Money troubles behind Home Depot’s switch from Initiative to Carat

Troubles over money that is as a new lower fees regime in the relationship between Interpublic’s Initiative Media and giant US retailer Home Depot seems to have led to the abrupt switch of its media account to currently all-conquering Carat.

This is Steve McLellan’s report in Adweek.

The Home Depot has shifted the bulk of its media assignment from Interpublic Group’s Initiative to Aegis Group’s Carat after a review, the client has confirmed.

The client spent $420 million on ads last year and $450 million in 2009, according to Nielsen. Those figures exclude digital.

After a transition period, Carat will assume most traditional and digital duties, with the exception of paid search, which will shift from Interpublic Group’s Reprise to an in-house unit at Home Depot, the client confirmed. IPG’s NSA will continue to handle newspaper planning and buying, and sister agency Octagon will continue to handle events.

The shift comes only about two years after Home Depot completed a lengthy media review and opted to retain Initiative. Carat was a finalist in that review, and sources indicate that there were signs of a growing rift in the relationship between Initiative and Home Depot from the start of the renewal period.

The two firms battled over terms of the new contract, per sources. Home Depot, which persuaded Initiative to reduce its fees in order to retain the business, insisted that the new rates take effect immediately. Meanwhile, Initiative wanted the higher fees to continue through the life of the existing contract, which had another three months to run.

That sticking point, back in early 2009, led the client to threaten to rescind the renewal and award the account to Carat, per sources. Initiative then backed down and agreed to immediately accept lower fees.

Last year, trouble continued between Home Depot and Initiative sister agency MRM, which handled digital and customer relationship management duties for the retailer. Last September, the pair parted ways.

Sources attributed the split to Home Depot requesting work beyond the original scope without paying additional compensation.

In an internal e-mail, MRM New York managing director Corey Mitchell wrote that “for reasons based on a fair exchange of services and a mutual inability to arrive at realistic expectations, we are choosing to walk away from our relationship with The Home Depot completely.”

The agencies didn’t return calls or referred questions to the client. A client rep confirmed the shift, calling it “part of our ongoing process of periodic supplier reviews.” The rep added that the change was “driven by the needs of the business. As we look to continue our strategic shift towards a more integrated multi-channel approach we felt this was a change” the client had to make.

The shift, a blow to Initiative, continues a year-long turnaround effort by Carat, which last month retained its $1 billion-plus Pfizer assignment after a review. Last year, it also won Red Bull, Relativity Media and Beiersdorf, among others.

What we’d all like to know are what these fees are of course. Do let us know if you do.

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