As global consolidation sweeps through the worlds of business and advertising, client conflict is forcing agencies to create new structures to accommodate clients – and, inevitably, the more lucrative the client, the closer the relationship between it and the agency.
Indeed, at times it becomes so close that in the case of DaimlerChrysler and BBDO, the advertising giant is going to roll out a separate network to service the car manufacturer’s new $2.4bn (£1.7bn) global advertising account it has won. DaimlerChrysler will also get a seat on the board of PentaMark Worldwide, the new network (MW last week).
But single-client agencies have a long history of troubles: failure to attract top-class staff and new clients when they need to; a lack of creativity and ambition; and, especially with a seat on the board, client interference in financial issues. The longevity of these set-ups is questionable.
PentaMark was set up in 1998 to handle BBDO’s Chrysler work in the US. The now re-named PentaMark Worldwide is expected to set up offices worldwide to form the fledgling network.
The BBDO network handles a vast array of motor clients in different agencies across different markets. In the UK, Abbott Mead Vickers.BBDO has the £20m Volvo account,but elsewhere BBDO services Nissan, Audi, BMW, Daewoo, Fiat, Lexus, Seat, Volkswagen, Toyota, Mitsubishi, General Motors, Mercedes Benz, Peugeot, Renault and Suzuki.
The situation has not really presented a problem until now. Unfortunately, the newly-won DaimlerChrysler account runs across the globe, conflicting with everything – hence the need for a separate network.
It isn’t yet clear whether the network will be dedicated to DaimlerChrysler, or if it will pitch for, and work on, non-car accounts. Either way, advertising industry commentators fear the set-up will not work in DaimlerChrysler’s, or BBDO’s, favour.
Some ad industry insiders have likened the relationship to that between Unilever and the former Lintas, now part of Lowe Lintas.
One of the industry insiders says: “It’s a direct parallel to Lintas which was set up by Unilever and actually never broke out of it.” Lintas was created in 1929 by Lever Brothers (later to be re-named Unilever) to run the company’s own advertising campaigns.
During the Sixties the separate units of Lintas around the world were consolidated to form a centralised agency, Lintas International.
But it was not until 1970 that Unilever sold a 49 per cent stake in the agency to Sullivan, Stauffer, Colwell & Bayles (SSC&B).
In 1979, Interpublic chairman Phil Geier acquired SSC&B and three years later Interpublic bought the remaining 51 per cent stake in Lintas from Unilever.
The source suggests the agency’s set-up was problematic even after Lintas had been hived off from Unilever: “The agency couldn’t get decent creatives and Unilever’s brand managers were frustrated because they felt tied to Lintas.”
He queries whether top-notch creatives, planners and account handlers will be prepared to work exclusively on a car account at PentaMark.
Restless creatives are a problem Coca-Cola faced with its dedicated agency Edge Creative.
Formed as a breakaway from Creative Artists Agency, Edge Creative worked solely for Coca-Cola for seven years, before its founders decided to dismantle the agency in favour of new challenges.
Burkitt DDB’s chairman, Hugh Burkitt, claims clients indirectly benefit from the fresh-thinking and the cross-fertilisation of ideas borne out of having several clients: “Most agency people like to work on a variety of business.”
Lowe Lintas’s managing director, Chris Thomas, says: “I don’t think single client agencies are likely to be successful. A fundamental benefit of agencies is that they offer clients different perspectives from different markets. One of the reasons agencies are successful partners to clients is that they bring something new.”
Thomas, however, says Lintas staff were able to work on a variety of Unilever products and brands which were like separate clients in their own right. He believes working solely on a car account is a different matter.
Even if DaimlerChrysler allows Pentamark to work on non-car clients, the agency may have difficulties attracting additional business.
Wieden & Kennedy’s UK office, for example, was constrained in its hunt for new business after it committed itself to work solely for Nike during its first six months.
Industry commentators claim Kevin Morley encountered a similar dilemma with the agency he formed – Kevin Morley Marketing – to handle the Rover account after quitting as managing director of the car manufacturer.
Burkitt says: “If you have an agency like Kevin Morley Marketing it doesn’t tend to last very long because it fails to attract new business. If you have a very large and dominant client, other clients tend to shy away.”
Ironically it was Ammirati Puris Lintas, a later incarnation of Lintas, that acquired Kevin Morley Marketing to help broaden its own client base.
“Fundamentally, that was the problem with Lintas. Even when it stopped being owned by Unilever there were touches of a master-servant relationship, instead of a partnership,” claims Burkitt. “Big clients can also become very bullying when they have an agency dependent on their business,” he adds.
Another industry insider points out that the finances of an agency can become an issue when you have a client sitting on the board.
“What happens if you are discussing the profitability of that client and it just happens it is losing you money in a particular market? Normally, you would put a case to the client for more money. There are salaries and bonuses to consider; these are also linked to profitability,” he says.
Lowe Lintas’s Thomas believes agencies can provide sufficient transparency for clients without the need to offer a seat on the board.
Thomas says: “There are lots of things agencies do to make the partnership tight and transparent, such as payment by results and remuneration aligned to the client’s business performance.
“There’s more transparency now than ever before. Giving someone a seat on the board is an interesting concept. You are taking stakeholder participation to a new level. I can see how it might have helped win the [Chrysler] business,” says Thomas.
But he does not think that established agencies will follow suit and give clients seats on the board. “I think it can only be done where you have a founding client.”
Michael Parker, chief executive of Saatchi off-shoot Team Saatchi – set up to handle types of business which required fast-turnaround creative work and ideas as well as pieces of conflicting business – disagrees.
He says. “We are a client service-driven business, so why not have clients on the board?
“I don’t think it’s going to end up with clients owning their advertising agencies as they benefit from agencies competing in their own market to have the best knowledge and ideas.”
Another example is the BMP DDB off-shoot, BMP4, which was created to overcome client conflicts and to work on Marks & Spencer’s quick-turnaround clothing and general merchandise business. The off-shoot was abandoned when M&S consolidated its account into Rainey Kelly Campbell Roalfe/Young & Rubicam.
BMP DDB chairman Chris Powell maintains off-shoots have a tendency to become “a ghetto” and says none have “ever grown to be a major force in their own right”.
TBWA London created a special unit, the NatWest Village, to service its prestigious financial account. But despite this, Village’s role as lead agency is under challenge from fresh creative ideas produced by M&C Saatchi.
Agencies clearly find dominant clients intimidating – and for good reason. Few dare to challenge their paymasters’ way of thinking.
Yet independent thinking and the ability to challenge are part of the service that clients seek from their agencies. DaimlerChrysler, which allegedly settled for BBDO rather than True North on price, will probably get the creative input it deserves.