Can - or Should - Businesses Serve Competing Clients Simultaneously?

Clients are harder to find and often demand lower prices. Talented employees are tempted by better pay elsewhere. What is a business to do?

Clients are traditionally uncomfortable with a professional services firm working for direct competitors. Lawyers, accountants, advertising and PR firms - all suffer from this constraint.

The ethics are murky. Despite assurances about 'Chinese Walls' - internal regulations guarding against unwonted disclosure - colleagues chatter, internal competitors fight for advantage and promotion, humans are curious. A business may erect a framework it assures clients can not be pierced but those on the receiving end are understandably skeptical.

There is no right answer. The trade-offs are difficult. No business wants to lose business simply to appease someone else. But in a challenging economic environment, no one can afford to alienate current clients who are paying the bills. In the end, it comes down to judgment. Even the perception of wrong-doing by one client, however false or misguided, can ruin a reputation and destroy a business. Trust is in short supply, perhaps even less so than revenue. Everyone is fighting for advantage and will use whatever leverage they can muster to secure it.

The risks either way are obvious. The advantages, not as clear-cut. But that is why they pay you whatever it is they pay you these days. JL

Marc Brownstein comments in Ad Age:

I've been running an agency most of my professional life. One of the things that continues to frustrate is that many CMOs and CEOs don't want an agency handling their brand and that of a competitor. According to Alvin J. Silk, emeritus professor at Harvard Business School, ad agencies in the United States and Europe historically did not serve competing clients simultaneously, but this practice has relaxed in recent decades as "the advertising and marketing services industry has undergone a number of structural changes."

Silk says that to make this possible, "hybrid conflict policies" have evolved, featuring "the split-account system long practiced in Japan, augmented by safeguards that serve as partial substitutes for the umbrella prohibition on serving rivals . . . By relying on safeguards and splitting account assignments among different organizational units within or across a mega-agency or holding company, clients exert a measure of control over those agencies' access to confidential information while also offering them incentives to avoid conflicts of interest."

The same thing can also be accomplished in small-to-mid-size agencies, by staffing competing brands with separate teams/units. But it's a tough call. So in the spirit of bi-partisianship, I've outlined the pros and cons of managing agency-client conflicts, and welcome the debate:

Pros (my utopian agency world)

A sales consultant famously remarked: Two clients in the same category = conflict; three clients in the same category = specialty. It's ironic, but there's a truth there. Many clients permit their agency to handle competing brands when that agency has many clients in the same category. Consider all of the vertically-integrated shops around the world -- pharma, real estate, tech, retail and so on. By allowing an agency to handle competing brands, clients benefit from the expertise of an agency that has a deeper understanding of the business, its sales channels and customers. Think of the bench of talent, trained in the vertical industry, that can rotate on a client's business, keeping the work fresh for years to come.

It is in a client's best interest to have a financially healthy agency. Once an agency has acquired clients in all of the key business categories, it begins to bump into conflicting companies in the same category. Clients that trust their agency to handle competing brands enable that agency to grow and thrive.

When a client-agency relationship is built on mutual respect, morale goes through the roof, and the people in the shop will work tirelessly for that client. In my experience, permitting an agency to take on competing brands inspires the agency team to do more than they are asked to ensure success for the client's brand. Sure, we all work hard in our shops, but imagine the benefit of the above-and-beyond efforts that come back to the client.

Cons (my current agency world)

I get it. Your arch enemy seeks to take market share from you and food off your family's dinner table. Coke & Pepsi. McDonald's & Burger King. Apple & Google. I understand the discomfort and the bitterness that comes from such rivalries. If Brownstein Group -- or any agency -- is working on one brand, how can it objectively promote another? How will clients sleep at night, worried their trade secrets will be shared by agency teams? Who is the favorite son? Exclusive marketing & media opportunities are routinely offered to agencies for the brands they represent. If the agency gives the exclusive opportunity to Client A, does Client B get cheated?

Speaking of 'A' & 'B,' I am often asked by my clients, "Make sure you only put your A-team on my brand." To which I reply, "We have only A players." In my heart, I believe that, but do my clients? I hope so. And if an agency has only a few leading experts in a category, which client do those select few work on?