The (New) Great Debate Among Agencies and Marketers

Taking Sides on Unbundling, Procurement and Role of Digital Shops

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Rance Crain
Rance Crain

The big financial holding companies got into trouble because they tried to push a broad array of financial services -- everything from mortgages, loans, investments, even real estate -- to consumers whether or not they wanted to put all their assets under one roof. The ideal of a financial supermarket really never caught on, even though it made sense from a corporate viewpoint.

Does the same thinking hold true for agency holding companies? Three agency execs recently squared off against three client types at the Association of National Advertisers Conference over the holding company dilemma, rebundling media services, procurement and other contentious issues.

Our Jack Neff posted a story about the discussion on our website, and after absorbing the comments, one reader observed: "The problem I have with holding companies, whether the agency at issue is a full-service agency or a media agency, is the pressure within the agency to push the holding company's various services, not based on their making sense, but rather a dictum from on high."

Even the agency representatives didn't seem overly enthusiastic about the holding-company concept. Andrew Robertson, president-CEO of BBDO Worldwide, said, "I would submit that provided the quality of talent in all of those component parts is high enough, you have a slightly better chance of making that work when the people you're requiring to collaborate are part of the same company."

And, he said, "Just being global is not enough. You have to have good agencies locally. ... Really well coordinated mediocrity is no good to anybody."

Brian Perkins, VP-corporate affairs of Johnson & Johnson, said his company "is still waiting for the holding company to become more than the sum of its parts. It's not easy." But he went on to say that "the walls are breaking down slowly."

Lisa Cochrane, VP-integrated marketing communications at Allstate Insurance, said clients had to take half the responsibility for the holding company not working as well as it could. "We have to be willing to pay for it to help it along. As clients we get in the way by being unwilling to pay for services."

On another toss-up question -- whether it was a mistake to unbundle agency media services -- Ms. Cochrane said, "What's important is collaboration. I'd like to see it totally together. It's not only important but we insist on it."

Mr. Perkins agreed. "They should be together. I remember how badly media folks were treated, and I apologize for it. But the media people can't be crosstown. We're not going to pay for two overheads."

Mr. Robertson said he categorically "disagreed" with Shelly Lazarus' statement that the agency world might have made a mistake by unbundling. "We never would have gotten the quality of research and modeling. It never would have happened." He said the media work "was never that good" when it was "buried in the bowels of the agency."

Crispin Porter & Bogusky CEO Chuck Porter took up the issue of procurement people negotiating fees. "We should be rewarded on how good our work is, not on how cheap it is."

Mr. Perkins admitted that the procurement people came in like "a bulldozer" claiming expertise in buying stuff like chemicals and office supplies. But he said "the more our partners work with procurement, the better off we are. Pick up the phone and call me if we do something stupid."

Ms. Cochrane said for procurement to work "we've got to get involved at the senior level. We can create a wonderful support system, but we cannot relegate it to a lower level."

Mr. Robertson was more skeptical. He said there are two kinds of procurement. "One is long term, knowledgeable and works with agencies to enhance efficiency through process improvements and so on. The other is 'hit and run'. They come in, slash the fees and disappear, leaving the marketers and agencies to live with the consequences."

Ms. Cochrane thought the industry should rename agency procurement Sourcing and Partnership Solutions as Allstate has already done. "There's a place for commodities, but there's also a place for service" negotiations, she told me later.

Eduardo Conrado, chief marketing officer-broadband mobility solutions at Motorola, contended that digital agencies should be the lead horse in handling assignments, but Mr. Porter said, "I don't understand why there needs to be two separate places. Smart agencies with good ideas," he said, bring in the technical expertise.

Digital, said Mr. Perkins, "is a very bad word. I wish the word would disappear. We shouldn't even be talking about it." Mr. Conrado made the point that it was the client side that created silos, "and we should break them down ourselves."

On the subject of compensation, Mr. Perkins said agencies should have some "skin in the game," so that some of their compensation is at risk. "If we don't make our forecast, neither should the agency."

Mr. Porter said agencies should have equity in their clients. "The more the goals are aligned, the better the relationship is."

How about mistakes? Mr. Perkins said his biggest was allowing the agency selection process to be democratic. He said he should never have abdicated the responsibility. J&J soon after had to pick another agency.

Ms. Cochrane said that she had to choose between going to her grandmother's funeral and being with her family in downstate Illinois or leading a pitch. She chose the pitch, and her agency got the business, but she has regretted her decision ever since.

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