Initiative: U.S. Media AOY ’08

It wasn’t long ago that Interpublic Group’s Initiative had, by many accounts, completely lost its way. By the end of 2005, the 14-year-old shop hadn’t won a major U.S. media-only pitch in more than three years and it was reeling from client defections, including the $320 million Bank of America account, Six Flags ($75 million), Maybelline and Pennzoil-Quaker State (both $50 million). Many of its tech clients had lost faith and departed, too, including prestige brands like Yahoo, Gateway — now back in the fold — and Nextel (a combined $400 million in billings).

The widespread perception was that Initiative was a big and proficient buyer of traditional media, but was falling behind as the media universe was becoming more complex. Its planning offering was thought to be sub par and its digital practice was lagging to the extent that most major clients went elsewhere for those services.

Those rough years now feel like an eternity ago.

“Four years ago, we weren’t even on the map,” acknowledges Tim Spengler, who was promoted to president of Initiative USA from chief activation officer last February.

A lot has changed. Competitors would kill for a year like Initiative had in 2008. It won close to $1.5 billion in new U.S. billings, most of it from three clients in showcase categories: Korean carmaker Hyundai/Kia ($800 million), brewer MillerCoors ($400 million) and soft-drink marketer Dr Pepper Snapple Group ($140 million). It also defended key pieces of business, impressing existing clients as well as new ones with improvements to its offering.
New business and organic growth combined to boost revenue in the U.S. by 22 percent to $345 million, all after the agency installed new global and U.S. leaders early in the year. Billings were up 12 percent to $13.1 billion, according to Adweek research, which factors in double-digit spending increases from clients such as Lionsgate Films, S.C. Johnson, Kao Brands and Best Western.

For a transformation that made believers out of new clients and reaffirmed the faith of existing ones, a smooth management transition, innovative campaigns and substantial revenue growth, Adweek has named Initiative its 2008 U.S. Media Agency of the Year.

This past year, Spengler says, might have been the shop’s best ever. The reengineering that took place from the end of 2005 through 2008, he says, was about “taking the long-term view and changing the agency for good.”

Richard Beaven, who joined as North American CEO in September 2006 and was elevated to worldwide CEO in January 2008, succeeding Alec Gerster, was instrumental in making that happen. Viewed by colleagues as analytical, tireless and an executive who leads by example, Beaven set a key goal for the shop: to significantly enhance the agency’s planning capabilities. To help do so, he recruited Sarah Power, svp, director, strategy, from MPG in 2007.

In February 2007, Initiative added planning duties to buying-client Bayer’s $400 million assignment after a review.

But the biggest wins happened early in 2008. In January, Initiative captured both the Hyundai/Kia planning and buying account from Carat, and the Dr Pepper Snapple Group assignment from Mediaedge:cia, Adweek’s Global Media Agency of the Year for 2007.

Jim Sanfilippo, evp and COO of World Marketing Group, U.S. marketing arm of the Hyundai and Kia car brands, says, “Obviously this is a tough period [for the auto sector]. [Initiative is] acutely sensitive to the analytics, meaning they’re watching the economy closely [and] they’re watching the car business. … We think we’re getting the best thinking from the group collectively.”

Michael Hayes, managing director of Initiative’s digital operation, who has spent the last four years overhauling that offering, says it was only within the last 12-18 months that Initiative could handle the digital needs of a huge car account like Hyundai/Kia, which spends an estimated $75 million a year in that sector.

“We didn’t have scale, we weren’t integrated into the offering, and we didn’t have the right mix of technological and experiential or creative expertise,” Hayes says.

After adding a mix of new software, tools and talent, the agency increased its digital client roster sixfold over four years.

Initiative didn’t just excel at winning new accounts in 2008. It defended key assignments and capitalized on major opportunities to both defend and expand duties with existing clients, as it did in the MillerCoors consolidation review (Miller and Coors merged in July). Initiative had been the buyer on the smaller brand, Coors, and added Miller in November after a shootout with the incumbent, Publicis Groupe’s Starcom.

“They showed us that they understood best how to leverage the scale of the new organization,” says Jackie Woodward, vp of marketing services for MillerCoors. “Their thinking was right in line with the business strategy that brought the company together.”

