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.”
For Michaelson, clients with a homegrown, Midwest feel represent the sweet spot for his agency to target — and they complement existing accounts like the Detroit Tigers, Detroit Red Wings, and Flagstar Bank. Among other recognizable efforts, SMZ developed the recent “Who’s Your Tiger?” campaign, as well as its currently running successor, “Always a Tiger.”
“We’ve had a bunch of core accounts that gave us the chance to play in that space,” Michaelson says. “So we’re trying to find other business that taps into that need. They’re businesses we’re calling heart-of-America businesses. We’re not trying to conquer L.A. or New York. It’s that Midwest emphasis.”
For Brzezina, the pursuit of growth focuses not on an expansion of market thinking, but rather on an expansion into different markets. “Our particular strategy is to really get vertical and diversify geographically,” he says. “We’re looking at a couple of industries, and we’re looking all over the country.”
That approach makes the most sense for his agency, Brzezina adds, because Michael Flora & Associates is strong in industries like financial services, where it’s hard to maintain more than one client in a geographic market because of conflict-of-interest issues.
“Agencies our size have long insisted on local clients, and clients like the proximity issue,” Brzezina says. But he adds such long-standing relationships are falling by the wayside with the Internet and any number of other modern conveniences. “It’s not as hard to go outside your own area as it once was. In fact, there’s nothing to it, really. Not long ago, I served a client for three years and I never met the guy.”
Brzezina says his agency is close to landing new clients in Ohio, Indiana, and Illinois, and is expanding its reach nationally. “I’ve had a focus on Midwestern states, but states that weren’t really devoted to one industry like Detroit was,” he says. “The farther west, the easier it is to do business long-distance. To a degree, it’s almost the way they prefer to do business — ‘Let’s keep it fluid. Let’s keep it simple. Let’s go.’ Going to the East Coast is where you encounter, ‘We’d rather have somebody local.’ It seems more provincial, I guess.”
Yaffe’s Morin believes growth opportunities may lie not so much in new kinds of clients, but in new ways for ad agencies to look at themselves and what they do.
“With a huge amount of unemployment, there are opportunities in education,” Morin says. “With aging baby boomers, there are opportunities in health care. So you can do something in those areas because they’re obviously growing. But other areas you can look at include the kinds of new media that are available to companies, all the way from something as simple as Web-based advertising to social media. And what has happened is that there have been specialists who have tried to gobble up that category, and all the ad agencies have said, ‘My God, we have to catch up.’ ”
Ludwick agrees that agencies need to think more in terms of content management rather than the traditional focus on creative and media placement.
“If you think of new media work, especially in the social media space, content is king,” Ludwick says. “The Navy was one of the first to have a YouTube channel. And the reason it ranks as one of the most popular YouTube channels is that the Navy has so much content that people want to see.”
Among the emerging specialties agencies might consider is the one Barnett’s MarsUSA team has chosen as its avocation — shopper marketing, which focuses on consumer behavior to pursue effective brand-marketing in the retail environment. That specialty requires its purveyors to combine a mastery of traditional retail activity and emerging communication forms, and to synchronize them to achieve a role as a strategic leader for clients.
“If you’re not a player-coach, you’d better learn to be, or else risk obsolescence,” Barnett says. “You must understand the new media world.”
Ludwick also sees a major opportunity for local agencies in the film production realm, but he has a bone to pick with the Michigan Department of Treasury. Although state government has established tax incentives for filmmakers to do business in Michigan, the current Treasury interpretation of that law doesn’t allow for the producers working on commercial productions to be covered. Ludwick believes the decision is costing the state’s ad agencies.
“If we can convince the legislators in Michigan to allow commercial production to enjoy the same incentives they gave to producers in Hollywood, we’ll unleash a huge industry [here],” he contends.
Every advertising agency understands the risk/reward balance inherent in signing a big client, or in getting in tight with an industry that’s chock-full of businesses.
That huge opportunity means a chance for growth, access to new capital, and opportunities to do things other clientele may not have offered.
For generations, the reality in southeast Michigan has been that many industries — not just advertising — called the auto industry their bread and butter. You would diversify as much as you could, of course, but when a big client offered top-dollar for strategic leadership, creative work, and media buying into the tens of millions of dollars, it was hard to pass up.
But that was then. Today, agencies are aligning to meet the very different needs of very different clients, and perhaps the only thing more frightening than making the change is failing to do so.
More on Detroit advertising: ‘Back to the Future’