afaqs!

Conflict management: Do agencies have a third option?

By , agencyfaqs! | In | October 01, 2001
With clients being cagey about their agencies handling rival brands, agencies end up either resigning one account, or setting up a second agency. Is there another option worth exploring?

'Conflict' is a very unsavoury word in agency vocabulary. The least it means to agencies is an incredible amount of uncertainty about the eventual constitution of the agency portfolio. And in its nastiest form, it connotes forfeiting huge sums of money in the form of billing. So much so that agency CEOs admit to devoting a large part of their time only to resolving conflict.

Conflict is not a new phantom to Indian advertising - it has existed in the past as well. But what has brought conflict right back into focus is the new economic environment in India. With more and more companies and brands entering the Indian market, in almost every product category, there is bound to be a sharp rise in the demand for professional agencies. But the point is, have the number of professional Indian agencies increased correspondingly?

Of course, it would be foolish to say that the agency market in India is glutted, across categories. In most categories it isn't, but here's a sample of the shape of things to come. Take the passenger car market. Almost every significantly big agency in the country has a car brand in its portfolio. HTA (Ford), Lintas (Maruti), O&M (Tata), Mudra (Hindustan Motors), FCB-Ulka (Tata), Rediffusion (Maruti), RK Swamy/BBDO (Mercedes), McCann-Erickson (General Motors), Leo Burnett (Fiat), Grey (General Motors), Saatchi & Saatchi (Maruti), Bates (Hyundai), Enterprise Nexus (Daewoo), SSC&B (Hyundai), Capital (Maruti) and Everest (Honda). What do we have left? Contract, Ambience D'Arcy, Publicis, TBWA Anthem, Triton, iB&W, Percept, Quadrant - half-a-dozen-odd agencies that multinational car brands might seriously consider. Industry analysts agree that the number of car brands likely to enter India outnumber the 'eligible' agencies by far.

Again, this is typical only of the local car market, but what prevents this situation from extending into other categories in the future? And anyway, given that most clients' desire to be serviced by a 'large agency', the size of their fishing pond becomes even smaller.

It can be argued that those agencies that handle relatively smaller rival brands would immediately pitch for the new entrant - if the newcomer presents an attractive enough proposition. In fact, that's what often happens, in private. But that would be only at the risk of losing both businesses. Clients have been known to sack their agencies for having courted a rival, albeit unsuccessfully.

Which raises one big question - why is conflict such a big issue in advertising, and in the client's mind? Why can't an agency handle two rival brands, without 'conflict' coming in the way? "When an agency services rivals, there is a lurking fear in both the clients' minds about confidentiality," says Anil Nair, vice-president, Quadrant Communications. "There's this fear of the agency sharing one another's information to create an impression. Also, both have the feeling that the other has got the agency's superior thinking. And unlike consulting firms, here there's a creative product and a media angle."

Mahesh Chauhan, client services director, O&M, agrees about clients being insecure over confidentiality. "It's a dog-eat-dog world out there, and marketers have become very wary," he says. "Especially in a product-parity situation where advertising and brand image are the only differentiators." Agreed. But the world over, there are instances where agencies have handled rival brands at the same time. "In Japan, Dentsu handles so many conflicting brands, but they have a system by which there are so many 'firewalls' that it never becomes an issue with them," says Chauhan.

One thing that most agency folk agree on is that there is no way that an agency can get away servicing 'direct rivals' - say, a Pepsi and a Coke. Fair enough, but at times, the conflict is more imagined than real. For instance, why can't an agency handle similar brands that address two different segments of the market? Take the hypothetical case of an Ulka servicing Tata Indica (which it does handle) and, say, Mercedes. There is no way that an Indica and a Merc will ever face-off - in fact, no offering of the Tatas is ever likely to confront a Merc. "There is a lot of room for cross-fertilization in such a situation," Chauhan points out. "The learnings from one segment can help devise solutions for the other."

There are some real-life examples that come to mind. HTA handles both Timex and Swatch. O&M handles Voltas and Electrolux - one from Mumbai, the other from Delhi. In fact, O&M handles both Electrolux and Kelvinator - but then, both brands belong to the Electrolux stable, and target different consumers. Incidentally, Videocon International moved the Akai account out of Quadrant for fear of Akai cannibalizing another Videocon brand that was with Quadrant - Sansui.

Quite a few ad folk feel clients are too rigid vis--vis conflict. "I can't see why clients are so insecure about this," cries one vice-president with a Top Four agency. "Clients have to realize that agencies are mature enough to respect confidentiality. This business is all about trust. We have business interests to defend; so how can we kiss and tell? And anyway, corporate espionage being what it is, you don't need an agency to spring a leak." Chauhan too admits that this feeling of insecurity "may not be fully justified, but that's the way it is and agencies have come to accept it".

Agencies have two ways of dealing with conflict. Resign the smaller - or 'problem' - account. Or set up a second agency, which shares a similar work ethic. Both routes are fraught with risks. The fate of Mudra's startup, Infinity (created for the Philips account), is still fresh in memory. Of course, second agencies can flourish, as in the case of Contract and Orchard Advertising.

But what about a third option, where agencies make a reasoned case to the client? "This whole thing depends on how the agency handles conflict by educating the client," says Nair. "For instance, if the Mumbai office is handling one account and the Delhi or Bangalore office is handling the rival, it need not be such a big issue." The anonymous vice-president blames agencies for not trying hard enough. "We are not working towards managing conflict. So how can we expect inorganic growth?"

Nair also feels that agencies don't come clean about conflict, which only adds to the insecurity. "If it's so much a problem, sign a confidentiality clause. But be transparent about what you are doing. Take the topmost management at both ends into confidence. I'm sure the clients will be convinced, as long as they are not in direct competition." Incidentally, Grey Worldwide lost the Dainik Jagran account to Mudra because, apparently, Grey had not intimated the Dainik Jagran group about the fact that it had won the Hindustan Times account. "What disturbed us was the fact that Grey did not inform us that it had got the Hindustan Times account," Alok Sanwal, brand manager, Dainik Jagran group of publications, had then told agencyfaqs!.

Chauhan doesn't think coming clean will be all that helpful. "It's a question of how mature and market and the marketer are, and at what level of its journey the brand is. It might apply in some cases, but not across the board." The interesting thing about conflict is that it's the bigger agencies that tend to bear the brunt, as they already have ample portfolio representation, as opposed to mid-sized agencies. "The Big Five are saturated as far as portfolios go, so they take a hit one way or another," says Chauhan. "And the problem is, most marketers want one or the other of these Big Five."

© 2001 agencyfaqs!