CLOSE-UP: LIVE ISSUE - REVERSE AUCTIONS. What happens to value when briefs are put up for auction?

Are clients damaging the business when they go on price alone?

How apposite that DuPont, the chemicals giant, should have Teflon, that famous repellent of all manner of nasty things, among its stable of world-famous brands.

The US-based multinational is currently fielding brickbats from ad industry people everywhere over the way it has chosen to conduct its search for a full-service global agency.

Seven networks - FCB, Saatchi & Saatchi, McCann-Erickson, Ogilvy & Mather, Young & Rubicam, Fallon and Doner - have pitched their creative work and the DuPont team is evaluating it. So far, so normal.

What makes this contest so unusual, however, is that the company is also sifting the results of an online reverse auction in which pitching shops were asked to show how much they would charge to service the account and how they did their sums.

A senior executive from one of the competing networks calls it "a bit perplexing". For others, this doesn't begin to describe what they regard as a crude attempt at cutting costs. "Appalling," a senior industry consultant fumes. "An aberration," the chairman of a large UK agency group claims.

Even ISBA, the representative of client interest, has grave reservations about excessive dependence on online auctions. Debbie Morrison, its director of membership, says: "Creativity can't be bought in this way. It may lead to some big discounts initially but these aren't sustainable."

It's not that reverse auctions are a new ploy. Print work is often bought this way, while finalists in Xerox's £8 million pan-European direct marketing pitch were put through the process. Two years ago, the insurance giant GE Life held an online auction to find out who could handle its £7 million media assignment at the lowest rate.

Until now, however, online auctions have never been used to help determine the outcome of a creative pitch. What DuPont has done is to turn the traditional practice, whereby a client picks the agency it wants to work with before negotiating terms, on its head. "You can bet that where DuPont has gone, others will follow," an agency chief sighs.

So how did it come to this? One factor is rapidly evolving technology.

More than half-a-dozen US companies are now producing software that enables such online auctions to take place.

Another is the effect of a market in which agency supply far outstrips client demand and creativity is increasingly regarded as a "given". Most crucial, though, is the relentless advance of procurement executives, who have pushed marketing directors well down the pecking order in many client companies.

The result has been a sea change. So complex have fee negotiations become that client service directors are often under orders to leave remuneration issues to be thrashed out between agency financial specialists and client procurers.

At Omnicom agencies, senior account people get regular lessons on how to get on the same wavelength as their procurement counterparts. Meanwhile, procurers are becoming an increasingly common sight at industry events as they attempt to increase their knowledge of how advertising works.

"It's got to a stage where procurement people are seeing themselves as guardians of the brand because they tend to stay around longer than marketing directors," an agency chief says.

As for DuPont, control of costs is key. The company, which invented nylon more than 70 years ago, is at the mercy of the world economy more than most. Products for cars and houses account for about a third of its revenue and sales of both have slumped.

Last month, it slashed its 2003 forecast for North American and worldwide economic growth by 30 per cent and 16 per cent respectively. Meanwhile, international uncertainty has complicated plans to sell or spin off its textiles and interiors business, which includes Lycra, polyester and nylon.

Now the company is looking to make economies in its advertising by having the DuPont name take precedence over its plethora of products, many of which are more famous than the "mother" brand.

DuPont acknowledges that the pitching networks were initially nervous about the reverse auction. But it refutes charges that it is treating advertising as a commodity and insists that a network submitting a higher quote than a rival won't necessarily be eliminated from the contest.

DuPont's communications manager for global sourcing and logistics, Julia Saia, can't understand what the fuss is about. "The auction is a standard industry tool we're using to evaluate price," she explains. "Price is just one of many factors being taken into account."

A senior executive at one of the networks competing for DuPont's business is equally relaxed. "This isn't necessarily a bad thing," he says. "All DuPont is doing is bringing financial negotiations into the middle of the pitch process rather than at the end. Better that way than having to agree terms with the only agency left in the ring."

Others disagree. "I've not been involved in a pitch in the past eight years where there hasn't been a lot of early discussion about fees," Jerry Judge, the chief executive of Lowe & Partners Worldwide, says.

What worries some industry figures is that reverse auctions will only accelerate the lack of respect among clients for what agencies do.

"It's a complete negation of the idea that clients should be seeking value rather than lowest price when choosing an agency," James Best, the BMP DDB group chairman, says. "It would seem to contradict any belief in the quality of creative work and strategic thinking an agency provides."

There's also a fear that such auctions will inflict further damage on a sector where margins are already under massive pressure.

"If everything is judged on costs, we won't be able to invest in people or the business and we will die," Lee Daley, the HHCL Red Cell chief executive, warns.

David Wethey, the managing director of Agency Assessments International, is equally worried about the destructive potential of reverse auctions.

"Clients who buy in this way will end up with a bad bargain - fewer good people, lower priority in the agency, indifferent service, poor quality control and a negative relationship," he declares. "Their rivals who are interested in achieving competitive advantage by hiring the best agencies and incentivising them will get bigger ideas, better advertising and results."

Meanwhile, doubts are mounting among agencies that clients really mean what they say when they claim reverse auctions will always have a limited role in the agency selection process.

"What worries me," a European network chief says, "is that your creative work wins the pitch, the client says he'd really like to appoint you but another agency has put in a lower bid for the job. He wants to know if you'll lower your price. What the hell do you do?"

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1 Job description: Digital marketing executive

Digital marketing executives oversee the online marketing strategy for their organisation. They plan and execute digital (including email) marketing campaigns and design, maintain and supply content for the organisation's website(s).