|As part of his effort to land the account, DraftFCB chairman-CEO Howard Draft offered Wal-Mart's senior VP-marketing communications, Julie Roehm, a ride in his Aston Martin.|
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Historic account shift
While some of the ad industry's biggest and best creative players turned out to woo the retailer, Wal-Mart, in a stunning decision, chose Madison Avenue's newest incarnation, Interpublic Group of Cos.' DraftFCB and its media partner on the pitch, Aegis Group's Carat, to help chart its future marketing course. The hookup is sure to go down as one of the most talked-about account shifts in ad history, up there with IBM's 1994 consolidation at Ogilvy, a move that saw Big Blue jettison 80 other shops.
What shocks about this move is that a marketer with the economic might of Wal-Mart decided to plant a massive and complex marketing account in a newly merged firm not yet operating as one and owned by a parent company that has a history of troubled agency mergers. That Wal-Mart made this choice during a critical time in its history -- it is struggling to grow and faces steep competition -- only makes louder the vote of confidence in DraftFCB, a union of a strong direct-marketing shop and a global ad agency whose success is vital to Interpublic's future.
'Educational and entertaining'
"We met with [Interpublic Chairman-CEO] Michael Roth, and he gave us a great look into their financial health, including their commitment to this merger," Ms. Roehm said in an interview. "And we spent a lot of time with Howard Draft, which is educational and entertaining."
Ms. Roehm, Senior VP-Marketing Stephen Quinn and Chief Marketing Officer John Fleming were especially won over by Draft's history of retail experience, FCB's package-goods bona fides and, most importantly, the new unit's capabilities in slicing and dicing consumer data. The DraftFCB-Carat team brought a wall of 15-inch screens to Wal-Mart's Bentonville, Ark., headquarters and showed the national retailer how it operates on a local level, with information on how consumers in specific communities live, shop and consume media. Carat, which partnered with Draft at Ms. Roehm's suggestion, brought to bear its motivational mapping and customer-segmentation capabilities.
Said one executive familiar with the review: "DraftFCB's a data company that does marketing. Carat is a research company that does media. And, though in the pages of your magazine Julie Roehm looks like a rock star, she's really a data wonk at heart."
But it wasn't all segmentation studies and dashboards. DraftFCB and media partner Carat also did a deep dive into Wal-Mart's business situation. Among the tactics: Mr. Draft; David Verklin, CEO of Carat Americas; and DraftFCB creative head Jonathan Harries all did individual shopping trips with real Wal-Mart shoppers. Mr. Draft's shopper was even brought in during a work session.
By all accounts, the new agency gave Wal-Mart what it said it was looking for in its RFP: A big-agency team that can help Wal-Mart support its new and sophisticated segmented-store strategy and create ideas that help unlock the marketing benefits of its vast storehouse of customer information. Expect changes in Wal-Mart's media mix and look for a targeted approach in local markets to complement its national advertising -- all with an eye toward improving same-store sales that have lagged nimbler rival Target Stores.
Wal-Mart reported a sluggish 1.3% gain in September, compared to 6.7% at Target. Just last week, CEO Lee Scott, who wasn't involved in the review, reported that the retailer is on track to log same-store sales of just 1% in October. Mr. Scott, in a conference call with analysts, discussed plans for aggressive price cutting and promotions during the critical holiday season and indicated lower gas prices could help lift sales.
Total integrated offering
Russel Wohlwerth, partner at A-Team Advertising Advisors, summed up much of the industry surprise that such a new entity could come away with such a big account. Interpublic has had such a poor track record on mergers that there was concern the combination of DraftFCB "was another chapter in the history of poorly integrated mergers," he said. However, DraftFCB now has "what every client espouses to want: a total integrated offering of everything from general marketing advertising to promotions.
"The model is working from a new-business perspective," Mr. Wohlwerth said. "The Wal-Mart win is a huge vindication of the concept." Now, he said, "the question is: Can they execute?"
DraftFCB bested finalists including sibling Martin Agency, WPP Group's Ogilvy & Mather and the only remaining incumbent in the pitch, Omnicom Group's GSD&M. "Losing sucks, but what are you gonna do?" said Roy Spence, co-founder-president of GSD&M. "We had a great ride for 20 years. I got to hang out with Sam Walton and we were part of building the largest retailer in the world. Not bad for kids from Austin."
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Alice Z. Cuneo and Mya Frazier contributed to this report.