Consultants Help Companies Navigate Ad Agency Maze : Advertising: Firms are saving time, money by paying review experts to thin the field of advertisers and then negotiate tough deals.

Advertising directors used to go to the dance alone. Now they’re taking chaperons.

When they choose agencies to handle their advertising dollars, companies as diverse as HomeBase do-it-yourself stores, the Carl’s Jr. fast-food chain and health care provider PacifiCare are increasingly doing so through consultants.

“I haven’t seen a review lately that hasn’t used a consultant in some form,” said William Bryan, president of WBA Inc., a management and marketing consultant in Rancho Santa Margarita.

Companies are willing to spend as much as $60,000 a shot for the services of review consultants. Their aim is to save time and, ultimately, money.

The consultants negotiate contracts that generally set the ad agency’s commission at 8% to 12% of what the client spends, said Mike Agate, president of Select Resources International in West Hollywood. Until recently, 15% was the industry standard.

While the consensus is that increased competition, client savvy and the recession were contributing to shrinkage of the 15%, review consultants “have nagged at it,” said H.E. McDonald, a Rancho Palos Verdes consultant who specializes in ad agency compensation.

Because they are merely middlemen, the consultants can “be nasty, walk away and save a bundle” for the client, said Alan Gottesman, an analyst with investment company PaineWebber Inc. in New York. “The client can’t be nasty” to prospective ad agencies, Gottesman said, “because whoever he picks he’s got to live with.”

Review consultants guide their clients through the maze of advertising services available. Then they negotiate contracts for the specific services that a company wants.

“The advertising industry is fragmenting, and it’s hard to keep up with who’s out there doing the best work,” said Agate, whose company is one of the better-known review consultants in Southern California. “We know.”

One-stop full-service agencies, which used to count on winning 80% of a typical company’s advertising budget, now are lucky to garner 30%, said Fred Zandpour, a professor of communications at Cal State Fullerton. The rest goes to direct marketers, researchers and firms that buy air time and print space for a company’s advertisements.

“The rules are changing,” Zandpour said. “Any time that happens, you want to bring in some fresh blood, an outside perspective. I wouldn’t be surprised to see more and more consultants involved.”

Review consultants appeared on the scene five or six years ago in Chicago, New York and Paris. They have been gaining popularity on the West Coast in the past two years and now handle about 20% of account reviews nationally, McDonald and others say.

That’s a big enough share to give the consultants considerable clout. “Anybody who doesn’t figure that out within 20 minutes doesn’t deserve to be in this business,” said one principal of a major Los Angeles advertising agency.

Most consultants charge the client a fee for the review. The amount is typically determined by the size of the client’s budget and by the time required to conduct a search. Some consultants have a minimum fee. Agate also charges ad agencies a fee to be listed with his company.

Though consultants say they examine all options for their clients, they have their biases, agencies say.

“If a consultant doesn’t think highly of you, you’re automatically excluded,” said Bruce Silverman, president of Los Angeles advertising agency Asher/Gould.

“All of these consultants, in one way or another, have a stable of agencies they’re familiar with,” said Silverman, whose company competed for but failed to win the Carl’s Jr. account.

Familiarity, though it may limit the field, brings efficiency for both sides. And that is one reason for the growing popularity of consultants, said Leonard Pearlstein, president of ad agency Lord, Dentsu & Partners in Los Angeles.

“People are really busy,” said Pearlstein, whose agency won HomeBase’s business. “That’s why consultants are taking more and more of a role.”

In recent months, Orange County companies hiring consultants have included Clothestime, Secure Horizons, Mazda’s now-defunct Amati division, National Education Centers, Children’s Hospital of Orange County Thrift Stores and Western Financial Savings Bank. Most of them have annual ad budgets ranging from $5 million to $25 million.

HomeBase, headquartered in Irvine, hired a review consultant in August after its low-key Stick Man TV campaign, created by Colby Agency in Los Angeles, failed to reverse the company’s profit decline.

David R. Kenshol, HomeBase’s vice president for marketing and advertising, said he did not want to take the time required to hear pitches from all 60 or 70 agencies that could be expected to show interest in the company’s multimillion-dollar account. He chose Mike Agate as his middleman.

With Agate’s help, HomeBase narrowed its list to 18 candidates, each of which completed in-depth questionnaires. Kenshol then interviewed nine of those and selected four to make full presentations.

It was a 14-week process, Kenshol said, which is not unusual. But the amount of time he devoted to it was greatly diminished. “I spent one or two weeks’ time” over the 14 weeks, he said. “Normally, I might have spent 10 to 12 weeks of my time.”

Lord, Dentsu & Partners won the business. Agency President Pearlstein would not reveal details of the contract, but did say that he considers the compensation fair.

He likes working with consultants, Pearlstein said, because they “help clients focus on their key priorities. . . . We get an earlier picture of what the business involves and whether we’d be right for it.”

Not all agencies are so willing, however, to accept the consultants’ terms.

Chiat/Day, renowned for its Energizer Bunny campaign, pulled out of the Carl’s Jr. review, citing compensation issues. The agency, based in Venice, did not return telephone calls seeking comment.

Miles Turpin, head of the agency that won the fast-food company’s account, conceded that “consultants are tough on costs.” However, said Turpin, who is chairman of Grey Advertising in Los Angeles, “most consultants come out of the agency business, and they realize that an agency has to make a profit too.”

The consultant for the Carl’s Jr. review was Michael W. Marsak, owner of Effective Marketing Strategies Inc. in Marina del Rey. His introductory letter identifies him as a proponent of “incentive-based compensation” and “direct accountability”--phrases designed to appeal to the recession-racked retail companies that are his specialty.

The job demands enterprise. Marsak, formerly an executive in the Los Angeles office of ad giant J. Walter Thompson, says he rises at 4 a.m. weekdays and works half a day on Saturday and Sunday to keep in touch with 250 companies he considers potential clients.

“As a successful consultant, you have to reap and sow every day,” Marsak. “I contact them long before they need me.”

Such activity limits the new business prospecting that an ad agency can do, for a client inclined to use a consultant will not be open to direct approaches--the consultant is the gatekeeper.

Asher/Gould’s Silverman said that, each January, he makes a list of about 20 companies he would like to court as clients. “The use of consultants, to a degree, negates that,” he said. Instead, “it becomes very important for me to know a Mike Marsak or a Mike Agate.”

The presence of a consultant, however, does not always guarantee a speedy process. Secure Horizons, the senior division of Cypress-based PacifiCare Health Systems Inc., has had a $10-million account in review since May.

The review was being handled by review consultant Don Dorward, principal of Dorward & Associates in Oakland. An agency had been chosen, a PacifiCare official said, and the review would have been completed last month except that the parent company decided at the last minute to seek a new agency for itself.

PacifiCare Advertising Manager Ellen Santoni, who joined the company in October, hired WBA Inc. in Rancho Santa Margarita to finish contract negotiations for Secure Horizons and to conduct the PacifiCare review.

“Timing became critical because of some other factors in our business,” Santoni said. “With health care changing every five seconds, it’s good to have someone who is keeping up with the agencies--who’s moving, who’s stable, who’s had a shift in philosophy.”