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Agency executives can be forgiven if they jump every time the phone rings these days. At any moment, an enviable client may invite a pitch or a major chunk of their business may walk out. When New York's N W Ayer celebrated its victory last week in capturing the $30 million Bayer aspirin account, the agency was still smarting from the loss two weeks earlier of the $65 million J.C. Penney account. Advertisers are flexing their spending muscle more aggressively than ever before. Even longtime clients feel little loyalty anymore to their agencies. As a result, ad firms are raising the stakes too, regularly raiding one another for business, and everyone is feeling the strain. Says Jerry Siano, chairman of the N W Ayer agency: "We are pitching more accounts than ever now."
Senior industry executives say the brisk pace of account shuffling is only the surface activity of a more violently churning business climate. Behind the scenes, they say, far more accounts are teetering in the balance as clients conduct tough, private "internal reviews," confronting their agencies with threats to replace them. Some clients seem fickle as well, bouncing like bungee jumpers from agency to agency. A little more than a year ago, a dissatisfied Reebok moved its account from California-based Chiat/Day/Mojo to Boston's Hill, Holliday, Connors & Cosmopulos. But last March the athletic- shoe maker left the Boston agency and gave part of the $40 million account back to Chiat, which has produced such memorable ideas as the Eveready Energizer Bunny and Nissan's fantasy drives, in which a young man dreams of Christie Brinkley coming along for the ride.
In the freezing blast that is hitting the industry, the economic recession that began last summer represents the "wind-chill factor," says Young & Rubicam chairman Peter Georgescu. Ad spending, which rose only 2.4% last year, to $128.6 billion, is expected to increase just 3.1% this year, according to McCann-Erickson's Robert Coen, the industry's leading forecaster. In order to cut costs and ride out the slump, Madison Avenue has trimmed hundreds of professionals from its ranks during the past year -- and the / cutbacks are far from over.
Conditions grew grim for agencies during the gulf war. Advertisers slashed spending sharply, in part because they were worried that commercial interruptions of combat coverage would offend American consumers. Since that feeling was so widespread among U.S. companies, many firms also viewed the period as one in which they could safely cut advertising budgets, confident that their competitors would do the same thing rather than take advantage of the quiet marketplace.
Now that companies are eager to renew their marketing efforts, though, they are taking a hard look at the tone and effectiveness of their ads. Many are concluding that the pitches that worked last year will fall on deaf ears. The white-hot decade of conspicuous consumption has cooled. Many accounts are in review because advertisers are casting a wide net in the agency business, searching for new ideas about how to reach consumers who are rejecting trendiness for practicality.