As Publicis Health faces a lawsuit for its role in advertising OxyContin, it seems an opportune time to explore considerations for agencies thinking about working with brands in regulated or controversial spaces. What costs and opportunities should be weighed? And how do these decisions affect agency new business?
The onus on agency leaders
The decision to represent controversial brands or companies in regulated industries must be made carefully by every agency. While ethical and moral considerations should be weighed, you may find it's less about “right” vs. “wrong” than it is about what is best for your agency.
With innumerous agencies for companies to choose from (and vice versa), there is room for agencies to calibrate their compasses differently. As an agency leader, it's on you to have a future vision for your agency and ensure that today’s decisions are consistent with that destination.
"We’re all grown-ups; we can decide whether we want to represent tobacco companies, betting companies, tax-avoiders, oil companies, foreign governments – as an industry, we just need to be honest about it." – Tony Langham, chief executive of Lansons, in PRWeek
Every decision that's made about the new business you pursue and which clients your agency takes on shapes your future options. This post will explore some important considerations when determining your agency's path and how it might affect future new business opportunities.
Publicis Health is the current headline, but they are not alone. As public opinion grows against big pharma’s role in the opioid crisis, Richard Whitman at MediaPost wonders if additional lawsuits might follow for agencies that represented pharma companies like J&J, Cardinal Health, and McKesson, which “have already agreed to settle for billions in damages for their roles” in allegedly contributing to the opioid crisis.
And it’s not just about opioids.
Advertising and PR agencies have increasingly found themselves entangled in lawsuits over client work (for example, Marketing Architects in 2018 for its work with Direct Alternatives’ weight loss products, and Osborn Barr in 2017 for its work with Monsanto’s Roundup).
Lawsuits like these do not blame agencies for representing clients whose products caused adverse outcomes. Rather, the agencies have been held accountable when they allegedly represented their clients’ products with messaging that was false, misleading, or deceptive. Only when those products were associated with negative outcomes was the advertising for them scrutinized.
Expect even more such lawsuits coming down the pike. Late last year, multiple states, a city, and the District of Columbia brought suit against oil companies, alleging “greenwashing” and accusing them of making “misleading and deceptive claims.” While the suits don’t name ad agencies as defendants, they do single out at least 15 campaigns (Reuters). The Reuters article points out that as climate change gains standing in the global agenda, ad agencies may face greater scrutiny for their role in representing fossil fuel companies.
And now for the five things your agency should consider before working with regulated or controversial brands:
1. Are you prepared to negotiate the complex regulatory environment?
CBD, tobacco, alcohol, healthcare, pharma, and finance companies are among those subject to complex regulations. Working with brands in these industries might require you to carefully negotiate restrictions on advertising channels, locations, and messaging, as well as customer data and privacy. Does your agency have the expertise and talent to support this balancing act, with legal compliance on the line?
It’s not just your client who risks exposure when your agency engages in marketing and advertising activities on their behalf. Your agency is also vulnerable when creative is noncompliant.
In a regulated industry, your agency can’t afford to be a “yes” machine. Is your team prepared to push back on proof or to back off from making claims that you can’t independently verify? If you attach your agency’s name to bad ideas, you’ll be on the hook for them too. And, while professional insurance may offer some coverage to offset financial damages, the negative press could leave your agency’s reputation in shambles.
“It is clear that ad agencies cannot escape liability if there are red flags that its clients cannot support the advertising claims they wish to make – particularly for health-related or weight loss claims. Agencies are at heightened risk when they work for...companies under FTC order.” — Lauren B. Aronson, partner, and Helen Osun, associate, at Crowell & Moring, LLP, (on the case against Marketing Architects)
2. What is the strategy? How will this opportunity help you win other business, and what is your endgame?
This goes back to your future vision for your agency. Five years from now, or ten years out, who will your clients be? What will be your areas of expertise? How big will your agency be?
Once you know where you want to be, you can consider whether a decision made today gets you closer to reaching those goals or narrows your window of opportunity.
If you hope to build out a strong practice around CBD and cannabis expertise, for example, you might consider questions like:
- How much business can you realistically bring in under this vertical umbrella, and are there hidden challenges or costs you may be overlooking?
- How big are the opportunities (and budgets) in the vertical?
- How strong is your right to win business in this space?
- Is the landscape overly competitive?
- How real is your risk of losing other business due to your focus on CBD and cannabis?
- Where does this fit in with your agency’s overall business model and other practice areas?
To give another example, if your agency specializes in reaching luxury consumers, and your future agency vision is to become the #1 agency for luxury brands across verticals, the question of whether to go after high-end liquor labels is probably less complicated.
3. Are you prepared for what it might cost your agency?
Many brands in regulated industries are not very controversial, but others require more careful consideration. Aside from tobacco, CBD, oil, and pharma, other verticals associated with controversy include firearms, adult entertainment, religious organizations, and companies that engage in animal testing. A lot of agencies will not consider taking on business in these categories.
Revenue is the #1 reason agencies take on clients—even those that come with more baggage. But what about the other costs that may come with taking on a controversial client? Are you ready for them?
Legal and PR staffing costs. If you have to take on additional staffing costs, can you maintain sufficient margins on your work for clients in regulated industries?
Limited opportunities. Just as younger generations of consumers are moved by purpose and values, so too are the brands that serve them in increasing numbers. Brands that might not have minded ten years ago if you had an oil industry client may find it a deal breaker now.
The #QuitBigTobacco campaign is a perfect example of how working with a controversial client can limit an agency’s opportunities. Since its 2018 launch, over 250 signatories have pledged not to work with Big Tobacco or agencies that do. Among the supporters are ad and PR agencies, as well as “brands that care about health.” According to PRWeek, many #QuitBigTobacco supporters are also opponents of vaping and will not work with e-cigarette brands, either.
