$700M Question: Will RPA Hang Onto Honda?
When American Honda Motor Co. put its media and creative accounts in play last week, it also put RPA's future in question.
While a big review will always bruise the incumbent, if the $700 million account leaves RPA, it could strike a fatal blow to the Santa Monica, Calif., firm. It is easily the largest client at the shop, which posted $122 million in 2011 revenue, according to Ad Age 's DataCenter.
The shop took on the Honda brand business when it opened its doors in 1986; in 1999 Honda consolidated its Acura media and creative business there as well. Founders Gerry Rubin and Larry Postaer launched the firm out of what was Honda's agency group within Needham, Los Angeles, after Needham Harper & Steers merged with Omnicom.
Since its inception, the firm has added a handful of accounts, including Farmer's Insurance and La-Z-Boy. Now, its flagship client's chief marketing officer, Michael Accavitti, is reviewing both brands' marketing and creative accounts. Mr. Accavitti joined Honda last year; from 1984 to 2009 he held various roles at Chrysler, the last of which was president-CEO of Dodge and lead marketing executive for Chrysler Group.
The move shocked many, especially since Mr. Accavitti, when he joined Honda last year, told Automotive News there was no need to put RPA's business up for review, saying "RPA is an extension of the Honda family." Wrote Mr. Postaer in his recent memoir: "There is such a thing as a happy and enduring [agency-client] relationship. For us, of course, the partner has been Honda."
Honda's review comes as the automaker posted its best November U.S. sales, according to Auto News. The Honda and Acura brands should combine to finish the year selling around 1.4 million units in the U.S. But Honda has grander volume aspirations: to increase North American sales to 2 million in the near term. Whether RPA guides it there remains to be seen. It's rare that an incumbent retains a client's business in a review of this sort. A number of industry executives said that the loss of all or any big piece of the Honda account could sink the shop, likening it to the folding of Omnicom's KPR and Griffin-Bacal. RPA declined to comment for this story.
Griffin-Bacal folded soon after it was acquired by Omnicom and Hasbro pulled the plug on its business. And KPR lost all of its business after a massive J&J consolidation review in 2008.
"It's not healthy for the top three clients to represent more than 50% [of the business]," said agency-search consultant Joanne Davis. Ms. Davis recalled a time when a client was torn about an agency that had just lost a big piece of business. "Midlevel people really liked the agency, but their bosses said, 'Maybe we shouldn't do this. If they go under it'll make [the team] look bad in front of our board.'"
Doner President David Demuth recalled the day the Mazda business walked out the door; it composed about 25% of Doner's business. "It was important to demonstrate to the people of the agency, to all of our other clients and to the world at large, that we won't just walk away with our tail between our legs," he said, but noted that it's difficult to retain people during a trying time. "People just get scared; they see the writing on the wall and look for jobs immediately, but you also have people who will dig in and keep their head down and do work," he said. Doner had a more robust roster of clients at the time of losing Mazda than RPA does today; months later, Doner won Chrysler business. "It's important to diversify," Mr. Demuth said.
The movement in the industry, however, is away from diversification and toward single shops managing a client's business, a trend that has cropped up most commonly at WPP, which has set up dedicated agencies for Bank of America, Ford, MillerCoors and Mazda, among others.
RPA will defend the account. There's wide speculation that MDC will put forth a team to compete for it using media scale-it recently acquired Targetcast and R.J. Palmer-and its creative shops based on the West Coast or with West Coast offices, such as 72andSunny, Vitro and the Los Angeles outpost of CP&B. BBDO is also a natural fit, given Mr. Accavitti's experience with the agency at Chrysler; it could compete with an Omnicom Media Group team. Martin Agency is rumored to be a creative contender. Horizon Media is likely to compete for the media portion. And Starcom or Optimedia are media possibilities out of Publicis Groupe .
For now, RPA can at least count on the support of another big client, Farmer's Insurance. A spokesman told Ad Age , "The Farmers Insurance relationship with RPA continues, and we are happy with that relationship."