Last week, Kmart Corp. picked the Minneapolis agency for its $175 million advertising account after a five-month review.
CME made its pitch for the business at Kmart headquarters in Troy, Mich., on April 13. Earlier that week, Kmart heard from BBDO Worldwide and Ally & Gargano, New York. Incumbent Ross Roy Communications, Bloomfield Hills, Mich., declined to participate in the review, but its work was considered by Kmart. Omnicom's BBDO, which is currently bidding for Ross Roy, presumably had an advantage in the Kmart review if it acquired the incumbent.
About 10 people from CME, including CEO William Dunlap, gave a 3-hour presentation to Kmart brass, including Kenneth Watson, exec VP-marketing and product development; Michael Wellman, VP-marketing; Gerald Habeck, VP-advertising; and other exec VPs.
"While it was a difficult decision, CME demonstrated that they meet our needs best," Mr. Watson said. He said the agency will be developing "an umbrella theme and advertising programs that help to build store traffic and support storewide promotions."
Mr. Dunlap was pleased with the biggest win in the agency's history and will be handling the account personally. "We believe in Kmart and its future and we believe we can be a good partner for them." CME plans to open a satellite office somewhere in the Detroit area to service the account.
CME retail and package-goods experience should help Kmart develop a clear marketing strategy. The agency's clients include: International Dairy Queen, Century 21 Real Estate Corp. and General Mills. It also has done project work for Dayton Hudson Corp.'s Target, including the launch of Target Greatland stores.
"Any agency that understands the fundamental building blocks of what has made Target successful will be an added value to Kmart," said Jeffrey Hill, managing director for Meridian Consulting Group, Westport, Conn. "However, the challenge for that agency is not to get ahead of itself while it is waiting in anticipation of new management."
Neither Kmart nor CME would comment on the presentation, future marketing strategies or the content of CME's first campaign, set to break this fall. But analysts and those close to Kmart expect CME's role will be minimal until Kmart can solve operation and merchandising problems as well as find a new CEO.
Kmart has been plagued with inventory control problems and internal management conflicts which have made it difficult for the retailer to develop any type of marketing image. And with the departure of President-CEO Joseph Antonini last month, Kmart's business strategy is still being decided.
At this time, observers say the agency's job will be to keep Kmart's name in front of consumers with highly promotional advertising and in-store efforts.
"Kmart needs to maintain a strong consumer presence during its transition, so it will not lose further ground," Mr. Hill said.
He said Kmart needs to be careful not to make sudden redirectional decisions before they have a CEO in place. "The new CEO is likely to have his own vision as to where the company should go which would heavily impact the consumer positioning and advertising."
Analysts say it is in Kmart's best interest to decide on a new CEO within the next one to two months. Analysts say some likely CEO candidates are: Michael Bozic, president-CEO of Hills Stores Co., Canton, Mass.; and Kenneth Macke and Boake Sells, both retired Dayton Hudson Corp. executives with significant Target experience.
Instead of being image driven, Kmart's fall campaign must focus on promotion, say observers.
"The fall campaign will be more a promotional activity as opposed to a fundamental positioning statement for the chain," Mr. Hill said.
This has been a very rocky review for both Kmart and the other agencies involved. People close to the review suspected that lack of direction and leadership turned off many agencies to the review. Three of six initial finalists-N.W. Ayer & Partners, Messner Vetere Berger McNamee Schmetterer/Euro RSCG and Ammirati & Puris/Lintas, all of New York-withdrew from the race.
CME will have its hands full helping revive Kmart's image.
"Kmart is looking to the agency to develop an image for the company to execute," said Kurt Barnard, president of Barnard Retail Consulting Group in Berkeley Heights, N.J. "Now, [in the minds of consumers] it is the polyester empire and it will be a difficult assignment. The agency will have its hands full."
Due to the Kmart loss, Ross Roy will close its New York office. "We have been winding down our activity there since we decided not to participate in the review," said Peter Mills, president-CEO.
Looking back, Mr. Mills doesn't regret the decision he made not to participate given the current situation at Kmart. "I wish Kmart and CME all the best. It is not going to be easy, but I'm sure that they are up to it," he said.