Bates Loses Hyundai Media Buying, Must Defend Creative Account
By JENNIFER BELLANTONIO
Bates USA West may be struggling to keep its biggest client, Fountain Valley-based Hyundai Motor America, but it has no plans to give up the fight, according to company officials.
The Irvine-based shop has been the automaker’s agency of record since its U.S. launch in 1986. Mark Weinfeld, the shop’s senior vice president, strategic planning, said Bates was blindsided around the holidays when Hyundai put the media buying portion of its about $240 million advertising account up for review,an event it wasn’t invited to attend.
Now Bates finds itself trying to defend the creative portion of the account, which is also up for grabs.
“The media thing, while I completely don’t agree with it, there’s at least some logic based on what some other people in the industry have done, which is consolidate (media buying),” Weinfeld said. “But the creative review was an absolute kick in the stomach. It was completely unexpected.”
Weinfeld said there was “no indication” that Hyundai was unhappy or looking to change.
“There didn’t seem to be any friction with the people we deal with,” he said.
Chris Hosford, Hyundai spokesman, said the reviews are about strategy, not any unhappiness with Bates.
He said Hyundai consolidated its media buying with that of sibling Kia Motors America Inc. in Irvine and wanted to use a neutral media buying service, choosing Aegis Group’s Carat North America.
“We could achieve significant savings and additional media clout,” Hosford said. “We didn’t want to use a media buying service that was associated with Hyundai’s or Kia’s creative agencies because there was a possibility of conflict between the two brands.”
With the selection of a new media buying service, Hosford said, Hyundai would have to significantly revise Bates’ contract “because so much of the compensation in a bundled services account like that is covered by media buying.”
“Senior management at Hyundai felt that if there was ever going to be a time to do a creative review this was that time,” Hosford said.
According to Hosford, Hyundai’s president Finbarr O’Neill believes Bates is doing “very good advertising,” but he isn’t certain they are doing the “best advertising possible.”
“It’s not that we’re dissatisfied,” Hosford said. “But we want to make sure we have the best possible job. After all, we’ve had the agency for 16 years. We’ve never had a creative review. Bates is participating in the review and may very well be the winner. Who knows?”
Hyundai tapped Select Resources in Los Angeles to facilitate the review. Hosford said Bates will choose a winner from among an undisclosed number of agencies by the end of the second quarter.
“We are determined to continue improving our sales position in the United States, and we want to make sure we have the very best advertising-marketing partner to help us do that,” Hosford said. “And we just don’t know if Bates is that company.”
However, even if Bates loses the creative review, it will still retain Hyundai’s National Dealer Association business, which is worth $100-plus million, according to Weinfeld.
“That is up to the board of directors at the (four) dealer associations,” Weinfeld said. “Our relationship with them is very, very good right now.”
Hyundai’s Hosford also reiterated that the dealer associations make their own decisions.
“They may choose to go with Carat. We certainly think that the cost efficiencies will make it attractive to them, but it’s up to the individual (associations),” he said.
The moves by Hyundai have surprised some industry observers, since the U.S. unit of the automaker has been hot for the past few years. U.S. sales last year grew 42% to 346,235 vehicles. Kia also has had double-digit growth.
“When things are as good as they are now it obviously begs a lot of questions,” Weinfeld said.
But Hyundai’s Hosford said that now is the best time to ponder a move.
“While it may seem counter-intuitive at first blush, the fact is that the best time to consider making changes is when things are going well, because that’s when you’re financially the strongest,” Hosford said.
The OC shop will retain Hyundai’s media business for the next 90 days. Weinfeld said Bates will keep its team in place to service the account and defend the creative business. He conceded that the agency, which reported about $250 million in 2000 OC capitalized billings and counts about 125 employees, may downsize some in the long term.
Bates also is concentrating on its other clients, such as Anaheim-based Pacific Sunwear of California Inc. and recent win, Aramark’s uniform services division, which is based in Burbank.
But neither account is on the same scale as an automotive account like Hyundai.
“There is no question that it cuts out the heart and soul of what has built this agency,” he said.
But Weinfeld added there is “not a chance” that the loss of Hyundai’s creative will cause the closure of the office.
