Crispin Porter & Bogusky (CP+B) made the news again
this week. It wasn’t your
run-of-the-mill news business story. Rather, Haggar Clothing not only hired the Miami agency, but gave it a
minority stake. This is newsworthy
because it’s one of those rare instances where an agency takes a stake in its
client’s company. It’s much more
expected that if a discussion of equity arises, it would be expected that both
agency and client would be comfortable discussing equity in relation to the
intellectual property that’s created as a result of the agency’s work on the
client’s behalf.
Questions: Will such a move become de rigueur for
agencies competing for a brand’s business? Will companies begin offering equity positions as a reward for work that
creates value in the business? To what
extent is this just an exception versus the start of a trend? It’s certainly one way an agency could
demonstrate both its belief in it’s own strategy for the client and that it
wants to fully align its incentive structure with that of the client. The next question, of course, is how many
brands want their agencies so tied to them and vice versa? Expect companies to tread carefully, since
there’s a limited amount of equity to go around (barring stock splits).
However, an equity stake
can certainly benefit an agency in a number of ways. First, it evens out an their cash flow, particularly if the
projected return meets a minimum hurdle rate. Second, in the case of a company the size of Haggar Clothing, it
guarantees that the agency will have access to the highest levels of the
company. What this means is that
Crispin will have input and impact on areas other than just advertising. They will be at the table when Haggar’s
senior management wrestles with strategic issues about new product development,
innovation and value creation. It’s a powerful
position to be in, no doubt. Most
agencies talk endlessly about having a seat at the strategy table. Based on this move by CP+B, perhaps they’ve
been focused on the wrong table. . . ?
More coverage here.
Technorati tags:
Crispin Porter + Bogusky, Haggar Clothing Co., agency compensation, fashion
