Group C – Module 4 – Case Study Henderson bas www. theniceagency. com [pic] Toronto Head Office Table of Contents Executive Summary 3 Problem Statement 3 Objectives, background, environment 3 Strengths3 Weakness4 Opportunities4 Threats4 Market and competitive analysis5 Financial Analysis5 Key Questions5 Alternatives6 Recommendations7 Action plan8 Executive Summary: Henderson bas is an advertising agency originally established in 1996 under the name Cybersite by its current CEO Dawna Henderson. Its name was changed to Ninedots and in 2004 to Henderson bas.
Later that year, MDC Partners Inc. purchased a controlling interest in the company. Henderson bas has focused its efforts in online and interactive services with large clients including Capital One, eBay, Molson, Nike and others. It is “Canada’s most awarded interactive agency” and is the only agency that uses a market-driven strategy and creative. Their projects link to the client’s business and marketing objectives and are rated against key performance indicators. They then use Creative to optimize their campaigns for best marketing results.
The current Director of Client Services, Louisa Morgan, is trying to determine how to set a price for a new potential client Halpernia Industries who has already rejected two creative proposals presented to them by Henderson bas. We will present options to Henderson bas for improving their pricing strategy while recognizing the importance of maintaining their relationship with Halpernia and future clients. Problem statement: Louisa Morgan must decide how to set a price for a proposed campaign for a potential major client Halpernia.
Morgan has to balance the need to be profitable with the importance of a relationship with Halpernia and the appropriate level of service for this client. Objectives and goals: Henderson bas has developed a strong market niche in the interactive advertising industry in Toronto. Henderson bas must continue to offer the high level of service and quality of the strategy it uses in the development of interactive projects to maintain its existing clients and obtain new ones. This is a very competitive, fast paced industry In order to Background and forecast Henderson bas was a 65 person online media and advertising firm started in 1996 by Dawna Henderson under the name Cybersite, later Ninedots and in 2004 due to copyright difficulties –Henderson bas • In 2004 MDC Partners Inc. purchased a controlling interest in Henderson bas • Henderson bas is the most awarded interactive advertising agency in Canada • Henderson is a mid-sized company focused on interactive and online advertising • It’s client list includes Capital One, Nike, Coca-Cola, E-Bay, Molson among others • Henderson bas is a niche agency among the large players including Leo Burnett, Avenue A/Razorfish, Agency. om and Cossette Communications • For continued success purchasers look for reputation, remuneration and relationships as criteria for selecting a firm such as Henderson bas S. W. O. T analysis Internal strength: • It is Canada’s most awarded interactive advertising agency • Henderson is aligned with the Canadian offices of large global brands and offers a very high level of service • Word of mouth is often used to promote the company Has a defined step-by-step process for managing engagements that has been very successful with their many clients • Henderson has a professional seasoned staff with a lot of experience in small and medium sized projects • Henderson bas has great reputation in the market; current clients always refer new clients to it. • Dawna Henderson , the CEO, has an international reputation and the experience to solicit new and larger clients • Clients enjoy the interactive workstyle Internal Weakness: While Henderson has aligned itself with the Canadian offices of large global companies it does not have significant experience in dealing directly with a large globalized brand • Louisa Morgan doesn’t appear to have the experience or training for a project of this scope • Henderson is a mid- sized company but may not have sufficient resources to take on large client like Halpernia • Henderson requests full payment upon completion of project while clients prefer to pay in installments • The account manager has the freedom to manage the assigned client with no input from ther managers • Contracts do not have clauses for addressing disputes over proposals or pricing External opportunities • As a leading interactive company with large recognized clients Henderson is in a solid position to acquire new clients especially as it is part of the global firm of MDC Partners Inc. Using its expertise it can leverage the quality of its strategic development process in interactive projects • Dawna Henderson , the CEO, has an international reputation and the experience to solicit new and larger clients • The online interactive development is in its infancy with the new technologies on the horizon particularly in the hand –held device industry including blackberries and I-phones etc. There is a huge market to reach globally External threats The industry is extremely competitive with both small and large firms fighting for the business • The industry is in a mature phase • Internet production services have become commoditized with many firms offering comparable technical services • Clients can easily change suppliers if they aren’t satisfied • Technology changes can quickly affect a firm’s ability to compete • Large players historically offered multi-channel ad service have expanded into interactive advertising industry
