Musical Chairs for ad agencies ?
Dec/08/06 07:34 | The agency side
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In case you hadn't noticed there has been a lot of musical chairs taking place on the agency side of the ad business. It's happening in the consumer and pharmaceutical ad agency business world and I expect it to continue . What's going on here? Well I believe that the good ol' days of the agency client relationships are quickly coming to an end and that marketers are sending a clear and concise message "we want strategic partners who can be accountable for their work".


Last month it was announced that Pharmaceutical giant GlaxoSmithKline had moved the professional advertising accounts for six brands to Interpublic Group of Cos.' FCB Healthcare and Torre Lazur McCann. WPP Group's Grey Healthcare lost the Advair account, valued at $100 million, as part of this consolidation. In October Novartis is moved the ad account for its high-blood-pressure medication Diovan from Interpublic Group of Cos.' Deutsch to sibling Hill, Holliday, Connors, Cosmopulos, according to multiple executives. It's happening in the consumer products area as well. This week Wal*Mart fired a Senior VP who lead a review for a new agency and promptly announced that they were reopening the account review of their $580 million business. While no reason was given for the termination of the executive the ad world is abuzz with speculation.


The old model of doing business was simple for agencies; their job was to develop ad campaigns, get them approved by the client and then bill for their time. That was then..this is now. Marketers now want agencies who are strategic partners and can be held accountable for their recommendations and work. Spend $100 million on a campaign and share doesn't move then someone has to answer "why?" Agencies are in a tough position because they often do not get to implement their recommendations. They enter the dark world of the pharmaceutical company matrix and often come out with changes to creative that are in direct conflict to what they recommended. On the other side of the street however we also find some agencies that deliver creative that is way off the mark because they are led by a DTC team with little experience in consumer marketing (see my post on Rozarem as an example).


Some ad executives, with vision, have been calling for change for a long time but nobody wants to be the first to step forward with a new business model and admit that consumers now have lot more power. The old business models and heavy up media plans just don't provide the same ROI's anymore. Marketers have to justify every dollar they spend and it's getting harder to justify mega-million dollar ad budgets today when share remains flat. Some agencies have decided to fire the first shot and fire clients (long overdue) because clients would not allow them to become strategic partners with the brand.


With all the changes on the horizon for DTC and the increased earnings pressures on pharmaceutical companies it's easy to see why every dollar and relationship is being scrutinized. I believe that a lot more shifting of business is going to happen in the near future as more companies hold agencies accountable for their work.
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