Epic Wave of Media Reviews Comes at a Crucial Time for Media Buying

Negotiating upfronts while pitching clients' business

This year, agencies are in an awkward position as they negotiate upfront deals for clients like General Mills. Photo: Getty Images

The seemingly endless fire hose of media reviews—20 in the past six months, representing some $17.3 billion in annual media spending—could not have come at a worse time.

Just as agencies like MediaVest and UM are negotiating upfront media buys for the likes of Coca-Cola and L'Oréal, respectively, those companies are reviewing their U.S. media accounts. So, while buyers focus on getting the best deals for their clients, they are in the midst of an existential crisis, contemplating whether they will still be negotiating on their clients' behalf six months from now.

As GroupM chairman Irwin Gotlieb lamented, "For those of us who make markets, our attention is being diverted unnecessarily."

The timing of these reviews—nine alone started in May—is unfortunate, even though companies like Procter & Gamble, Citi, Sony and Johnson & Johnson obviously felt the need to jump. The latest is General Mills, which put its $830 million media account at Zenith Media in play. The core reasons, according to sources, fall into two categories: financial and strategic, with some peer pressure at work as well.

Financially, companies like P&G, J&J and Sears Holdings are struggling to grow and looking to cut costs. With P&G that means shedding dozens of noncore brands and slashing $500 million in marketing spending. And reexamining media agency relationships in the U.S., with an eye toward bundling business at fewer shops, certainly jibes with that goal.

As a P&G representative said when the process began two weeks ago, "We plan to significantly simplify and reduce the number of our agency relationships and the costs associated with the current complexity and inefficiency."

P&G, which spent $2.6 billion in media domestically last year, and General Mills haven't reviewed their accounts since 2004 and 2001, respectively, and the media landscape has changed seismically since then. This leads to the strategic reason behind review fever: Marketers don't know if they have best-in-class media players in areas like mobile and social marketing simply because the disciplines are new. Also, marketers are investing more heavily in digital video, noted another media division executive.

"As online streaming video becomes part of the mainstream ... a lot of these clients are asking themselves whether they have the right partner," the exec said.

For agency CEOs, the pace of reviews is unprecedented and has their staffs scrambling between pitches and existing accounts. The spate of contests also forces bosses to make hard choices about what to pitch.

"There are finite resources available, and you've got to look at where you've got the best opportunity to convert," said Doug Ray, U.S. CEO and global president at Carat. "The other thing is that our clients that we currently have—we cannot lose track of them."

Chasing new business "puts existing business at risk," Ray added. "And I'd rather grow my business organically with the current clients than have a revolving door of new business [that with] every new business pitch you bring in, you lose a client."

Agencies generally are leaning toward pitching companies they already work for rather than unknown entities, particularly when a marketer is only considering roster shops, as with Coke, J&J and Citi. As a result, CEOs are turning down chances to expand their client base because they don't have the bandwidth to do both.

"I'm getting to the point where I'm at capacity," noted Marla Kaplowitz, MEC's North American CEO. "I can't fathom taking on more."

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