Wal-Mart's 31-Year Relationship With Original Ad Agencies Hits Skids

Bernstein-Rein and GSD&M Scramble to Stay on Post-Review Roster

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NEW YORK (AdAge.com) -- It was the day that every agency chief dreads.

Last Wednesday, some 31 years after Sam Walton made the four-and-a-half-hour drive up I-71 from Bentonville to meet for the first time with Bob Bernstein and Skip Rein -- founders of the Missouri agency that bears their names -- that road came to an end as Wal-Mart called a review of its $578 million ad business.
The retail behemoth has two main ad agencies, Bernstein-Rein and Omnicom-owned GSD&M, Austin, Texas. Between them they have 51 years of service, yet in coming months, they'll face a bitter battle to stay on the Wal-Mart roster, facing off against the bevy of agency networks and smaller creative shops sure to chase this huge account.

But even as agencies jostle for position in the review, first reported by Advertising Age online, they may spare a thought for Bob, Skip and their counterparts at GSD&M, whose simple ads have helped push product and define Wal-Mart for decades as the retailer experienced unprecedented growth.

A major change to the roster would wound GSD&M-which has a list of top marketers that includes BMW, Southwest, and AT&T-but it would be a devastating blow to independent Bernstein-Rein, the Kansas City, Mo., agency with 300 employees, the majority of which work on the Wal-Mart business. It would bring to an end a 32-year-long partnership, one of the longest in the business.

culture keepers

Wal-Mart is by far the agency's largest client and only national retail account. It's next largest is Beauty Brands, a regional chain of 50 beauty salons. The agency today still boasts on its Web site: "Sam Walton called us the keepers of the Wal-Mart culture."

But that culture-at least in terms of marketing-is changing. Since joining the company, Chief Marketing Officer John Fleming has been working to expand the marketing staff and has brought in executives like Julie Roehm, who joined from Chrysler Group, and Stephen Quinn, a former Frito-Lay executive.

The marketers have been very public in talking about their goal to get away from Wal-Mart's deep-discount positioning in the hopes of attracting shoppers who would buy higher-margin items. To that end, Wal-Mart ads have taken a different tack recently. Smiley, the 11-year-old icon associated with price-slashing, has been unceremoniously booted from TV spots and ads have been pushing higher-end items such as plasma TVs.

Both agencies have said they will defend. "After 19 years of an extraordinary growth partnership between Wal-Mart and GSD&M," said Roy Spence, the founder and president of GSD&M, "combined with a whole new team of best-of-class marketing people at Wal-Mart, plus the fact that Wal-Mart has not had a full agency review in over 30 years-I would say it is about time. GSD&M is 'all in'-as Willie Nelson said in his song 'Me and Paul'...'we've come to play not just for the ride."'

Said Bernstein-Rein Chief Operating Officer Steve Bernstein last week, "It's an important piece of business for us. We've worked for them for 32 years and we look forward to more good years with them."

It remains possible that the review could result in a larger roster, more like the one Mr. Fleming worked with at Target Corp., Wal-Mart's chief competitor. It could include one or both of the incumbents. "We will consider anything that's the best integrated marketing communications we can find," said a Wal-Mart spokeswoman.

Helping the Bentonville behemoth to take its brand upmarket and fight off the advances of sexier competitors, like Target, is an interesting challenge. On top of that, Ms. Roehm, who is running the pitch, is said to be open to a wide range of options and is expected to accept credentials from all agencies, large and small.

Though it offers the opportunity to work with an iconic American brand in need of some shaking up, engaging with Wal-Mart has had its downsides. Being part of the Wal-Mart roster severely limits the retail clients an agency can take on. In addition, the retailer, like other mass retailers, is said to skimp on agency fees.

contributing: mya frazier, lisa sanders
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