Advertisers have long avoided sharing agencies with competitors. McDonald's just abandoned that tradition, and other big brands could follow suit.
- McDonald's recently shifted its lead US creative duties to independent agency Wieden and Kennedy, which means the fast-food giant will share an agency with rival KFC, another Wieden client.
- Some analysts say this shift could signal a change in how big marketers manage their business.
- McDonald's willingness to work alongside KFC could mean looser conflict management policies that let agencies pursue new business more aggressively.
- Some analysts disagree over whether the new arrangement will work out for McDonald's and its agencies.
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McDonald's recently shifted much of its US ad business from holding company giant Omnicom to independent agency Wieden and Kennedy, which means it will share an agency with rival (and longtime Wieden client) KFC.
Analysts called the chain's decision to abandon previous conflict management policies that would have forbidden its agency partners from working with competitors a significant development.
The McDonald's move hints at potential changes in the way major brands manage their
Relaxed conflict management policies could be good news for ad agencies
The most important question stemming from the McDonald's decision is whether it means other marketers will follow suit and let their agencies work with more openly with direct competitors, said Brian Wieser, global head of business intelligence at WPP's GroupM.
Forrester chief analyst Jay Pattisall said he believed agencies could benefit from such a shift by getting greater freedom to pursue new business, while brands would be less restrained by concerns about what their competitors are doing.
"If McDonald's is willing to let go of their obsession around conflicts and exclusivity, then other brands should consider it as well," he said.
This sort of conflict management is the foundation of the modern ad industry. The first holding company, IPG, formed in 1961 when ad agency McCann tried to avoid a conflict with Coca-Cola by creating a larger company whose other divisions could work with the soda giant's competitors. As if to demonstrate why that approach was necessary, Nestle stopped working with McCann two years later because the agency acquired Erwin Wasey & Co., whose clients included Nestle rival Carnation.
More forgiving clients could also theoretically allow agencies' consulting divisions to pitch against management firms such as Bain and McKinsey, which have long used their work with one company to sell services to its adversaries.
"Two accounts in the same industry is a conflict, but three is an expertise," Wieser joked.
Will the new model ultimately work for brands?
According to the same observers, McDonald's shift to Wieden simply proves that company structure and client policy are irrelevant if the resulting creative work isn't good.
Multiple sources who worked on the McDonald's account at Omnicom also said the dedicated holding company approach, combined with a corporate structure that requires a board run by McDonald's owner-operators around the country to approve all major ad campaigns, didn't always allow good ideas to break through.
One example of this strategic disagreement between agency and client centered on an idea to produce an LP for McDonald's that would have been made entirely of bacon, Business Insider reported earlier.
Greg Paull, principal at marketing consultancy R3, said the McDonald's-Omnicom partnership "never gelled creatively.
"[Fast-food] is an incredibly demanding daily business with overnight sales results," he said. "Without innovation and creativity, the weak will not survive."
"All [the KFC decision] tells us is that there's someone smart at McDonald's who wants an agency that can create good advertising," said Bob Hoffman, agency executive and creator of the popular Ad Contrarian blog and newsletter. "Now the question is, will they let them?"
Pattisall remains skeptical, stating that McDonald's abandoning the dedicated unit model is "a big loss for creativity." He described the decision to divide the business among Omnicom and other agencies, rather than maintaining a single cohesive unit to handle wide-ranging responsibilities like digital, social, client loyalty marketing, and TV work, as "counter-productive."
The Forrester analyst compared the divided model to those of decades past, when clients would bring on specialist agencies for each of these disciplines and force them to collaborate. "It didn't work then, and it won't work now," he said.
