The move shocked industry observers and agencies that had been asked to participate, since DDB Needham had created well-known campaigns including the award-winning "Hey, you never know" effort. Many New York agencies that were invited to the review either declined to participate or dropped out early due to concerns that DDB Needham was a shoo-in to win the mandatory government review.
"Everybody on the street said DDB has this locked up," said one agency executive.
In a statement, the lottery cited an undisclosed "cost saving proposal" from Grey as a main factor in its decision. It wasn't clear at press time whether the cost aspect included discounted agency fees or greater efficiencies in media buying, or both.
The lottery estimated Grey's proposal would save as much as $2.4 million over current rates during the three-year duration of the contract. Grey's contract also has three additional one-year extensions possible at the lottery's discretion.
A release from the lottery stated: "The Grey Advertising proposal demonstrated that the firm could provide the variety of services in the areas of advertising, sales promotion, retail support, planning and research, public relations, and television programming with substantial cost savings to the state."
But Grey U.S. President Bob Berenson said it was Grey's entire proposal, not just the cost aspect, that won the agency the business. "You don't win these things on price, you win on quality . . . You've got to deliver," he said.
FAIR PRICE, FAIR PROFIT
Mr. Berenson said: "We provide the client with a fair price, [that also] provides us with a fair profit."
Other industry speculation was that the upcoming departure of DDB Needham New York Vice Chairman-Chief Creative Officer Mike Rogers was a factor in the review decision, but a DDB Needham spokeswoman dismissed that. A lottery spokesman declined to directly address whether Mr. Rogers' exit was a factor, but did say, "In the complete evaluation of . . . submissions, Grey put in a strong overall proposal and the cost part of Grey's bid is what won them the contract."
The three finalists, which included Avrett, Free & Ginsberg, had to produce a mock TV show to demonstrate their capabilities, said one executive with knowledge of the situation. The presentation had to include spec creative, a media plan and promotions.