The price does matter

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Daimlerchrysler has no problems with its agencies' ads; its problem is with their fees. The winner-take-all contest pitting FCB Worldwide against BBDO Worldwide may seem a harsh reward for two loyal long-service "partners," but it can be healthy if the result is a better grasp of whether agencies have too much overhead or charge too much for value received.

Hopefully, this is not the opening shot in a wider outbreak of client grumbling over agency pay -- not after all the work that's gone into developing new compensation models and pay-for-performance plans. But it's telling that DaimlerChrysler, according to an executive close to the company, has not been able to figure out the profit margins at FCB and BBDO, a situation the executive said has generated much past wrangling about compensation. A Chrysler PT Cruiser buyer, checking the Web, knows the dealer's profit margin, yet DaimlerChrysler doesn't understand the margin its own ad agencies are making? Quite odd. So is it a surprise the auto marketer has pointedly said the winner in this current agency review will be the shop willing to do the work for less?

Advertisers can read the quarterly earnings reports of the big agencies. They know times have been good -- very good, in fact -- for most of the big agency companies. By comparison, some analysts are bracing for grim profit news from DaimlerChrysler, and cite problems at Chrysler, Dodge and Jeep. With DaimlerChrysler management already committed to making big cuts in its worldwide cost structure, and having already consolidated its U.S. media buying some time back, it was unlikely FCB and and BBDO would escape the squeeze.

So the compensation debate goes on. The specter of more DaimlerChrysler-like agency shootouts, where the low-bidder holds the trump card, will not be universally welcome in agency offices (or in many client marketing departments, for that matter). But DaimlerChrysler's focus on cost should be a tonic to remind ad shops that great work at a good price is the winning combination.

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