One of the biggest sticking points in client-agency relations is the disagreement over the interpretation of the conflict policy. As an agency search consultant, I constantly see this in pitches. Too often an agency, much to its chagrin, is forced to decline an invitation to compete because a client has a rather broad view of what amounts to a competitive conflict.
Agencies have lamented for years that conflict restrictions are just an emotional knee-jerk policy and lack true merit. They point out that clients can be inconsistent in their protocol. While they enforce a strict, uncompromising conflict policy with their ad agencies, they are more flexible when consulting firms like McKinsey handle their competitors, simultaneously.
Historically, advertising agencies in the U.S. and Europe did not work with clients who were competitors, at the same time.Thus, an agency could not handle Coke and Pepsi simultaneously, or McDonald’s and Burger King; or Budweiser and Miller, for example.
However, in recent years we have seen clients loosening restrictions about account conflicts and limiting this to direct competitors, as opposed to blanket prohibitions against working for rivals. Thus, Pharma companies, for example, view conflicts by indication, not as company-wide. This hybrid model has long been practiced in Japan.
By relying on safeguards and splitting account assignments among different units within or across an agency network or holding company, clients allow greater flexibility.That is how WPP, for example, can work with P&G, Unilever, Kimberly-Clark and Colgate-Palmolive at the same time.
Confidentiality and safeguards are not the only reasons for clients to enforce a conflict policy. Some clients use it to deny competitors access to talent. This is a clever strategy considering the shrinking talent pool on Madison Avenue.
However, last week, the conflict policy was redefined in a dramatic way. McDonald’s bombshell announcement that it is moving its creative account from DDB to Wieden & Kennedy was unusual: Wieden handles rival fast-feeder, KFC, and both agreed to co-exist under the same roof. This is a truly dramatic development, marketing’s interpretation of the prophecy, “The wolf and the lamb shall feed together.”
The agency managed to convince both restaurants to let it work with them simultaneously, but separately, from its fairly autonomous offices. I suspect that the clincher was access to Wieden’sNNNN talent, arguably the best in the business. The desire of both McDonald’s and KFC to tether it to their business in the hyper competitive fast food category helped them to overcome old fashion conflict restrictions. McDonald’s U.S. Chief Marketing Officer Morgan Flatley told Ad Age, “At this point, [the conflict] doesn’t concern us. We wanted to make the decision around getting the best work that this business deserves.”
Contributing to loosening rules for conflict is the changing nature of the marketing ecosystem. Consolidation of individual agencies and the small number of holding companies, along with the disappearance of many smaller and midsized shops, has narrowed the pool of shops. This has made clients more receptive in allowing solutions in what, once, might have been ironclad policies that forbade agencies from working on competing accounts.
In any case, conflicts, in my opinion, were always more an emotional trigger than a real problem. Advertising legend Jerry DellaFemina might have been right when he quipped, “There are no client conflicts, only bad explanations.”
It’s time, perhaps, for clients to relax conflict policies. Account conflicts are a way of life for agencies.Once an agency has acquired clients in key business categories, to keep growing means that it begins to bump into conflicts. And, this is a major problem, especially at a time when agency margins are razor thin and their financial health is challenged. This makes conflicts sometimes an issue of survival, not just an issue of safeguarding proprietary information. Agencies need all the accounts they can get.
Smart clients actually help their agencies get around and manage conflicts, rather than erect roadblocks. As long as agencies with competing clients meet clients’ expectations regarding confidentiality, reasonable firewalls can be erected.