The danger of putting too many eggs in one basket

A 32-year-old relationship between Wal-Mart and Missouri advertising agency Berstein-Rein officially came to an end a few weeks ago (the account had been up for review since May). According to Ad Age (subscription required), the partnership that had begun with a handshake between Sam Walton and Steve Bernstein, ended with a phone call from Wal-Mart’s corporate communications department.

The catalyst for the change was John Fleming, Wal-Mart’s new chief marketing officer. As is the case so often nowadays, the new guy wanted his own agency, and had no real regard for the legacy or heritage of what had gone before.

So, now, Bernstein-Rein is left holding the bag, and will have to scramble to figure out ways to replace more than 30 percent of its total billings. Beyond the financial challenges, the KC shop also has a significant image problem to overcome since, according to industry observers, it’s always been seen as "Wal-Mart’s agency." Now that that "halo" is gone, the firm must quickly figure out how to re-position itself in a brutally tough competitive environment.

To its credit, Bernstein-Rein is saying all the right things about its now being unencumbered and unfettered, and able to pursue new clients in a wide range of categories previously restricted by the Wal-Mart relationship. But, how long can it go without dramatic cutbacks and downsizing? And, will prospective clients see it as a smart, strategic solution or as just "Wal-Mart’s old agency?" Time will tell.

Bernstein-Rein made a pact with the devil when it agreed to place so many eggs in one basket. While an 800-pound client can be a great thing to help build the image and reputation of a nascent firm, it can also inhibit growth, creativity and morale.

We’ve been down the "too many eggs" road on more than one occasion (and paid dearly each time the 800-pound gorilla moved on):

1) In our very early days, we represented Alexander & Alexander, a large business insurance firm that accounted for a sizable chunk of our billings. I’ll never forget the client call telling us they were about to be acquired by Aon. Happily, we found another large client, Ernst & Young, to fill the void.

2) E&Y was the client who first put us on the national PR scene. We began with a small project and, soon, they were accounting for 40 percent or more of our billings. As people came and went on the client side, however, our situation became more and more precarious, and finally ended. The simultaneous dotcom explosion, however, enabled us to replace the billings almost immediately.

3) Next came GE and the "imagination at work" campaign. Once again, a single client accounted for more than a third of our billings. And, once again, the client’s needs and wants changed, and we were out the door.

4) More recently, Tyco brought us on board, promising to not only be our biggest client, but to also provide billings in excess of $10 million annually (pretty heady stuff for an $8 million agency). The account started well and soon represented a third or more of our billings. But the CMO left, and so did the billings.

Today, we have a much more balanced account structure and can more easily absorb the loss of a large client. But, I have to admit feeling a chill going up and down my spine as I read the Wal-Mart/Bernstein-Rein reports. Here’s hoping "Wal-Mart’s agency" can quickly re-position itself and attract significant billings. It would be a shame to see the actions of one man, the new Wal-Mart CMO, cause the demise of a long-standing Midwestern advertising tradition.

One thought on “The danger of putting too many eggs in one basket

  1. RepMan – thanks for the smart words. We are going through this right now (just added a huge account) and I’m trying to manage the culture explosion. Exciting and scary at the same time.