You have to feel for OMD UK, McCann-Erickson and Grey Advertising after losing pounds 80 million of billings from Boots. Why? In all intents and purposes, they were doing a grand job, fulfilling the briefs, getting results, building trust. After all, what more could an agency be expected to do than ensure that their clients are happy? Apparently, hope that those clients' bosses aren't considering the benefits of consolidation.
Last week, Boots, the UK and Ireland's leading health and beauty retailer with 1,400 outlets, announced that it was pooling its entire global marketing function into WPP. The reasons were blindingly simple: to have a unified approach to branding and ... to save money.
The company has its sights set on global expansion and, building on its joint venture in Japan with Mitsubishi in 1998, Boots has continued its advance into Asia with the opening of stores in Thailand and Taiwan. Korea is the next target. Last week, it acquired the Clearasil brand and the next move will be to connect with international consumers through different channels such as Boots products available via other retailers in Holland.
Alastair Eperon, the director of group corporate affairs at Boots, explains further: 'In order to ensure consistency in the delivery of this expansion, we obviously need to have a totally integrated and seamless marketing function across the range of activities, and on a global basis. That calls for a unified agency approach.'
As a result, Steve Russell, the chief executive of The Boots Company, contacted WPP's head, Martin Sorrell, with the proposal.
J. Walter Thompson has been handling Boots the Chemist's creative work in the UK since 1994 and it was felt by the board that it had a good understanding of the Boots brand. No surprise, then, when it was decided that JWT was the logical choice to take this understanding of the brand global.
Eperon cites WPP's size and comprehensive range of services as contributory factors but admits that a large part of the decision was purely economical.
'We were able to negotiate an arrangement that will deliver extremely good value, i.e. cost savings on the global package going forward,' he says.
So does this mean that in the future, business will be allocated at boardroom level and not through the traditional review or pitch process? 'It's a return to an inclusive service approach, which has faded in recent years. But when you are dealing with sums of money of this kind, inevitably, decisions are made in the boardroom,' Eperon concedes.
He adds that this is simply systematic of what is likely to occur when big money and equally big ambitions are involved. A global approach is vital. But this doesn't mean that Boots will not continue to shop around.
The company intends to use other agencies from time to time.
This, unfortunately, provides no solace for those who were left on the shelf. The move has cost OMD UK pounds 60 million in billings (12 per cent of its annual billings) as the media planning and buying goes over to MindShare.
Paul Taylor, the chief executive of OMD UK, disagrees with the practice of the holding company making the decision across a group of suppliers.
He believes that choices are being made without any reference back to brand or marketing directors.
His point is illustrated by the appearance of Boots' group head of procurement, Julian Coles, in OMD's latest corporate reel. Coles, ironically, provides a glowing testimonial lauding the company's excellent work. 'OMD has delivered pounds 50 million worth of extra value over the period of our centralisation,' Coles enthuses, going on to add that the company has acted very professionally and added value in innovation.
'Now all this seems to have been bypassed by the decision,' Taylor laments.
'It is an extraordinary situation to lose business without a competitive tender and when the client is entirely satisfied with the service we are providing.'
Taylor points to Wal-Mart's entry into the UK market as the possible driving force behind Boots' expansion and concedes that it will probably receive more added value for the businesses with this move.
Eperon also agrees that Boots was very happy with OMD's work but that it had to sacrifice the relationship as part of the negotiations with Sorrell. 'WPP needed to feel that the deal was a good one for them as well as us,' he says.
One possible positive outcome for those agencies left out of the Boots/WPP deal may be the uncertainty surrounding the No.7 cosmetics account. With JWT already handling the global Rimmel work, it may be decided that the obvious conflicts between the brands require the agency to give it up. This could mean that the pounds 5.5 million account may move back to St Luke's as quickly as it departed.
Although JWT is refusing to reveal Boots' new global brand strategy just yet, sources say that it is more than likely to follow the line of the existing UK campaign.
Ros King, the director in charge on the Boots account at JWT, feels the main challenge lies in changing the way the company operates. 'Because they are set up as separate companies, actually coming together as one brand is interesting. That is part of the reason Boots appointed WPP. JWT was working across all the Boots divisions and we started seeing synergies. They have got to work together in a different way - to operate as one company.'
King believes that splitting the Boots offerings, as the company's campaigns do, won't weaken the brand, as some would argue has happened with Marks & Spencer. With the convergence of health and beauty markets, she hopes that diverse campaigns will support the overall Boots brand. King says that returning to the old-fashioned centralised agency approach is the only way: 'We're putting back together the full-service agency but with bells on.'
So will this be the shape of things to come? What will it mean for advertising if creative accounts are awarded not by an educated judgment of a number of pitches, but by how much dosh can be saved? With the word round the campfire being that Sorrell may well have a few more similar deals tucked up his sleeve, it won't be long before we find out.
This article was first published on Campaign