Beaven credits Spengler for taking the U.S. shop to new heights, while Beaven himself spent most of his time traveling across the agency’s far-flung global network (91 offices in 70 countries). Spengler, perceived as intensely competitive — he was an All-American tennis player in college — sees the agency business as the ultimate team sport. It was at a Spengler-led brainstorming session that the idea emerged to create a devoted MC Media unit, in response to MillerCoors’ desire for a “one-stop solution” for media planning and buying.

“Initiative  anchors it,” says Woodward, noting that Spengler is chairman of the consortium, which includes fellow IPG shop Draftfcb for planning; WPP’s Kinetic for outdoor; and Publicis Groupe’s Digitas and Microsoft’s Razorfish for digital.

The new structure, Spengler adds, would allow the entire team to “better focus on consumers and selling beer. I think it resonated because it brings a very integrated effort.”

“Our clients don’t come to us with media challenges, they come to us with business and marketing challenges,” says Beaven. For Burlington Coat Factory — which Initiative successfully defended in May — that challenge was to persuade consumers to cast off preconceptions about the off-retail chain. According to Spengler, that meant getting messages in front of mothers during their “personal” time.

“We got the client to consider media they hadn’t thought of,” he says, including unconventional vehicles such as emery boards at nail salons, niche magazines and the Internet.

Existing clients, such as film studio Lionsgate, were also pleased with Initiative’s efforts to transform itself. Erika Schimik, svp of media and research at Lionsgate, credited pre-launch media campaigns by Initiative for the April premiere of martial-arts release The Forbidden Kingdom — including YouTube and Google promotions that generated 4.4 million video views — for helping it to open at No. 1 at the box office.

For the Oliver Stone film W., the shop executed outdoor stunting and on-air and online blitzes tied to the presidential debates, which helped the small-budget film generate a whopping 70 percent awareness among consumers 25-49. The work demonstrated that Initiative is “creative and innovative,” Schimik says. “They understand today’s consumers.”

With his team, Beaven (Mediaweek’s 2008 Executive of the Year) established a core set of values, including relentless curiosity, teamwork, client results, creative thinking and flawless execution. But perhaps the overriding value is caring, Beaven says. “That’s probably the most important word in the company. Otherwise, you have problems, because it’s not a mechanistic, disconnected business; it’s a highly connected and sociable business. That’s how great ideas happen,” he says.

Nick Brien, CEO of Mediabrands, the IPG management arm that oversees the holding company’s big media-agency operations (including Initiative and Universal McCann), says the scope of the turnaround since Beaven’s arrival has been “remarkable,” and that what Initiative had been lacking was leadership. He also lauds Spengler for stepping up and delivering on the expectations. “Tim had deep TV experience, and his broadening and the learning curve he’s been on … was great to see,” Brien says. “He’s grown and developed into an impressive leader.”

Without a doubt, Spengler’s first year in charge of the U.S. operation was hectic. In addition to being centrally involved in the key reviews, he brought in new talent, including Kris Magel, evp of national broadcast (and a Mediaweek 2007 All Star), and Jason Meil, evp and managing director of innovations.

Another top priority: to focus on the company’s culture. “We want this to be a fun place to work,” Spengler says. “We don’t take any pride in working until 9 o’clock at night.”

Despite all the improvements, he adds, Initiative is still a work in progress. “This is a marathon, not a sprint,” he says

INITIATIVE ’08 AT A GLANCE:

–U.S. Billings up 12 percent to $13.1 billion (est.)
–Revenue up 22 percent to $345 million (est.)
–Accounts Won/Media Budget: Hyundai/Kia ($800 million); MillerCoors ($400 million); Dr Pepper Snapple Group ($140 million)
–Accounts Lost/Media Budget: CBS/Showtime ($135 million; effective February 2009); Levi’s/Dockers ($70 million)

 2008 Highlights:
–Richard Beaven promoted to worldwide CEO in January
–Tim Spengler promoted to U.S. president in February
–John Nuzzi promoted to evp, managing director, Initiative West

(Sources: Adweek, agency reports, Nielsen Monitor-Plus)