Wal-Mart's New-New Adman

By awarding The Martin Agency its main creative account, the top retailer tries to put an embarrassing episode behind it and regain momentum
by Burt Helm and Pallavi Gogoi

After a difficult month that saw Wal-Mart (WMT) sack a star marketing executive and fire the ad agency that exec had helped select, the retailer has decided who will handle its roughly $580 million annual advertising budget. The Martin Agency of Richmond, Va., owned by the Interpublic Group (IPG), will run Wal-Mart's general market creative account, while Publicis-owned MediaVest will handle media buying and planning, Wal-Mart said in a Jan. 12 statement. The company also named three agencies to handle multicultural advertising: Southfield (Mich.)-based GlobalHue for African-American advertising, Los Angeles-based IW Group for the Asian-American market, and Houston-based Lopez Negrete for Hispanics.

The announcement comes after a roller-coaster ride for Wal-Mart's marketing side, including the abrupt dismissal in December of Senior Vice-President Julie Roehm and the related firing of Interpublic-owned Draft FCB just six weeks after its selection as Wal-Mart's ad agency (see BusinessWeek.com, 12/7/06, "Wal-Mart Leaves Draft Out in the Cold"). The selection is especially good news for Interpublic, as the beleaguered holding company will keep the high-profile Wal-Mart business. Interpublic shares rose 2.5% on the announcement. "We're excited to work with a high-quality group of people on a canvas that is very large, very visible, at a time when Wal-Mart is doing some of the most exciting things in its history," says John Adams, Martin's chief executive officer and chairman. Wal-Mart said it had nothing to add beyond its press announcement.

Upscale Initiative Stumbled

The agency selection process, originally announced this past May, was part of plans to refashion Wal-Mart's image beyond merely a big-box retailer known for low prices and attract consumers to shop for higher-margin items such as apparel and electronics (see BusinessWeek.com, 9/19/06, "Wanna Be Wal-Mart's Adman?"). After appointing John Fleming as chief marketing officer, the retailer brought in fresh talent from outside of its home state of Arkansas, including Roehm, then marketing chief for the Chrysler Group (DCX), and Stephen Quinn, chief marketing officer for PepsiCo (PEP) unit Frito-Lay. In October, Wal-Mart selected Draft FCB out of four finalists (including Martin) to lead the charge as its agency of record.

Chief among Wal-Mart's plans: Woo upscale shoppers by stocking its stores with fashionable apparel, including its new Metro 7 line, and place multipage ads with fashion bible Vogue. But that strategy backfired badly and third-quarter revenue and earnings fell short of expectations. "We expanded Metro 7 beyond what now appears to be the right segmentation," conceded Vice-Chairman John Menzer in the company's earnings conference call on Nov. 14.

More dramatic changes occurred during the week of Dec. 4. In short order, Wal-Mart dismissed Roehm and her deputy, Sean Womack. Both had been heavily involved with the agency selection process. Days later, it fired Draft FCB. Publicly, a Wal-Mart spokesperson would only say these actions were the result of "new information obtained over the past few weeks," and declined to elaborate. But people familiar with the situation say the two executive dismissals and the agency firing were due, at least in part, to violations of Wal-Mart's gift policies and a clash with its conservative culture. At the time, Roehm and Womack denied any wrongdoing.

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Source: BusinessWeek.com