Prospects will judge your agency based on its client roster and may not want to be associated with an agency whose values don’t align with theirs. That trend is only gaining momentum. New perceived conflicts of interest may also emerge (for example, if you work with both tobacco and healthcare clients). Be sure your choices leave your agency sufficient room to maneuver and grow.
Ability to attract and retain talent. Those younger generations who value purpose are also a key talent source for your agency. How will your agency’s client roster and expressed values affect its ability to attract new talent? (I’ll discuss some additional considerations around employee retention below).
"A wonderfully sage friend advised me to only take on work for which I want the company to be known. His point was that any work we undertake will become an ad for the firm, and a very public indicator of the kind of projects we aspire to take on. And even though it might be satisfying to cash chunky cheques in the short term, it could take years for an agency to recover from a toxic association.” - Ben Goldsmith, founder of Goldsmith Communications, (in PRWeek)
4. Is this opportunity consistent with your agency’s values?
When making decisions about the areas of expertise you will build-out, and which types of business you value more than others, it’s helpful to be guided by your agency’s “north star.” In terms of connecting today’s decisions to an aspirational future state, your agency’s values are a compass to help you reach your target destination.
Many agencies try to capitalize on their values and culture as a point of differentiation. But to get credit for them, the agency must commit to them broadly, over time. You can’t say, “this is who we are,” and then a year later, take on a client that conflicts with that position, even if you need the revenue.
Values and principles are easily stated and much more challenging to adhere to. Living by values means having to make hard decisions and decline work that conflicts with those values. If you take on business despite a value conflict, you risk losing credibility for the agency’s purported values and culture. That can hurt the agency from the inside (with employees) and the outside (with current and future potential clients).
Today, greater effort is being made to hold agencies to their words. That can be seen across causes, whether it's tobacco, fossil fuels, or diversity, equity, and inclusion. Agencies will be held accountable by their employees, consumers, brands, and even regulatory bodies. They will not get away with saying one thing while doing another and not be called out for it.
All the more reason for your agency to have a firm grasp on its values—if you take an unpopular stance, or client, you should be fully committed to it.
“We’re at the point where you can no longer play both sides credibly or with impunity,” —Christine Arena, CEO of Generous (on big agencies that present themselves as climate saviors while representing clients accused of wrecking it, via Reuters)
5. Will your team be on board?
Social media and public forums like Fishbowl have empowered agency employees to share their disagreements with agency choices. That, combined with the rising importance of purpose and values, has created an environment where employee activism flourishes.
“I think in some ways we're dealing with a generational divide between the CEO and the junior employees. And a clear sign that any kind of work that brands and agencies do can be judged by the court of public opinion, now amplified by social media. It holds people accountable in a way that gives people, who aren't as powerful, some kind of leverage in making sure that companies work in ethical ways.” - Avi Dan, CEO of Avidan Strategies (in Forbes)
When they take on controversial clients, agencies not only risk losing valuable talent, but they can also find themselves in a PR crisis. In one well-known recent example, Edelman’s employees publicly criticized its decision to work with Geo Group, ultimately causing Edelman to drop Geo Group as a client—but not before creating a PR problem for Edelman.
Attempts to silence employees are destined to fail. A better alternative is for leadership to approach “hot button” business decisions differently. As Rum Ekhtiar of Rum and Co. explains in PRWeek, these “employee rebellions” arise from misalignment with values, poor employee communications, opaque leadership, and disjointed agency culture.
When business leaders don’t stop to weigh profits against the values of their employees and clients, they risk losing talent, Ekhtiar says. Agency leaders are more likely to secure buy-in when employees' concerns are heard and when employees understand the considerations that went into a client decision. Even then, though, not all employees will agree.
Some people will leave, and others may not want to work on a particular account as a matter of principle. Wherever possible, it serves the agency to accommodate those requests. This approach can help soften the edge of taking on a client that some employees view as unpalatable.
A note on toxic clients
Controversial companies (including those whose controversy stems from toxic leadership) need not be in regulated or even controversial industries. Papa John’s and Nivea are two well-known recent examples. Most of the considerations addressed here apply to them as well.
If your agency goes into business—and stays in business—with clients that take misogynistic, racist, or other toxic “ist” positions, it says something about your agency, too. And prospective clients are among those listening.
From a human resources perspective, taking (and keeping) a toxic client doesn’t just hurt your agency’s ability to attract and retain talent but can also damage morale and productivity. All of that directly affects your agency’s ability to attract and retain clients, as well. That’s why it's critical to have a solid grip on your agency’s values and know where to draw a line in the sand. Because if you don’t stand up for your agency’s values (and your employees), who will?
New business is a game of strategy. Those who win it are thoughtful and deliberate about how they want to grow their agency. Those who act in desperation and are willing to close anything pay the cost for it down the road.
Working in regulated industries—and even with controversial clients—can be rewarding for agencies. But it shouldn’t be undertaken lightly.
The best way to determine if the business is right for your agency is to carefully cross-check new business decisions against your agency’s values and future plans. As values and purpose continue to take on greater importance, and as agencies are increasingly being held accountable for their words and actions, this step falls squarely in the “must-do” category for agency leadership.
- How to Use Industry Trends for Agency New Business
- How Culture Impacts Agency New Business
- Where Purpose, Brand Performance, and New Business Intersect
- How Agencies “Present” on Diversity to Prospects Now
- How Brands Nail or #Fail Brand Purpose, with Max Lenderman
- Analyzing Agencies in 3 Hot Niches: A New Business Perspective