Love's Lost Between JC Penney, Saatchi as Pair Breaks Up

As New Agency Partners Come Aboard, 5-Year Relationship Ends

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Come 2012, the Lovemarks will be officially over between Saatchi & Saatchi and J.C. Penney Co..

Moves by the retailer, under new leadership, to add a cadre of partners to its ad-agency roster have effectively squeezed out its agency of five years, Publicis Groupe -owned Saatchi.

"Both JC Penney and Saatchi mutually decided to end our relationship," a spokeswoman for JC Penney told Ad Age . Representatives of Saatchi were not immediately available for comment. Executives close to the situation say the ink is not yet dry on the separation agreement, but the companies are in the final stages of reaching a pact to part ways.

So what gives? JC Penney is looking to go in a new direction by leaning on a number of different shops for its creative needs rather than just one lead shop. And hanging on doesn't make financial sense for Saatchi. The agency's piece of the overall pie has been been sliced smaller and smaller over the past few months, and in the meantime it stands to lose out on pitching other retail opportunities.

Still, the split from JC Penney will constitute a massive hit for Saatchi -- not an ideal way to start out the new year.

According to the most recent ad spending figures from Ad Age 's DataCenter , JC Penney was the 25th largest national advertiser, with a total of $1.32 billion devoted to U.S. marketing. That figure is likely to fall, however, given that the retailer is struggling with sales due to weakened consumer spending and competition from rivals such as Macy's and Kohl's.

In October, Target 's marketing chief Michael Francis resigned to become president at JC Penney . He is overseeing marketing while the company searches for a chief marketing officer to replace Mike Boylson, who retired in July.

Mr. Francis has wasted little time making his mark, demonstrating his distaste for creative advertising being consolidated at a single agency. He quickly brought on a new set of agency partners. The first he tapped was indie creative agency Peterson Milla Hooks, followed by PMK-BNC, owned by Interpublic Group of Cos. The latest addition is Mother , New York, which has been added to the roster to handle undetermined projects.

Mr. Francis knows both PMH and Mother from his days at Target , and so it's very possible any future shops JC Penney brings onto the roster could be ones he's worked with in the past as well.

The JC Penney spokeswoman declined to comment on what exactly each agency will be charged with handling. The new shops could be forced to hit the ground running, however. The retailer is typically a major advertiser during the Academy Awards, slated for Feb. 26 in 2012. The department store also inked a 10-year deal with Martha Stewart Living Omnimedia earlier this month.

In November, Ron Johnson, an Apple alum, became CEO, replacing Mike Ullman. Mr. Ullman is now executive chairman for the retailer. Mr. Johnson has vowed to "not improve but transform" the aging department store. Sales at stores open at least a year fell 1.6% during the third quarter, while overall sales dropped 4.8%. The retailer operates more than 1,100 stores and has annual sales of more than $17 billion.

Saatchi and JC Penney consummated their relationship in 2006, when Mr. Ullman and Mr. Boylson fell for Kevin Roberts and his Lovemarks concept. Mr. Ullman had heard Mr. Roberts speak at a conference and was smitten. He filled in his chief marketer while the two were traveling on a corporate jet, sketching out the axis of love and respect -- Mr. Robert's way of understanding how consumers relate to brands -- on a cocktail napkin.

"He gave me a copy of the book and said that it was worth looking into and that JC Penney needed to be a lovemark with middle America," Mr. Boylson told Ad Age after shifting the account to Saatchi from DDB, Chicago. DDB had handled the account since 2000. The new relationship birthed the tagline "Every Day Matters," replacing the chain's "It's All Inside" positioning.

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