The working relationships of advertiser and agency are similar to a marriage. They require trust, openness, and honesty to work well, and they can founder when there is suspicion, discord, or animosity between the two sides. As both agencies and advertisers have grown bigger, each group has voiced complaints that the other party has grown too impersonal or bureaucratic or unresponsive. These generalizations are hard to substantiate, however; while some advertiser—agency relationships have lasted as little as 3 months, many others have gone on for 50 years or more.
Long-term relationships are becoming far less common. The reasons for breakups between advertiser and agency are many. Sometimes an advertiser has worked with several agencies and found that some are more responsive and creative than others, so it drops the one it finds less effective and reassigns the business to one of the remaining shops. Or it may decide to sever ties with its agency and put the account under review, asking several agencies to put a presentation together to solicit the piece of business. This solicitation for business is known as a pitch. Occasionally, the current agency is asked to be part of that review, as was the case for Leo Burnett and United Airlines, but it is quite uncommon for an agency to hold onto a piece of business that goes under review.
Less frequently, it is the agency that decides it no longer wishes to work for a particular advertiser. This may occur if the working relationship has deteriorated to the point where it is no longer feasible, or if the compensation received is not acceptable to the agency. In another scenario, an agency will drop an advertiser if it wishes to go after a competing account, such as another brand in the same category. In recent years, the problem of conflicting accounts has grown in the U.S. In this country, advertisers do not like their agencies to work on any business that they perceive to be a competitive threat to their own. They consider it a conflict of interest, as well as a security problem, to let the agency handle sensitive, proprietary advertiser information. This seems to be less of a concern elsewhere in the world, where agencies may handle brands in different categories even if the parent companies consider themselves competitors.
As both agencies and advertisers expand their reaches, it is almost inevitable that one branch of an agency will end up working on an account in the same industry as that of another branch. Young & Rubicam, for example, does work for both Colgate-Palmolive and Johnson & Johnson in its different worldwide offices. Because both companies manufacture oral care products, a potential conflict would exist if, for example, Colgate decided to introduce a mouthwash into the South American markets where Y&R does the advertising for Johnson & Johnson.
Agencies spend a good deal of time, effort, and money soliciting new business. They may do so by direct contact with advertisers who have publicly acknowledged that they are searching for a new agency for a given brand or brands.
Or they may work behind the scenes to develop relationships with key personnel at an advertiser to exhibit their interest in working for that company. Often, a small project conducted either openly or in secret can turn into a new account for the agency. This was the case for Leo Burnett Company, which after working on a piece of the Reebok business, went on to win the worldwide account (although it later resigned the account).
When advertisers ask agencies to participate in a review, they usually ask the agencies to put together a speculative advertising plan, or a plan on spec. This means that the agency has to create the plan for free, or with only minimal expenses paid for by the advertiser. While the cost of the preparation may be small compared to the size of the account, some agencies decline to participate if they feel the costs involved are too high compared to their chances of winning the business. Ammirati & Puris, for example, spent an estimated $250,000 to win the creative portion of the Burger King account. The new client compensated the agency about $100,000. Agencies that tried to win the business of Kmart were thought to have spent up to $1.5 million each to obtain the $175 million piece of business.
More and more, advertisers are turning to special consultants to help select their agency partners. These people find out from the company what their needs and preferences are, and then listen to the agency presentations (along with the prospective clients) and advise them on who they believe would be the best match. Consultants maintain that they help make the search process easier, while their critics say they get in the way of a free exchange of ideas and information.
The advertiser—agency relationship is not as stable today as in the past. One reason behind this is the flurry of mergers and acquisitions that started in the mid-1980s and continues still. Such changes of ownership often result in cutbacks in advertiser spending or agency size. Saatchi & Saatchi, a U.K.—based agency, purchased the Ted Bates Agency, Compton Worldwide, Dancer Fitzgerald Sample, Backer & Spielvogel, and several smaller shops to create the world’s largest agency group, called Cordiant. It was soon followed by Martin Sorrell’s WPP Corporation, which purchased J. Walter Thompson and Ogilvy & Mather. Doyle Dane Bernbach merged with Needham Harper Worldwide to form DDB Needham Worldwide, which then, in turn, linked with BBDO under the corporate umbrella of Omnicom. In a reversal of that trend, Cordiant was divided again into two separate entities, the Saatchi & Saatchi agency network and the Bates agency network.
On the advertiser side, Philip Morris Companies purchased Kraft General Foods (itself the product of the merger of Kraft and General Foods), while R.J. Reynolds bought out Nabisco, to become RJR Nabisco. The British pharmaceutical giant, Glaxo, bought out Wellcome to create one of the largest pharmaceutical companies in the world. Bayer Group, a German company, renamed the U.S. business that had been called Miles and spent $60 million in advertising and promotions to announce the new name to the public. Federated Department Stores now owns Abraham & Straus, R. H. Macy’s, Bloomingdale’s, and Bon Marche. Whenever these kinds of changes take place, it is fairly certain that the advertising, and the advertiser—agency relationship, will be affected too.
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