J. Walter Thompson, the struggling advertising firm that has spent two years trying to build an image for Sears' Discover Card, lost the $35-million account on Tuesday, putting a damper on the ad agency's attempts to rebuild its own muddied image.
The ad agency's loss comes at a time when the Discover credit card is also facing image problems--and financial losses. Since it was introduced two years ago, the Discover Card has been unable to compete head-to-head with Mastercard and Visa, analysts say.
Even though about 19 million cards have been issued, the Discover Card lost $106 million in 1986, said Beth Steinfeld, a spokeswoman for Dean Witter Financial Service Group, a wholly owned subsidiary of Sears, Roebuck & Co.
The loss of Discover Card adds to the long string of clients that have abandoned the New York-based ad firm since its parent company was purchased for $566 million in July by the giant British marketing firm, WPP Group PLC. Since that time, Thompson has lost nearly $400 million of business, including the $200-million Burger King account; about $100 million of international Ford business; about $20 million of Chevron's retail ad business; and earlier this month, Beatrice Cos.' $10-million Hunt-Wesson account, and the $25 million Goodyear Tire & Rubber Co. account, which was picked up Tuesday by the New York ad firm, Young & Rubicam.
Despite these mounting losses, some industry analysts still hold out hope for a turnaround at Thompson--which posts worldwide billings of about $3 billion. "The fire gets a little hotter before it goes out," said Alan J. Gottesman, analyst with the New York securities firm L. F. Rothschild, Unterberg, Towbin Inc. "But it does look like the stellar mediocrity of the financial side of the company is starting to infiltrate the good side of the company--its creativity."
Thompson executives offered no official response on Tuesday to the loss of Discover Card business. But one executive, who asked not to be identified, conceded: "No question, it's going to hurt. You can't have that kind of loss without layoffs across the board." Over the past year, Thompson has laid off nearly 200 workers at its offices worldwide.
Within the next few weeks, Thompson's Chicago office--which handled the Discover Card account--is expected to announce substantial layoffs among its staff of 550.
But the agency that won the account--the Chicago division of DDB Needham Worldwide--will soon be adding staff, said Joel Hochberg, president of DDB's Chicago office. This is the same division that created the "Spuds MacKenzie" campaign for Bud Light beer.
"We'll try to make the Discover Card relevant to the consumer," said Hochberg, whose Discover Card ads will begin to air April 1. "The major hurdle is not just to get people to think about it, but to get them to use it."