When an Incumbent Shop Should -- and Shouldn't -- Defend in a Review
NEW YORK (AdAge.com) -- When VW invited its shop of four years to repitch its $200-million-plus ad account last month, Crispin Porter & Bogusky came back with thanks but no thanks: "As a rule, we do not participate in reviews for our current accounts, and this will not be an exception."
Crispin declined to talk to Ad Age about why it maintains a "no defend" policy, but people who have worked at or with Crispin said it stems as much from practicality as it does pride. After all, fewer than 10% of incumbent agencies are estimated -- by the reckoning of either the 4A's, industry consultants or Ad Age -- to hang on to an account at the conclusion of a review process.
Even so, declining to defend when the consequence is waving goodbye to a fat and prestigious ad budget in a poor economic environment is a bold enough statement that outsiders took notice. "I applaud what Crispin was standing for," said Vic Walia, senior director-brand marketing at Hotels.com, adding: "While I will always invite the incumbent agencies out of respect and give them the option of participating or not, I fully respect if they don't want to. A review is a very expensive proposition with no clear outcome."
Still, the "no defend" rule is rare. An agency may save face and pride, but it is essentially accepting the loss of a substantial piece of income, which few are prepared to do. And in some situations -- such as consolidations of ad accounts among roster shops -- abstaining from a pitch could result in forfeiture of additional business.
On the other hand, repitching business can cost hundreds of thousands of dollars, have a debilitating effect on agency morale, and be a distraction from both managing current accounts and finding new ones. (Crispin, for example, has been asked to pitch Chrysler with ideas for the fourth quarter; it would have been difficult for the agency to do that otherwise.)
Some agency heads and industry consultants say it's best to steer clear of a blanket rule about defending accounts. "A hard and fast policy is short-sighted," said Judy Neer, president of Boston-based consultancy Pile & Co. "Every agency should think hard about why a client is doing a review and whether they participate or not."
But Stan Richards, founder of Dallas-based Richards Group, said his agency is a "better, happier place for having adopted [a no-defending] policy a long, long time ago."
When clients and employees ask about the rationale behind the approach, Mr. Richards explains it like this: "What if I were working as a creative director, and my boss came into my office one day and said, 'I really like what you're doing, but I'm going to interview three people for your job, and there's a good chance you'll keep your job, but if you don't we're going to part ways'? I can tell you that I'd work there for maybe another 10 minutes. It demonstrates an enormous lack of respect."
Still, Richards Group made an exception when it chose to defend -- and successfully hung on to -- the account of longtime client Home Depot after a review of the $600 million business last year. "Home Depot had moved marketing under the direction of merchandising, and merchandising in vendor relationships requires a mandated review," Mr. Richards said. "It had nothing to do with lack of respect."
To be sure, not all reviews are called due to dissatisfaction with a client or turnover in the chief-marketer seat. Government accounts, which include state tourism and lottery ad accounts, typically require reviews on a five- or 10-year basis.
Procurement is changing the game too. Industry executives report that more and more pitches are being driven by purely financial circumstances; the marketing team may be perfectly happy with its agency, but procurement departments are continually in search of a better deal. In such cases -- if the existing relationship is healthy, and the current agency is willing to negotiate compensation -- it's not uncommon for an incumbent to retain the business.
For Matt Seiler, global CEO of Interpublic Group of Cos.' Universal McCann, the decision about whether to defend a piece of business comes down to the health of the client-agency partnership. "If you have a shitty relationship, and the business goes up for review, it's going to be difficult to suddenly become something great for them from that starting point," Mr. Seiler said. "If the relationship is good, then, of course, you defend it with everything you've got."
"Maybe it's a good policy for other agencies, but I don't think it's a good policy for us," said Duff Stewart, CEO of Omnicom Group's GSD&M Idea City, which has landed on both sides of the issue. The Austin, Texas-based shop chose to defend its lucrative U.S. Air Force account, for example, and last April came out with a potential nine-year, nearly $400 million contract after a lengthy shootout with DraftFCB for the business. A few years earlier, when Walmart invited GSD&M, its agency of 20 years, to repitch its $580 million account following the high-profile reversal of awarding the account to DraftFCB, GSD&M walked away.
Defending can be a sound proposition provided you "think you can win and you believe in the strength of that brand," Mr. Stewart said. Otherwise it's likely to be perceived as desperate.
Statistically speaking, there's no question the odds are stacked against incumbents. "The conventional wisdom is that in a [formal] review, the incumbent is only going to retain the business between 5% and 10% of the time," said Tom Finneran, exec VP of agency-management services, 4A's.
"Marketers have several possible reasons to include an incumbent in a review when they really don't have a snowball's hell of a chance of winning," Mr. Finneran said. They may want to "try and shake a few nickels and dimes out of the system," he said, or ensure "servicing continuity" during the review; prove to themselves that the grass really isn't greener on the other side; or, he said, it could be a "wimp's approach" so as to avoid giving an agency bad news.
"There's a little bit of a perception that they're letting them down easy," said Ann Billock, principal at consultancy Ark Advisors in New York. "The agency-client relationship is an intense one. ... They have personal relationships with these people and care about them very much."
"There can be exceptions -- like any relationship, it can be salvaged with the right amount of counseling," said Mike Doherty, president of Seattle-based Cole & Weber United. "But nine out of 10 times, defending is a waste of time and money. If the agency has failed to demonstrate its value in a way the client appreciates, you're staring from a much deeper hole than the bright shiny new objects of desire that a pitch offers."
In his view, clients are prone to asking incumbents to participate "more often than they should." He added: "Inviting them to pitch is a way of feeling better about breaking up in some cases."
Pile's Ms. Neer said she and other consultants routinely advise marketers to think hard about inviting an incumbent agency and do so solely when the shop has a good shot at keeping the business.
Still, Ms. Neer estimates that in "50% of the reviews we do, the incumbent is asked if they'd like to participate, and typically, if they are asked, most of the time they do."
"The onus is just as much on the agencies to realistically evaluate their chances," said Ark's Ms. Billock. "It's part of the charge of agencies' new- business departments to work with upper management to evaluate the toll that is being taken on them and employees and decide whether it's worth it."
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Contributing: Michael Bush
The 4A's 'Points to Consider'Defending a piece of business is a big economic decision for an agency and can be emotionally draining for its staff. The 4A's suggests several "Points to Consider" when deciding whether to defend an account that's headed into review:
If the review is mandated -- such as a periodically scheduled review of a government account -- then an incumbent should stand a reasonable chance of retaining the business and should consider participating.
Roster reviews and consolidations, where the client is reviewing the capabilities of several incumbents at the same time with the objective of restructuring or combining businesses in order to further scale or alignment, should provide each incumbent with a legitimate opportunity to prevail. Assuming a balanced playing field exists, capable incumbents normally participate in a roster-review process.
Draw another card
If a client raises concerns about the agency relationship or business performance, the first step should be trying to identify the sources of problems. The client and agency should co-create an action plan to fix the situation and embrace an ongoing, 360-degree monitoring and evaluation mechanism to makes sure fixes are implemented in a mutually satisfactory and timely manner.
If the client decides to conduct an unscheduled or non-roster review of the business without attempting to fix the existing relationship, this doesn't bode well for the incumbent, and the incumbent may not have a fair chance of prevailing.
Management changes at the client, especially when the newcomers have pre-existing relationships with other agencies participating in a review, mean the incumbent's chances of prevailing are likely limited.
If the client has previously worked with the agency to fix relationship or business performance problems and subsequently the client decides to put the business in review, the incumbent agency's likelihood of retaining the business are probably remote.