Market strategy Target market: Large companies Market Mix Product: multiple online services, including web design, advertising, e-mail marketing, database marketing and technology services. Distribution: directly sales to end users Price: based on cost and demand of each project Promotion: existing clients referring; publication; Segmentation analysis |Large |Medium |Small | |Who |Large companies; famous brands |Medium companies; new/modified brands |New built companies; new products | |What |Online advertising and promotions; |Web development; online advertising |Web design; e-mail marketing; | | |e-mail marketing; database marketing |and promotions; database marketing; |technology services | | | |technology services | | |When |Current products promotion; new |Current products promotion; new |Companies set up; new products | | |products |products | | |Where |Publication; referring |Publication; referring |Publication; referring | |How |Instalments |Cash / Instalment |Cash / Instalment | |Size |50% |30% |20% | |Trent |Increase |Increase |Increase | |Benefits |Good reputation; high quality; |High quality; competitive price |Effective services; lower prices; meet| | |reasonable price | |deadline | Competitor analysis
Henderson bas competes with both small and large firms in a very competitive environment in Canada including Leo Burnett, Avenue A/Razorfish, Agency. com and Cossette Communications Financial analysis See Appendix Key success factors • Acceptance by Halpernia of the creative proposal • Payment made by Halpernia for the project to date • Delivery of a successful campaign and earning their trust Key uncertainties • Satisfying Ivana Drago • Preparing a satisfactory third creative proposal • Recovering all costs of the project • If client is not satisfied possible damage may occur to reputation Analysis of alternative solutions Evaluation criteria • Acceptance of the creative proposal by Halpernia • Agreement with Halpernia on the proposal costs Development of a long term relationship with Halpernia Alternatives Alternative 1 – Agree to a third proposal free of charge Pros • Restore and strengthen the firm’s relationship with Halpernia • Word of mouth advertising from winning a large client contract • Long-term relationship and profits from Halpernia and potential new large clients Cons • May set a bad precedent for future clients by offering free creative proposals • Halpernia may come to expect many more “free” services in the future • Halpernia may not like the third proposal and walk away leaving a tarnished reputation for Henderson • Resources taken away from other existing or potential clients
Alternative 2 – Present a new creative proposal for a standard proposal fee using “menu” Pro • Would cover the costs of the proposal • Client wouldn’t expect free services in the future and pays for exact services ordered • Henderson has a structure to use with other clients Cons • Halpernia may walk away to a new firm leaving Henderson no recourse for recovering costs • In a small competitive industry Henderson’s reputation with potential larger clients will be severely compromised probably by word of mouth Alternative 4 – Meet with Halpernia executives to discuss how the product does meet their needs and how the benefits outweigh their concerns Pros This will give Morgan an opportunity to ‘sell’ Henderson based on their sterling reputation in the industry and high level of success • It is clear that Halpernia’s representative does not have the knowledge or the ability to evaluate the proposal so Morgan has the opportunity to outline the benefits of the proposals to date • Provides an opportunity to gain the trust of Halpernia if Henderson is given the chance to follow through on the project • The costs to date are sunk costs and Henderson can absorb them and negotiate a contract that will allow them to recover costs in the future Cons • If Morgan can’t convince Halpernia executives of the benefits they may be turned away and lose the client • The costs will be lost and not recoverable Henderson’s reputation may be tainted with larger clients as word is spread in a small competitive community Recommendation We recommend Alternative #2 to Henderson bas. Action Plan Short-term Step 1: Arrange a meeting with Halpernia’s executives including Ivan Drago’s boss and Louisa Morgan. Include Dawna Henderson, CEO in this meeting Step 2: Review the situation with Halpernia. Review the current facts and gather as much information as possible concerning their objectives for this campaign Step 3: Discuss any problems with the current proposals and convince Halpernia of the benefits of Henderson’s creative proposal Step 4: Discuss the implications if Halpernia doesn’t agree to Henderson’s strategy in terms of business and time lost for Halpernia
Step 5: Give Halpernia executives an opportunity to more clearly define their needs • Ivana Drago needs to provide Morgan with a clear indication of Halpernia’s expectations • Ivana Drago must provide reasons why the proposals to date have not met their requirements other than it “it is not how I envisioned it”. This may ne a personality or ego problem that needs to be checked. Having senior executives in the meeting my solve this issue. Step 6: Respect Halpernia’s point of view but re-emphasize Henderson’s strategy in this campaign and the benefits of moving forward. Step 7: Provide Halpernia with a breakdown of costs to date in preparing a creative proposal and discuss options for payment Step 8: Be sure to have an acceptance from the client before leaving that satisfies both parties and clearly spells out respective responsibilities Long-term
We recommend that Henderson have a clear process for dealing with new clients and a method for collecting fees to prevent future problems or at least recover variable costs of a proposal As part of MDC Partners Inc. Henderson should be inviting MDC experts to assist them in setting out processes when dealing with large clients. Contingency Plan Henderson can provide a third creative proposal after carefully revisiting the clients needs and direction. Payment for the third proposal should be required especially since the client has signed off on the strategy document three times. Halpernia has to accept responsibility if they sign off on an agreement or they may do this to many firms.