The Woolworths media pitch: a case study on how not to treat agencies

nic christensenIn the wake of the decision by retailer Woolworths to retain Carat as its media agency, Mumbrella’s Nic Christensen asks if the much-maligned pitch for the $240m account is a case study in how clients should not treat their agencies. 

It’s funny how history has a habit of repeating itself, but you’d like to think the marketing world would occasionally learn a trick or two. Some of the decisions in the process which led to the decision by Woolworths to keep its mammoth media account at Carat certainly make you wonder what goes through the minds of some clients when they pitch.

bandt pitch debacleThe article to the right is from an edition of B&T several years ago, with the Advertiser Federation of Australia slamming Coles for running a pitch in the middle of its sale to Wesfarmers.

There’s a fairly simple lesson in the story. At a time of major corporate upheaval, don’t pitch.

Fast forward six or seven years and its Woolworths that this time at the centre of pitch “debacle”, and while the names involved have changed, the issues around clients managing their processes better and treating agencies with respect are largely identical.

Before I get into the pitch, let me start by saying I have no problem with the decision of Woolies to leave the business at Carat. That agency has worked hard and has clearly made a series of promises and a series of major leadership changes in an attempt to retain that business.

However, the way the pitch has been handled has left a bad taste in the mouth of many of those involved. What began as a straightforward process in February and was supposed to be “over by Easter” rolled on and on for many months.

There were changes to key decision makers, like the appointment in March of supermarkets CMO Tony Philips from Coles, with conspiracy theories suggesting he would award the contract for just a year. The pitch soon dissolved into an internecine internal political war between Phillips and the retailer’s head of media Helen Lecopoulos, which left the industry as bystanders while the two sides argued over the result.

A result where at the end of it, bar several hundred thousand dollars wasted by the agencies willing to step up and bid for the business, nothing materially changed.

How did this happen? Well let’s wind the clock back for a minute.

helen lecopoulosWoolworths had been expected to pitch the media account since late last year. The first official confirmation that something was in the air was the appointment of Helen Lecopoulos, who departed McDonald’s for a new role as head of media.

Three months later agencies were briefed and the pitch was formally called with the original line up seeing Carat and three others, OMD, MediaCom and Starcom Mediavest hoping to pick up the account. Starcom Mediavest would later pull out as it focused on the many other new business opportunities that were in the market in the first half of the year.

The first curve ball arrived its March when it filtered out that Woolworths, one of the most demanding and all-consuming clients in town wanted to look at smaller “strategic agencies” with Match Media, Bohemia and Ikon originally on the list.

This fitted with how Woolworths had been briefing agencies on how they wanted more “strategic leadership” on the media account. However, many in the industry questioned how a relationship with one of the big buying agencies and an independent providing additional strategic assistance (presumably on parts of the business) might work.

Interestingly today’s statement by Woolworths did not mention the appointment of an independent media agency.

Tony phillipsThe second curve ball was the appointment of Phillips, which was the point many feel the pitch should have been called off by the client.

The supermarket side of the business represents around half of the $240m media account, and while he was only one part of a voting panel in the process, Mumbrella understands Phillips strongly opposed any shift in media agency, arguing it should stay with Carat. As a side note this is the first time Carat has actually been handed the business, as it was previously won by sister Dentsu Aegis media agency Mitchell & Partners, and quietly transferred across after the retirement of patriarch Harold Mitchell last August.

As a new CMO it is understandable that Phillips, who was also inheriting a brand new creative agency as Leo Burnett unexpectedly took over the account from Droga5, would be reluctant to have further changes as he bedded into the role.

But it appears this position was at odds with Lecopoulos who is thought to have strongly favoured OMD, an agency she has worked with in the past at McDonald’s and Telstra.

Sources have described to me how there was “no love lost” between the two, particularly after The Australian, which rarely write about media pitches, ran a news story suggesting that the business would stay with Carat for one year, with Phillips wanting to later move the business to the IPG Mediabrands stable, which he has had a long relationship with as UM is the agency for Coles.

woolworths1Woolworths hastily issued a denial that there had been any change to the pitch, and said that the contract would be for three years, which has been borne out by today’s announcements. However a number of sources have noted it includes a 30 day termination notice should Woolworths decide it is unhappy at any time.

Since The Australian’s article in May the last few months have seen the agencies, who did no less than four stages to pitch, waiting and waiting as Woolworths debated what it wanted to do. For many of the agencies involved the cost of the process is hundreds of thousands of dollars. While there was talk that Woolworths would compensate agencies for part of the cost, any such payment is likely to be largely token.

In today’s fragmented and complicated media and marketing environment clients need good agencies to do work for them and deliver good results. Implicit in that is respect for the agencies, and recognition that each agency has more than one client.

I’ve criticised before the constant new business chase some media agencies are on, and they have to accept some responsibility. But there is also an onus on clients to recognise that when they pitch this puts a burden on agencies and often diverts major resources from existing clients. This means that the process should be fast, efficient and if there is major turmoil be it a sale, or a change of a key decision maker, then the process should be called off.

Otherwise we’re clearly learning nothing.

Nic Christensen is deputy editor of Mumbrella.


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