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Mark Penn is the Chairman and CEO of MDC Partners and the author of “Microtrends Squared”.
With so many brands slashing their marketing budgets these days, the global agency holding companies have been taking a financial beating. But the pandemic is not solely to blame: it just worsened a pre-existing condition.
The business woes of the agency holding companies initially began years ago when digital ads began to overtake TV as the preferred ad medium. Heavily reliant on traditional ad spending, agencies were slow to respond to the growing client demand for a data-driven strategy and digital transformation. And then the big consulting companies swooped in with their change management playbooks, wooing away global clients by leveraging their C-suite relationships. Meanwhile, agencies were under pressure from clients to lower fees, forcing them to reduce billings and trim staff. They were caught in a deadly embrace: expected to deliver the same level of service at a lower cost, torpedoing their profit margins.
Today clients are more desperate than ever for design thinking, marketing innovation, and technical wizardry. But where do they turn? The complexity of managing marketing communications across multiple touchpoints has become overwhelming: brands need help orchestrating the end-to-end customer experience. That calls for agencies to undergo a radical transformation of their own: fixing a broken business model by helping clients catch up to the growing expectations of their customers.
Mark Penn, the CEO of MDC Partners, the 9th largest agency holding company in the world, recognizes the urgency of transforming his $1.5 billion enterprise into a “modern marketing company of choice”. Last year he made a calculated bet that MDC could respond more nimbly to the needs of clients than its much larger competitors, buying into the company with a $100 million investment from his private equity firm The Stagwell Group. He took over the company at a critical time, its stock price in need of rescuing.
Now, after a year of fixing the balance sheet, Mark Penn has set out to reinvent the company’s service model, knowing that clients are looking for answers to their business challenges beyond advertising. The “partner firms”, as MDC likes to call its family of 50 agencies, have been clustered into synergistic hubs or “tentpole networks”, making it easier for their leaders to collaborate and pitch new business together. The goal: offer the right balance of strategic thinking, versatility, and creativity.
While the pandemic may have put a crimp in his plans, Mark Penn is renowned for turning emerging trends into opportunities. He earned fame as Bill Clinton’s pollster for six years, helping him win re-election in 1996, partly by convincing him that he needed to win over a new swing voter called the “soccer mom”. He went on to serve as Chief Strategist to Hilary Clinton in her 2008 campaign to win the Democratic Presidential nomination. He has also been a senior adviser to such well-known leaders as Bill Gates, Steve Ballmer, Tony Blair, and the late Menachem Begin.
A decade ago, Mark Penn published a ground-breaking work called “Microtrends” which posited that opportunity can be found by identifying small slivers of the population who have a disproportionate influence on social, cultural and political trends. His latest book, “Microtrends Squared”, builds on that original work, describing a new set of forces at play shaping the direction of society. So I started the interview by quizzing him on his thesis.
Mark Penn: The basic notion of a microtrend was always kind of the small forces that are in many ways, right in front of yourself that you maybe don’t see that are developing into, you know, super important trends. And so, we classically used to define a macrotrend as a percent or more, that it had to be growing, right, that it had to be a little bit counterintuitive. Like, I don’t do a microtrend, like people are concerned about the environment. Then we also look for every trend, you know, what we call Newton’s Law of Trends. For every trend, there is a countertrend, just not necessarily opposite, and equal will be opposite, but not necessarily equal, right. And so you always have to look at both ends of the spectrum, if you’re looking at…you know, that everybody is getting a smartphone, aha, so that’s the trend, that’s maybe a megatrend, right? But a microtrend is people buying more flip phones, for example. So there’s a group of people who say, “You know, I can’t stand this technology, I don’t like it. It’s too complicated. It’s not for me.” And then it turns out that you have this…you might call it a niche, but it’s a growing segment of people who wanna be, you know, against technology. Who very much wanna have a different technological experience, right, and so they bring back the flip phone, right? So, that’s kind of…if you look at this, you really kind of expect to see growth, you expect it to be small but punch over its weight, right, in order to be something of significance. And then it could be something, you know, significant, even if it doesn’t get to be a megatrend, like buying a smartphone.
Stephen Shaw: How do these niches make themselves apparent to you? Are you gleaning this from survey work that’s been done? Is it the power of observation, simply seeing these forces at work and you’re identifying these trends, and the quantification of the size of the segment you referenced and whether it’s growing or not? How did these evolve in your work?