a destructive precedent for the industry for a number of reasons and explains why he thinks it’s unlikely to prove successful.
- The agency will have full responsibility but virtually no authority.
- As any agency profit will be based on whatever performance goals McDonalds sets, this could easily be a problem further down the road if targets are not met.
- They will have no control over the creative product or strategy.
- They will have no authority over either pricing or operations.
- It’s hard to make a creative impact with primarily price-based promotions.
- Franchisee buy-in will be a nightmare.
While the thought of an agency working for a client as big as McDonalds and essentially not making any guaranteed profit might be unjustifiable to those in the advertising industry, Mark Ritson puts forward a few potential positives of the move.
- This incentivises the agency to focus on increasing overall sales in the long-term rather than being happy with fluffy campaigns.
- It underlines the ‘digital first’ mindset and prioritises an integrated approach.
- As media spend is part of the deal, it avoids any ‘shadowy gouging of client funds’.
- It will force agencies to re-evaluate their structure and make themselves more efficient.
Either way, it’s a big bet for Omnicom. It’s very much a relationship that benefits the client in this case and not many brands will have the pull of McDonalds to convince an agency to go along with something similar. But with more than 60% of new advertising business in the US featuring a performance-based component, this is starting to become more and more common. And for brands you can see why. As Mark Ritson puts it;
“The agency’s skin is now very much in the game. Rather than obsessing over billing, creative work or ‘extra-curricular activities’, McDonald’s can now rely upon its trusted agency to exhibit a passion for burger sales like their life depended on it. Because it does.”