The abrupt split between Sprint Canada and its newly hired agency of record BBDO has put the spotlight on the whole issue of client conflict – an area of growing concern for the industry in an era of widespread consolidation.
Sprint, which made the announcement on April 12, just weeks after awarding its creative account to BBDO, cited "competitive changes in the telecommunications environment" as the reason for the parting of ways.
The move was prompted by the news that one of Sprint’s major competitors, Telus, plans to purchase a majority stake in QuebecTel. The QuebecTel account is handled by Montreal-based PNMD Communication, which is part of the BBDO network.
Vickers & Benson, which already handles Sprint’s Internet and direct response business, has been awarded the balance of the creative assignment, including business and residential voice services and small business.
At the same time, Sprint announced that it was moving its $16-million media account to Genesis Media from incumbent Harrison, Young, Pesonen & Newell, following a review.
Mike Fyshe, president and CEO of Toronto-based BBDO, says it was his agency that initiated the split.
"Obviously, BBDO and PNMD share a number of clients," he says, "and therefore it created a conflict where we had to favour the incumbent client."
BBDO also has other ties to Telus, Fyshe adds. OMD Canada, the agency’s media management division, handles the telco’s $50-million media buying account. And some of the Telus creative business is with two of BBDO’s sister Omnicom agencies in Vancouver: Palmer Jarvis DDB, which handles the $30-million consumer creative assignment, and Lanyon Phillips Communications, which has the $15-million wireline business creative job.
With more and more consolidation taking place, in both the client and agency worlds, some industry executives say the potential for these kinds of conflicts has increased greatly.
In some hot categories such as financial services or the dot-com business, for example, it’s almost impossible to find an agency that doesn’t already have one such client on its roster. In years past, agencies might have created spin-off shops to get around conflicts, but that remedy has become far too expensive for most to even consider.
Jim McKenzie, president and CEO of Toronto-based Leo Burnett, says the whole client conflict situation may be further complicated now that a number of major Canadian agencies have moved to spin off separate media management companies – although that has not yet been seriously put to the test.
Leo Burnett, for example, established its standalone media division, Starcom Worldwide, last year. What would happen if Starcom took on a client that competed with one of Leo’s? Obviously, McKenzie says, the agencies would have to be able to assure the clients that there was "total separation" between them.
Conflict is a challenge to deal with, he adds, because it can be as much an emotional issue as a pragmatic one. Clients are, naturally, concerned about compromising confidentiality – but they also object to the idea of their agency getting revenue from a competitor.
"Each category has its own peculiarities as relates to conflicts," McKenzie says. "Ultimately, the client determines what the rules are and, within reason, you have to live with them."
Domenic Caruso, president and CEO of Toronto-based MacLaren McCann, says there needs to be a more relaxed view on conflict if clients want to be able to work with their agency of choice.
That’s already happening in some international markets, he says. In Japan, for example, agency consolidation has reached the point where Dentsu now controls the lion’s share of the country’s advertising business. And because Dentsu is deemed the best shop around, clients are willing to put up with the agency also working on competing accounts – provided that the different business groups are rigorously kept separate.
