Mad Men: Detroit
When auto sales went into a tailspin two years ago, the region’s advertising industry saw the last remnants of a glorious era fade to black
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Watching an advertising agency go into scramble mode to replace a big piece of lost business can be a chaotic and troubling scene. So what happens when nearly every ad agency in town hits the reset button at the same time?
Metro Detroit is finding out. “It’s kind of a scary thing,” says Michael Morin, executive vice president and director of client services at Yaffe Group in Southfield. “If companies don’t figure out a way to be diversified, and if they don’t look at ways by which they can be different, then they’re in trouble. The market of ad agencies in southeast Michigan is impacted drastically by automotive.”
But that doesn’t include Yaffe, Morin hastens to add, since his agency has had a long-standing practice of focusing on nonautomotive business. Morin doesn’t pretend that he and his predecessors necessarily foresaw the advertising industry’s current problems, but they did believe they were better off developing a diverse roster of clients. Still, even some agencies that never had a lot of automotive business are being affected by today’s environment.
“One thing I see is that, with a lot of bigger agencies losing their automotive clients, they’re now fishing in the pond that we traditionally fish in,” says Tom Brzezina, president of Michael Flora & Associates in Troy. “They’re [trying] to get clients we would typically go for — not really small clients, but not Coke, either. Sort of middle market.”
Such are the cascading effects of a cataclysmic event. The global financial meltdown in late 2008 saw auto sales plummet, especially at General Motors and Chrysler. While both companies successfully exited bankruptcy last year and are starting to recover financially, no one is pretending that all of the auto industry’s losses here can be recouped.
“People call you from outside the state and they say, ‘You’re in Detroit?’ and they talk to you in a hushed tone, like your aunt died,” says Jamie Michaelson, president of Simons Michaelson Zieve Inc. (SMZ) in Troy. “There [are] still a lot of talented businesses here.”
One of the most high-profile account losses in recent times occurred last April, when Chevrolet announced it would pull its dealer business from longtime agency partner Campbell-Ewald in Warren. The news could not be called a complete shock, given the direction of the industry, but in many ways it was still jarring. Campell-Ewald, after all, had been responsible for iconic Chevy campaigns like The Heartbeat of America and Like a Rock.
Although the loss of Chevy was a blow, Campbell-Ewald Chairman Bill Ludwick says the agency had helped itself by making diversification a priority. “Fortunately, about 10 years ago we went on a very aggressive initiative to build and diversify our business,” he says. “So today, we have the U.S. Navy — and we’re proud to say that we’ve had over 90 months of record recruitment for the U.S. Navy.”
Other recent clients the ad agency has garnered include the U.S. Postal Service, Alltel, Giradelli Chocolates, and Remington.
The Doner agency in Southfield, meanwhile, lost the Mazda account — which accounted for 20 percent of its annual revenue — in June. Mazda shifted the work to WPP Group, in London, as part of a consolidation effort.
Agencies of all sizes and specialties understand the implications of the auto industry’s downturn. Janice Rosenhaus, CEO of Birmingham-based Harris Marketing Group, may not lead a large agency, but she sees communitywide consequences when big players lose big business.
“I was sorry to see the decisions to get rid of the large agencies,” Rosenhaus says. “I understand that people need to reinvent themselves, but to see so much of this business leave Detroit and leave Michigan was really disheartening for the state. There are some really smart people here, and some of these major agencies have a global presence and can get some of the smartest and most talented people in the world if they need to. Hopefully, the community here can recover.”
Ken Barnett, CEO of Southfield-based shopper marketing specialty firm MarsUSA, sees the automotive-related account losses and overall client expectations changing at the same time. “Businesses have learned what they need, and what they thought they needed,” Barnett says. “So have agencies, and so has clients’ willingness to pay for it. Clients want everyone to be making a contribution to business growth.”
That new philosophy has forced once top-heavy agencies to make some drastic — and often painful — adjustments.
“Clients have trimmed their administration jobs, to [keep] only the people they need to have,” Barnett adds. “The agencies were left with people who had no client alignment and they became a cost burden, not a value, to the business. These jobs aren’t coming back, and neither is that bloated style of operating on either side.”
Many local agencies are tapping into their specialties to grow. “We’ve looked at health care, we’ve looked at retail — anything where we can drive sales, build a customer relationship management platform, and build measured results,” Rosenhaus says. “We’ve looked at travel, large hotel chains, and also home-building for big national companies.”