A recent spate of agencies dumping big-spending clients such as Volkswagen, Kmart, Mars Inc. and Boston Chicken Inc. in mid-courtship suggests a new conservatism by agencies toward new business pitches.
Consider recent dropouts Martin/Williams, Minneapolis, in the $110 million Volkswagen of America review, and N.W. Ayer & Partners, New York, in the $175 million Kmart Corp. pitch. Martin/Williams discovered it disagreed with Volkswagen's strategy and the role the agency would play in remedying the marketer's problem.
"As businessmen this was not a situation that we were willing to put our agency through," said David Floren, chairman-CEO at Martin/Williams. "You have to ask yourself if you can legitimately help the client and if it's even a situation that an agency can solve."
Similarly, several surprises appeared during the review that went beyond the retailer's obvious financial problems. Kmart had numerous consultants contradicting each other on strategy, leaving agencies questioning Kmart's leadership (AA, March 27). What's more, the fee-based commission was said to be less than half the reported $175 million.
Ayer Chairman-CEO Steve Dworin said the agency decided to focus its energy on two other new business pitches including Marriott International Hotels, Resorts & Suites and Boston Chicken Inc.
But prickly clients aside, some consultants who spearhead the reviews blame agencies for opportunism and bad management.
"Most of the time the agencies are not doing their homework, especially regarding conflict situations," said Arthur Anderson, principal at management consultancy Morgan, Anderson & Co., New York.
Indeed, Ogilvy & Mather Worldwide raised eyebrows several weeks ago when it dropped out of the Mars pitch at the 11th hour, citing client conflicts with Hershey Foods Corp. The conflict would have seemed obvious at the outset.
But to hear O&M tell it, the agencies were in the dark about what portion of the $400 million Mars account was up for grabs from longtime agencies Backer Spielvogel Bates Worldwide and Saatchi & Saatchi Advertising Worldwide. O&M assumed it was invited to pitch only the pet food portion of the business. When it became clear that the entire business was in review, O&M had to drop out.
Still, a WPP Group insider said that despite the last-minute pull-out the sheer marquee value of the invitation to participate in the pitch outweighed the eventual embarrassment of dropping out.
But opportunism alone is hardly the motivating factor it once was. Agencies are planning their long-term strategies more carefully. "The real question becomes what if we do win, how will it affect the agency and its other clients?" said Martin/Williams' Mr. Floren.
Agencies who have gone through the mill with traditionally fickle clients will attest they are careful not to put themselves at risk with a client that may suffer from either a volatile financial or management situation.
"We have to evaluate our prospective clients on whether it's the type of business we want for our agency long term," said Louise McNamee, partner and president at Messner Vetere Berger McNamee Schmetterer/Euro RSCG, New York, which recently dropped out of the Kmart and Boston Chicken reviews. With Boston Chicken "we realized that their plans were somewhat similar to some of the clients we already have," such as Stouffer Foods. (The busines went to J. Walter Thompson USA, New York.)
As for Kmart, Ms. McNamee said the agency was already participating in the $50 million Sony Electronics Corp. pitch and decided to pool its resources behind that potential client.
Agencies also point out that prospective clients will sometimes ask them to bail out voluntarily over a possible conflict at a sister agency. Saatchi & Saatchi Advertising, New York, fell victim to that dilemma when it received the cold shoulder from potential new client Amoco Corp., after the oil company got sensitive about Saatchi's sister agency Bates USA's rival Texaco account.
But the conflict issue notwithstanding, agencies concede the excuse is more of a smokescreen for many other issues prompting agencies to drop out of a review.
"We're starting to get smarter about balancing the cost and time of pitching new business against our duty to our current loyal clients," said Ed Wax, chairman-CEO of Saatchi & Saatchi Advertising Worldwide.