Philips’ global creative and media review is still in the early stages, with incumbents DDB and Carat, respectively, gearing up for the inevitable uphill battle of keeping a mega-account.
The stakes are huge, given that globally Philips spends about $500 million in media each year. Also, the company finds itself at a strategic crossroads, as it eases out of the business of making televisions and invests in less sexy but higher margin products like medical devices for future growth.
In its latest quarterly earnings report, Philips blamed a 54 percent profit decline in part on TV price competition from the likes of Samsung and Sony in the U.S. Complicating the incumbents’ defense is turnover in Philips’ executive ranks, from CEO down to chief marketing officer.
DDB worldwide CEO Chuck Brymer noted the churn in an internal email to his regional leaders. “While disappointing, in many ways this review seemed inevitable,” Brymer wrote. “Despite the amazing work we have done for Philips over the last few years, Philips [has] completely changed over [its] entire management team—including a new CEO, new divisional presidents and CMOs in two of their three sectors, and a new global brand director.”
Brymer added that the new leaders “are reviewing their entire list of partners and suppliers to make sure they have the right structure, processes, and partners to fulfill the strategic ambitions of the new CEO.”
The pitch for the media business, which Carat won in 2001 and successfully defended in 2007, is expected to be separate from the creative pitch. The contenders the last time around were MEC, Omnicom Media Group, and ZenithOptimedia. In the end, it came down to Carat and MEC.
Philips consolidated its creative business at DDB in 2003, after years of employing a dual-agency structure. The ’03 consolidation came at the expense of Leo Burnett.
Like most global reviews, the process is expected to be lengthy. S.C. Johnson’s search took more than seven months, and ExxonMobil’s review began last fall and has yet to conclude. Philips aims to complete its search before the end of the year, according to a company representative.