Agency execs set strategies for tough times

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[naples, fla.] Advertising agency executives largely have written off a quick economic recovery. But rather than bracing for the worst, many who attended the American Association of Advertising Agencies' annual meeting here said they are recalibrating their strategies to find an upside in the downturn.

"It is going to be a tough year, and right now we don't see any signs of an upturn," said Linda Wolf, chairman-CEO of Bcom3 Group's Leo Burnett Co. "So instead, it's about how do you work smarter, better and more effectively. It's a good time to re-examine how we do business.

"Hunkering down is not an option," she added, "This business is too intense, too competitive."

Or, as Omnicom Group's DDB Worldwide Chairman Keith Rein-hard said, "When it's raining, sell umbrellas."

As marketers hold their agencies more accountable in a soft market, shops are retooling their organizations, revamping new-business practices, re-examining compensation, even kicking competitors while they're down to gain market share.

On the new-business front, many of the more than 300 attendees said they are cutting back on pitch expenditures and trying to snare more work from existing clients instead of soliciting new ones. Still, at least one agency executive predicted the pace of account swaps will accelerate. "Over the course of this year, there will be more than the average number of reviews," said Chuck Porter, chairman of Crispin Porter & Bogusky, a Miami shop partly owned by MDC Communications Corp. As marketers look for quick fixes, agencies will feel the pressure, he said. Clients want change, "and someone has to take the hit. It's often the agencies," he said.

"Accountability is the buzz word," added Mr. Porter, noting that agencies have to show results to retain clients.

Conference speakers such as True North Communications' FCB Worldwide CEO Brendan Ryan, Publicis Groupe Chairman-CEO Maurice Levy and Omnicom's BBDO North America Chairman Phil Dusenberry also stressed accountability from the podium.

"Without measurable business objectives as our starting point, we are engaging in something akin to malpractice," said Mr. Levy. "I believe it is every client's obligation to be very specific about the terms of success and every agency's duty to challenge that objective or plan to [do] it."

Mr. Dusenberry posed the question: "Is advertising in shape these days to sell the way it ought to? Or have the good times made us soft and self-satisfied and more concerned with entertaining than with pushing the brands that pay the bills?"

Marketers and their agencies alike are keeping an eye on compensation as ad budgets get slashed. As agency compensation increasingly is based on fees rather than media commissions, marketers are pressing agencies to take lower fees for their work.

"Look at markets like San Francisco, which took such a business hit from dot-coms. It's bitterly, cutthroat competitive now," said Mr. Porter. "My hunch is there will be more fee cutting than ever before."

He said agencies that once asked for a 20% margin in fees will be willing to "cut deals" just to stay afloat. "In a market like that, it's a matter of survival."

Mr. Reinhard said his agency is taking advantage of the struggles of management consultancies, which have been vilified by ad shops in recent years because of their growing influence over companies' marketing strategies. DDB is trying hard to regain that strategic role with clients, he said, arguing agencies can do that more cost-effectively than can consultants.

Proving how fiercely competitive the market has become, the usually mild-mannered Mr. Reinhard paraphrased a quote from McDonald's Corp. visionary Ray Kroc: "When your competition is drowning, shove a hose down their throat."

Contributing: Scott Donaton

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