A handful of marketers have used online auctions in media buying reviews, but few agencies have experience with them on creative reviews
Typically, a marketer decides which agency it thinks it wants to hire and then negotiates compensation terms. DuPont's online auction instead pits agencies against each other, and some fear makes price a leading factor in the decision and treats the business as a commodity.
DuPont-manufacturer of products as diverse as Tyvec protective materials and Lycra fiber-spent $68 million in measured media in the U.S. in 2002, according to Taylor Nelson Sofres' CMR. It is looking for agencies with global capabilities to service a wide array of brands across diverse categories. Agencies will likely be contacted with specifics on the auction at the end of this week.
"Most agencies-even if they've participated in government reviews that are highly regulated-have never done anything like this before," said one executive at a shop involved in the DuPont review.
Last week, seven agencies gave creative presentations. Shops selected to continue must determine how much they would charge to service the account, a calculation that would be done during the normal review process. However, given the complexity of a global creative account across so many brands, agencies view the online auction process as particularly challenging.
Price is "only one factor of more than 50 that are being considered in the selection process," Julia Saia, communications manager, DuPont Global Sourcing & Logistics, said. "Being global, for instance, was a key criteria."
Ms. Saia emphasized that if an agency, because of its cost structure, has a higher bid, it isn't necessarily out of the review. "This is a process from beginning to end," she said. The review is scheduled to be complete by the end of April.
Participants are trained prior to going online. The marketer decides, before the auction begins, whether each participant's actual bid will be displayed or translated into a ranking that rivals will see.
The idea, said David Clevenger, market-development manager at Pittsburgh-based Freemarkets.com-which has conducted auctions with agencies for DuPont, according to executives involved in past reviews-is that "the agencies compete with each other, rather than negotiate one-on-one with the potential client."
DuPont refused to comment on specifics of how its auction will be conducted. Neither Freemarkets.com nor DuPont would say whether Freemarkets.com will handle the auction.
DuPont launched its review in January by sending requests for information to more than 20 shops. Nine were invited to continue. The seven that presented creative last week were independent Doner, Southfield, Mich.; Interpublic Group of Cos.' Foote, Cone & Belding Worldwide, and McCann-Erickson Worldwide, both New York; Publicis Groupe's Fallon Worldwide, Minneapolis, and Saatchi & Saatchi, New York; WPP Group's Ogilvy & Mather, and Young & Rubicam, both New York. (Two agencies, Omnicom Group's BBDO Worldwide, New York, and DDB, Chicago, withdrew.)
"You have to develop a strategy before you go online," said one executive familiar with DuPont's Corian-surfaces review last year, in which agencies also participated in an online reverse auction. "Potentially, the way to win the pitch is to create a cost-efficient, rather than a market-efficient, solution."
DuPont last year signaled its interest in the online process. Reverse auctions "will become the new norm for doing business," Mimi Kramer, DuPont's global team leader-marketing communications sourcing, said at an Association of National Advertisers event last May.
DuPont believes the technology is an efficient way to manage the bid process. "An online reverse auction, where one buyer reviews bids from multiple sellers, stimulates market-driven, competitive bidding using technology," Ms. Saia said. "It saves time and money in the search for materials or services."
But some purchasing executives who use auctions to buy non-advertising marketing services question their value in acquiring agency services.
"We're not sure that the benefit of using the auction tool just for the compensation part of an agency review outweighs the cost in terms of time and effort required to train people and execute a successful auction," said Loren Martin, global sourcing manager, advertising, Eastman Kodak. "With an agency-of-record review, you are talking about a long-term relationship. I don't think there are many companies that can specify their scope of work well enough in advance of a year's time for an agency to be able to say what it would cost to deliver that work."
New-business teams from the seven shops last week journeyed to the company's corporate country club in Wilmington, Del. For three days before a live audience of 70-plus marketing and procurement executives, ad executives presented ideas for a global brand architecture for the company's numerous and varied brands.
The number of people involved, the scope of the brief, presentations in a ballroom "the size of a basketball court, with chandeliers," said one executive present, made the pitch "very bizarre."
Some agency executives believe that rigorous, process-heavy reviews like DuPont's will become more common, "particularly for large, global marketers with a portfolio of brands to manage," said one executive involved in the review.
"Reviews will also be more business-oriented, with subjectivity being diluted by so many other factors, like planning, pricing, media neutrality." With the online auction process, this executive said, "You just have to come up with your costs and decide how much you'll discount."