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Desperate ad agencies scramble for business

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During this drought in the ad market, the prospect for new business resembles a parched landscape with hungry predators scrounging for food. When an opportunity arises, ad agencies pounce on it with a fury because it may be their last meal.

"It’s like a feeding frenzy," said David Redhill, global director for brand strategy at Deloitte Consulting, which last month completed a review for a new advertising agency, brand agency and public relations agency to reposition the company.

DDB Worldwide was awarded the ad agency account; Interbrand won the branding business, and Ketchum was named to handle PR. Billings were undisclosed.

"As one of the few highly visible players actually commissioning new creative work, we were fair game for a lot of players to approach us," Redhill said. "There are a lot of desperate people out there."

Redhill said he was bombarded by phone calls, e-mails and faxes from agencies of all types looking for work, even after the selections were announced. In some instances, agencies offered work for free.

One unnamed agency has continuously solicited Redhill, offering free creative executions and strategies. In one day, Redhill received 17 e-mails from the agency, each with separate creative presentations attached.

"Even though they know some parts [of the business] are taken, they’re still sniffing around for some sort of edge they can pry open," Redhill said.

Deloitte’s review came on the heels of its announcement in February that it plans to separate from Deloitte Touche Tohmatsu later this year. This is an effort to keep its management consulting business separate from its accounting business in the face of increased regulatory scrutiny. In the aftermath of the Enron accounting scandal involving the energy company’s auditor, Andersen, the Securities and Exchange Commission is considering new rules that would prohibit companies from obtaining auditing and consulting services from the same firm.

"To reassure our clients and partners, we had to show evidence of our thinking and strategy as soon as possible," Redhill said, pointing to an accelerated review process for all three components of the firm’s business. The entire process took about two months.

Deloitte’s short list

For the branding component, Deloitte began with a list of seven agencies and short-listed three—Interbrand, Enterprise IG and FutureBrand Worldwide.

Redhill, who joined Deloitte on March 27, met with each finalist during his first week on the job, heard pitches on April 8 and 9, then selected an agency on April 11. A similar compressed schedule was followed for the PR review, which was conducted in mid-April and consisted of finalists Ketchum, Hill & Knowlton and Fleishman-Hillard. For the ad agency review, which was conducted in May, Deloitte began with 20 agencies and short-listed four—DDB, Doremus, Red Cell and Weiden & Kennedy.

"When an agency says, ‘We love thinking on our feet,’ when you give people a limited amount of time to prepare a pitch, you really see creative people in action," Redhill said.

Lou Rubin, CMO for Doremus, said time frames for reviews are becoming incredibly compressed, going from an average of three months to two weeks, as clients react to the economy and make quick decisions to switch agencies.

"Everyone is in a reacting mode," Rubin said. "If they’re not getting business results, particularly because of the economy, they’re willing to take a risk to try a new agency."

He said some clients are asking for speculative work when they wouldn’t have asked for it in the past, and many agencies are happy to comply. And larger agencies, which previously wouldn’t have been interested in competing for small projects, are pitching for any kind of new business, he said.

"Even the behemoths are going after the tiniest pieces of business," Rubin said. "In the past, if [the account] was less than $10 million, people like Y&R, Grey and Ogilvy wouldn’t pay attention. Now, if it moves, people jump all over it."

David Beals, president-CEO of agency consulting firm Jones Lundin Beals Inc., said, "We’re seeing [lots] of time pressures, especially after 9-11." Clients are putting more demands on agencies to deliver results at a low cost, he said, and cost pressures are affecting reviews.

"There is a lack of proper upfront dialogue in many searches," according to Beals. "Compensation is a relationship issue that is all too often discussed only after the business is awarded."

Pressure to perform

Pete Kovac, president-CEO of ad agency NKH&W Inc., Kansas City, Mo., agreed that there is considerable cost pressure being put on agencies to perform.

"Some [clients] are doing agency audits," Kovac said. "If things aren’t working, there’s not a lot of patience. Projects are scrapped en route if it looks like they’re not going to provide a good return on advertising investment."

Kovac added that clients are asking agencies to do more predictive work and build in metrics on the front end. "Clients are carefully scrutinizing what they’re doing," he said. "They are engaged in more frank dialogue with their agency, asking ‘What are we getting for our every nickel?’ "

The dearth of new business also is forcing agencies to be more aggressive in marketing their services.

"For the first time since maybe 1991, we’re finding we have to take a decidedly more pro-active approach to new business," said Rick Segal, chairman-CEO of HSR Business to Business, Cincinnati. "The pipeline is dry compared to what we’ve seen over the last 10 years."

To promote itself, HSR last month launched a new ad campaign in trade publications, direct mail and e-mail.

However, Segal is optimistic business will rebound. "This will be the third recession I’ve captained this ship through," he said. "The tide is out, and the tide will come back in."

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