Debunking The Consolidation Myth

new york The specter of consolidation has hung over the ad industry for years, threatening to take work away from the many and hand it to the relative few. And while that trend continues, the pendulum recently has swung on the creative side, with some marketers shifting away from a single lead-agency approach and toward using multiple shops.

The decentralized approach is nothing new: Coca-Cola once employed more than 20 agencies globally and continues to share the wealth. Target also keeps a stable of creative shops. Now others, including Walt Disney Parks & Resorts, Motorola, Macy’s and Sony Electronics, are adopting the multi-agency approach. In addition, PepsiCo continues to reassign brands that once were consolidated at BBDO, the latest being the $30 million Doritos, which shifted to Goodby, Silverstein & Partners this month.

The shifts by Disney, Motorola, Macy’s and Sony involved more than $500 million in ad spending and date back to January ’05. During that period, Adweek reported just two significant creative consolidations: Sears, which consolidated its estimated $650 million account to Young & Rubicam after years of using both it and Ogilvy & Mather, and LG Electronics, which shifted $20 million in business from Ogilvy to LG roster shop BrandBuzz.

Motorola, Macy’s, Sony and Disney all took the decentralized route despite once embracing the single lead agency concept. These clients appear to prefer choice and a bit of interagency competition to the relative ease of one-stop shopping. “Why would an advertiser look to be putting all its eggs in one basket?” said Bob Liodice, CEO of the Association of National Advertisers. “A diversity in agency relationships might be a better approach.”

Often, these clients have fixed on a strategy and need agencies to execute the work. “We like the idea that there are different [creative] approaches,” said Michael Mendenhall, evp of global marketing at Disney, who described longtime agency Leo Burnett and newcomer mcgarrybowen as “equal partners” on the brand. “We are looking for the best creative against our strategic program.”

Disney, which also uses Omnicom Group’s TBWA\Chiat\Day in San Francisco for projects, has been moving toward a multi-agency dynamic for more than a year. (Before joining the U.S. roster last week, mcgarrybowen did project work.) Mendenhall attributed the shift to a significant change in how Disney markets its theme parks. “We were very site-specific in the past. We have moved now to a global model—branding ourselves and positioning ourselves globally,” Mendenhall explained. As such, Disney needed more agencies and “will wind up probably with four,” he added.

The splintering of duties previously handled by a single agency comes after years of steady creative consolidation. Between 2001 and 2004, Adweek reported more than $3 billion in such moves involving some 25 clients. The trend continues on the media side, where a dozen clients consolidated some $5 billion in billings last year.

Among the factors contributing to the swing toward expanding agency rosters is the rise of global chief marketing officers who, in the past, consolidated business at one shop to make it easier to manage and to ensure brand consistency, and now are focused on creativity, said Arthur Anderson of Morgan Anderson Consulting in New York. And while some marketers used several shops before the era of consolidation, it was mainly a function of regional marketing chiefs working with different agencies; now, the divide-and-conquer approach increasingly is driven globally from the top, Anderson said. “Now the CMO has his arms around the world and needs to manage marketing operations,” he said. “More and more, the mantra is, ‘Follow the creative. Look around for it and find it.’ The con is, can you do this with multiple resources and keep the brand positioning constant and current?”

Liodice and Mendenhall acknowledged the brand continuity challenge. Said Mendenhall: “It’s just about being disciplined inside.”

After a year with Interpublic Group’s Lowe as its lead agency, Macy’s last summer began to shift project work to shops such as WPP Group’s JWT in Chicago and independent Work in Richmond, Va. “We wanted a lot of smart people working on our business,” said Macy’s chief creative officer Joe Feczko. “The typical [lead agency] relationship wasn’t working for us. We have to speak to several different demographics and ethnicities.”

Work CEO Cabell Harris says the system is not that different than the relationship between a client and single agency, except the agency profits less and might have to live project to project. But Harris welcomes that. “I’d rather have a client hire us and put us on a test drive,” he explained. “That’s a great way for a client to find a shop.”