NEW YORK (AdAge.com) -- The government isn't the only one handing out controversial bailouts amidst the recession -- marketers can now turn to adland, too.
Last month, Toronto-based agency Elemental sent some 4,000 advertisers a direct mailer announcing that one lucky marketer could win an advertising stimulus package that would include strategy, a communication plan and creative -- all at zero cost.
"We tried to put ourselves in the shoes of the marketing manager and the pressures they are under to continue to hit their goals while also suffering a big hit to budgets," said Dustin Brown, director of new business at Elemental, which counts among its clients Dyson and the government of Ontario. "We've seen in the past that in hard times the advertising budget is one of the first things to get slashed. We may appear as though we are charging too much."
From coupons to bargain-basement rates for creative work -- and, in some cases, no fees at all -- small and midsize agencies have launched an array of recession-friendly tactics in recent months in the hope of luring cash-strapped clients from their more expensive big-agency partners. While agency executives report that the efforts are helping draw interest from marketers during the downturn, observers warn such low-cost strategies could prove costly to agencies' reputations in the long run.
In late May, Brainstorm Group -- another Toronto agency that has been around since 1992, numbers 50 staffers and handles work for the likes of Popeye's Chicken, Canon Cameras and Kenneth Cole -- ran a full-page ad of a coupon in the Globe and Mail newspaper, offering new clients a $40,000 discount on a retainer of $250,000.
The agency's chairman-CEO, Ron Telpner, said the Brainstorm Group's website saw a spike of 1,600 hits the day it ran the coupon, the majority from first-time visitors. While the shop hasn't had any takers, it was invited to participate in five new-business pitches by marketers who saw the coupon, Mr. Telpner said.
"Small to midsize agencies really have agility right now, and we're certainly more prepared to take a bigger risk than some of the big multinational [agencies] would," said Mr. Telpner. "Smart agencies are doing things that push the envelope a bit, because that's what cuts through."
Atlanta-based agency Fletcher-Martin created a recession-oriented program called "Ad It Forward" that charges clients a mere $1 creative fee (and that, too, can be waived if they don't like the ad presented to them). The only catches are that the client has to spend $50 at a business in the neighborhood to help stimulate the local economy, and Fletcher-Martin can include the work in its promotional materials.
AgencyNil, which was launched in May by enterprising VCU grad Hank Leber, has no set fees for work; it follows the Radiohead model, allowing clients to name their price.
It's not just little-known agencies that are willing to bend in unprecedented ways amid the recession. Even recognized agencies with global clients have accepted drastically low fees merely to stay competitive and remain active with their communications.
Boston-based Modernista, which handles ad duties for embattled automaker General Motors and the newly launched Palm Pre, this month auctioned off creative ideas on eBay. In the end, the highest bidder for the work -- a set of 12 scripts suitable for beer commercials -- paid just $45.
But not everyone is on board with the cut-rate trend. Some industry observers are cringing, fearful that toying with compensation practices could cause permanent damage.
"It's a short-term way of standing out, but long term I think it smacks of desperation and it's a terrible thing for the industry," said Elizabeth Zea, partner at consultancy Glibert & Co., New York. "If you give something away for free or create work and auction it off at prices that are basically free, is that really valued? I think it undermines the whole industry. ... I think it's disappointing."
The risks are greater for established, larger players, Ms. Zea said: "For a small agency, like the VCU startup, they've got nothing to lose and it's a bold way to break into the business. But if you are an established midsize agency, then I start to worry it's a last-ditch effort and if I should be worried for their financial health."
"It's a high-stakes gimmick that is not without consequence, and I hope the agencies have really thought it through because the economy will perk up again, and now these agencies have established their value," she added.
At Brainstorm, agency management "did a lot of thinking about [the coupon promotion], because we never wanted to denigrate our own brand," said Mr. Telpner. It asked its current roster of clients for approval before launching the promotion, and they gave their blessing. "They know that we give them great value; it wasn't that they felt they were overpaying.
"Anybody who can afford a full page in the Globe & Mail isn't desperate. ... Desperate agencies don't look to spend more money on advertising," he said, adding that his agency has given employees bonuses despite the tough economy and has not had to initiate layoffs.