Proponents of the idea contend it's an extension of the needs for efficiencies and one-stop servicing for clients. Critics see it as a smoke-and-mirrors way for agencies to find revenues from B-list clients.
'All the rules are changing,' said Thomas L. Bernardin, CME-KHBB/Detroit president, in defending the move. 'The way we deal with our clients and our suppliers is changing and while every agency may come up with a different solution, most agencies are looking for new ways of servicing their clients better.'
Bernardin said the office created the Hot Shop it believed it would save its clients money and turn a satisfactory profit for the agency at the same time. By retaining control over keylining, typesetting and graphic design jobs, the agency saves the client time and money and improves quality, Bernardin believes. And he rejects the notion it's an attempt to 'hide' clients.
'We deliberately structured the Hot Shop with a separate overhead structure,' he said. 'They are located in our offices, but from an accounting standpoint, we don't charge them the high overhead of the full agency so that everything they bring in is applied to the profitability of the unit. That's why they can run so efficiently for our clients and their own. Some of our favorite clients are very small and it just wouldn't make sense to work with them at the larger agency level.'
The 'sub-agency' approach has found several supporters in Minneapolis. At CME-KHBB headquarters office there, an extensive network of specialty subsidiaries has existed for more than 10 years. Fallon McElligott is in the process of expanding its 'below the line' services to include sales promotion, public relations, direct marketing and retail advertising, and has placed group director John Forney in charge of setting up the new structure.
Starting in 1989, Martin/Williams, Minneapolis, established its first in-house subsidiary and today has five such separate groups under its umbrella. Dave Floren, ceo and chairman of Martin/Williams, said the decision to add sub-units was initially motivated by a desire to capture revenues that were flowing elsewhere. However, Floren said within the last three years, clients have become less likely to want to work with agencies that are one-dimensional and only offer advertising.
Copyright Adweek L.P. (1993)