How much information about an agency's operations is a client entitled to? At what point does an agency say, "None of your business"?
Clients have been requesting what several agencies characterize as propriety information, and some shops are providing it, likely under pressure to preserve client relationships and win business when there's little to be had. Deutsch, however, proved willing to lose an account rather than divulge certain details to Pfizer, and the two parted company last week.
During a yearlong contract re-negotiation with the New York client, Deutsch was asked to agree that it would provide, if requested, information such as the salaries of staffers working on Pfizer brands Zyrtec, Zoloft and Bextra, and the profit margins on other accounts, sources said. The New York shop was also asked about its overhead expenses, including those not billable to clients, sources said.
In compensation discussions, salary information is often provided in the aggregate—for example, the collective salary for the creatives on a piece of business. But individual breakdowns are "always inappropriate," according to the American Association of Advertising Agencies' guidelines on compensation agreements.
The Pfizer renegotiation was initiated by client purchasing executives and an outside consultancy, Beekman Associates in New York, sources said. Pfizer is said to be cutting costs by scrutinizing the contracts of all its vendors. A client rep denied that Pfizer had asked for salaries and profit margins, dismissing such talk as "wild rumors."
But several sources said Pfizer purchasing executive Greg Duncan and the consultant had requested the information as part of the fee negotiations with Deutsch, which is relatively expensive compared with its peers. Other Pfizer agencies, including McCann-Erickson in London (which handles Viagra in Europe), were also asked to sign contracts stipulating they would provide the information if asked.
At least one Deutsch competitor applauded the shop's stance. "An agency should not be asked to live with that deal," said the executive, who had seen the proposed contract.
The Deutsch-Pfizer divorce came despite what sources described as a solid and successful four-year relationship between agency staffers and client executives. The Zyrtec campaign ("Lots of allergies. Just one Zyrtec") won a gold Effie last year.
"It's just one of those sad stories with an unhappy ending, because we couldn't agree on a contract," said Deutsch CEO Donny Deutsch, who would not discuss details of the split.
Pfizer is now expected to launch reviews for Zyrtec, Zoloft and Bextra, and sources said roster shops would be invited. The client spent $125 million on all its brands through November 2002, according to CMR.
While the Deutsch-Pfizer episode raised eyebrows among industry executives, they acknowledged that, driven in part by the rise of purchasing departments in reviewing agencies, more clients are demanding detailed financial data.
"We haven't had anything quite that specific," said a CEO at a global media agency, referring to Pfizer's requests. "But clients have been a lot more aggressive in the kinds of information they're asking for."
Clients are "trying to treat agencies just like other suppliers they buy from," said Arthur Anderson, managing principal at Morgan Anderson Consulting in New York. "It looks like they're asking agencies for more, but they're just getting up to speed with what they are asking all their vendors."
Bill Nicholson, evp, management services at the 4A's, acknowledged that "every company today wants to eliminate unnecessary costs," but added, "certain practices are unacceptable."