From cocktail parties to press clippings, the notion of a "record number" of agency account reviews has been a hot--yet debatable--topic this year.
In interviews with industry insiders and observers, there were sharply diverging views on if there is greater account movement than usual and, if so, on why.
EYEING SEARCH CONSULTANTS
Also noted and being discussed throughout the agency world, in particular: the heightened visibility of search consultants, seen by some as culprits.
Ad accounts: On the move
Then again, it might just be business as usual, with the perception of increased reviews an illusion based on the uncoupling of longtime, large-billing, high-profile relationships such as United Airlines and Leo Burnett Co.
`MUCH MORE BOTTOM LINE'
"This business for quite a long time was a good ol' boy network that had to deal with high-service and relationship aspects," said Bob Kuperman, president-CEO of TBWA Chiat/Day North America. "[Now] it's much more bottom line, what have you done for me today--which opens [accounts] to volatility."
Most of those who insist the number of reviews is mounting would agree, saying the driving force is a continued corporate fixation on quarterly financial results. That position de-emphasizes the importance of longstanding relationships, executives say, and puts the spotlight on how well agencies can deliver quick fixes to sales problems.
SHORT ATTENTION SPANS
Cheryl Benton, Senior VP-general manager, Poppe Tyson, New York, said that in the current business environment "companies don't have long attention spans, especially companies that are looking for results quarter to quarter. People are looking for measurable, tangible results for their marketing dollar."
The pressure is no less intense just because the economy is strong, either. Since marketers already have done as much downsizing as practical, increases now have to be achieved through "real unit growth," said Peter Georgescu, chairman-CEO of Young & Rubicam, New York.
"Are there more accounts in review? I don't know the answer, but I understand why there could be more," he said.
"While financials are good, the growth rate in the U.S. is still modest. You're seeing enormous pressure because of financial expectations given the high multiples in the industry. Corporations now have to deliver double-digit increases in earnings on a consistent basis."
The marketer's solution, Mr. Georgescu said, is " `Let's sell more units' ... which comes back to us--marketing. So there we are having to deliver the goods. The pressure is on clients, so in return, there is pressure on agencies."
DATA INDICATE MORE REVIEWS
Few hard facts are available on the activity; most of the evidence is anecdotal. But a recent survey by the American Association of Advertising Agencies does imply there have been more reviews as the duration of agency/client relationships has shortened.
The study showed that the average length of client/agency relationships dropped from 7.2 years in 1984 to 5.3 years in 1996. The problem is last year's figures also include new categories such as high-tech advertisers that may skew the relationship averages. The survey covered 175 agencies and their 3,700 accounts.
Financial pressures also add to the turnover of management among agency clients, said O. Burtch Drake, president-CEO of the Four A's. Accelerated management churn dislodges agencies from ad accounts and, as the pace of those changes accelerates, a similar level of upheaval can be expected in agency relationships, he noted.
"The No. 1 reason you have an agency review is that they change the management on the client side. If you have a change of management--either CEO or marketing management--the odds are pretty good you'll have an agency review," Mr. Drake said. "When all is said and done, the advertising agency business is a service business, a relationship business. If you have a change in management, those relationships change."
Keith Reinhard, chairman-CEO of DDB Needham Worldwide, New York, agreed.
CHANGES IN MARKETING DEPT.
"If there are more reviews than ever, it is probably because thereAccount action are more changes in marketing departments than ever," Mr. Reinhard said. "I bet there is a direct correlation between the number of job changes in the client marketing function [and the number of reviews]. When a client shakes up his marketing department . . . there's a review or a threat of a review."
A change of top management preceded the recent reviews of accounts including United, Delta Air Lines, Domino's Pizza and the current, ongoing MasterCard International and Ameritech Corp. reviews.
"A new CEO or marketing manager sends up a flag that says it's time [for an agency] to build a bridge," said Peter Drakoulias, senior VP-director of business development at Deutsch, New York. However, he doesn't believe there is more review activity now.
Mr. Drakoulias added that agencies are feeling increased pressure and accountability since "advertisers that took their eye off the branding ball during the recession are getting away from the quick fix of sales promotion and putting money back into traditional advertising."
Poppe Tyson's Ms. Benton pointed out that in the past year, after three of her clients underwent management changes, each account went into review.
REQUIRED TO REINVENT WHEEL
"You get a new [client] team and you have to reinvent the wheel," she said.
John Adams, chairman-CEO of the Martin Agency, Richmond, Va., also believes there hasn't been abnormal activity.
TBWA's Mr. Kuperman, on the other hand, said that it's rising hot shops like Martin--and others outside of ad centers such as New York--that are giving clients great-er options, thus increasing the chances of a review.
"There's a greater amount of agencies out there who are capable of bringing those solutions--it's not just a Madison Avenue business," Mr. Kuperman said.
He added that these new options give a brand manager the opportunity to bring in a separate agency of his choice.
"As companies become less top-heavy and more entrepreneurial in the way they run operations, you'll find a lot of unbundling going on," he said.
Mr. Kuperman also attributed the increase in reviews to "more multi-agency relationships [such as Coca-Cola Co. and its corral of shops] going on. Before, [having multiple agencies] was seen as a problem--now it's seen as an opportunity. I think that has led to a lot more client business up for grabs."
The Four A's Mr. Drake said the perceived spike in reviews may be just an illusion, a result of the huge publicity surrounding high-profile advertiser/agency breakups like Delta and United.
"Whenever you have a relationship of 20 to 25 years that busts up, there's a lot of notice," he said.
Industry observers also noted that two major business trends--corporate consolidation and spinoffs--are affecting the pace of ad agency reviews. Many publicly traded companies are spinning off divisions into independent operations, while others are buying up companies.
When a company is acquired by another, client conflicts between the agency and new parent often lead to agency change.
Procter & Gamble Co.'s pending acquisition of Tambrands is ex-pected to put that $65 million account in jeopardy at Foote, Cone & Belding, New York, since FCB is a major agency for P&G rival Kimberly-Clark Corp.
FCB's Chicago office also seems to be in danger of losing Snapple to Deutsch since the beverage was bought by Triarc Cos. from Quaker Oats Co.
There is "major client consolidation" going on, acknowledged Bruce Mason, chairman of FCB parent True North Communications, as nearly every mature business category consolidates. There thus is inevitably consolidation at the agency level, he said.
Mr. Mason said more than 75% of the top global advertisers have consolidated accounts in some way recently. FCB was a beneficiary in some of those, picking up S.C. Johnson & Son for a global assignment that included more than 35 products in more than 50 countries.
Consultants who are in the business of helping advertisers search agency availabilities and capabilities--increasingly visible in reviews rather than working behind the scenes--are seen as the culprits by those who think there are more account switches.
"It's in their best interest to encourage reviews," Mr. Reinhard said.
However, he added, "If they are succeeding, it is because we allowed a vacuum to exist. As brands become more important to CEOs, instead of us being brought in as the brand architect, we are now the carpenters. And a consultant moves into the space we have left vacant."
Mike Agate, president at consultantcy Select Resources International, West Hollywood, Calif., said the most reviews he had handled at the same time was three to four; but in the last quarter, he handled six reviews at once.
"By our experience," he said, "we have been more active than at any time in our history."
Contributing: Mercedes M. Cardona, Alice Z. Cuneo
Copyright June 1997, Crain Communications Inc.