TIME: Almanac 1993/TIME Almanac 1993.iso/time/070891/0708200.000

Text File | 1992-08-28 | 12.0 KB | 253 lines

                                                                                BUSINESS, Page 42

MARKETING

Feeling a Little Jumpy


More fickle than ever, advertisers are quitting their agencies
in search of sharper ideas and better deals. Result: fear on
Madison Avenue.

By JANICE CASTRO -- With reporting by Mary Cronin/New York and
William McWhirter/Detroit


    Avis believes everybody should try harder. When it
decided earlier this year that it might want to hire a new
advertising firm to handle its $35 million account, the company
considered virtually every major agency in the phone book -- 100
of them -- for the job. Once Avis chose six finalists, the
agencies poured their energy into the project. Researchers made
studies of consumer driving trends. Copywriters crafted catchy
new slogans. Creative teams worked up lavish demonstrations of
their talent with music, art, sample ads and commercials. Last
week Avis announced that after examining the industry's best
efforts, it had chosen the work of New York City's Backer
Spielvogel Bates -- the very agency it had been thinking of
dumping. Why go to all the trouble? Said a disappointed Bill
Tragos, chief executive of TBWA Advertising, which competed for
the account: "Maybe they were looking for a way to wake Backer
up. Sometimes clients do those horrible things and make the rest
of us jump through hoops."

    Like Broadway dancers and Hollywood hopefuls, even the
largest advertising agencies these days are submitting to the
grueling and humiliating auditions known in the industry as
account reviews. Backer, the longtime imagemaker for Campbell
Soups and other major brands, beat long odds: 85% to 90% of
agencies called on the carpet for their work in such reviews
lose the account.

    At a time when advertising firms are struggling through
the third year of the worst slump to hit the industry in more
than a dec ade, account reviews have become a harrowing aspect
of business as usual, one that some agency people call the
"dance of death." Observes Frank Stanton, the former chairman
of Simmons Market Research Bureau: "Pandemonium is a good word
to describe the business now." Shaken by the instability in the
industry, many agencies are only making the problem worse by
retreating to ideas that seem safe -- but that may bore
consumers and further alienate clients.

    Since last July, more than $800 million worth of
advertising work has moved from one agency to another. (The size
of an account is measured by the client's annual ad spending,
on which the agency earns a percentage commission.) A few days
before the Avis decision, Eastman Kodak shifted the lucrative
media-buying responsibility for placing some $55 million worth
of its ads to the Lintas agency, a contract probably worth at
least $1 million in fees. The loser: J. Walter Thompson, which
has been creating Kodak's advertising for 61 years, most
recently its "True Colors" campaign. "It came as a complete
surprise to us," said the sobered JWT chairman, Burt Manning.
"I still don't know what happened." Among the advertisers
currently working the crowd for a possible new image: American
Express (billings at stake: $60 million), Michelob ($35 to $40
million), Weight Watchers ($30 million) and -- appropriately
enough -- Maalox ($15 million).

    Agency executives can be forgiven if they jump every time
the phone rings these days. At any moment, an enviable client
may invite a pitch or a major chunk of their business may walk
out. When New York's N W Ayer celebrated its victory last week
in capturing the $30 million Bayer aspirin account, the agency
was still smarting from the loss two weeks earlier of the $65
million J.C. Penney account. Advertisers are flexing their
spending muscle more aggressively than ever before. Even
longtime clients feel little loyalty anymore to their agencies.
As a result, ad firms are raising the stakes too, regularly
raiding one another for business, and everyone is feeling the
strain. Says Jerry Siano, chairman of the N W Ayer agency: "We
are pitching more accounts than ever now."

    Senior industry executives say the brisk pace of account
shuffling is only the surface activity of a more violently
churning business climate. Behind the scenes, they say, far more
accounts are teetering in the balance as clients conduct tough,
private "internal reviews," confronting their agencies with
threats to replace them. Some clients seem fickle as well,
bouncing like bungee jumpers from agency to agency. A little
more than a year ago, a dissatisfied Reebok moved its account
from California-based Chiat/Day/Mojo to Boston's Hill, Holliday,
Connors & Cosmopulos. But last March the athletic-shoe maker
left the Boston agency and gave part of the $40 million account
back to Chiat, which has produced such memorable ideas as the
Eveready Energizer Bunny and Nissan's fantasy drives, in which
a young man dreams of Christie Brinkley coming along for the
ride.

    In the freezing blast that is hitting the industry, the
economic recession that began last summer represents the
"wind-chill factor," says Young & Rubicam chairman Peter
Georgescu. Ad spending, which rose only 2.4% last year, to
$128.6 billion, is expected to increase just 3.1% this year,
according to McCann-Erickson's Robert Coen, the industry's
leading forecaster. In order to cut costs and ride out the
slump, Madison Avenue has trimmed hundreds of professionals from
its ranks during the past year -- and the cutbacks are far from
over.

    Conditions grew grim for agencies during the gulf war.
Advertisers slashed spending sharply, in part because they were
worried that commercial interruptions of combat coverage would
offend American consumers. Since that feeling was so widespread
among U.S. companies, many firms also viewed the period as one
in which they could safely cut advertising budgets, confident
that their competitors would do the same thing rather than take
advantage of the quiet marketplace.

    Now that companies are eager to renew their marketing
efforts, though, they are taking a hard look at the tone and
effectiveness of their ads. Many are concluding that the pitches
that worked last year will fall on deaf ears. The white-hot
decade of conspicuous consumption has cooled. Many accounts are
in review because advertisers are casting a wide net in the
agency business, searching for new ideas about how to reach
consumers who are rejecting trendiness for practicality.

    Take Subaru. After more than 15 years with the New York
agency Levine, Huntley, Vick & Beaver, Subaru of America in June
awarded its $60 million account to Wieden & Kennedy, the hot
shop in Portland, Ore., that handles Nike's ads. Subaru hopes
the right ad campaign will help boost U.S. sales from last
year's 108,000 to as many as 150,000 in 1992. Said Chris
Wackman, Subaru vice president of marketing: "Consumers are
looking for qualities like safety, affordability and rugged
performance, all of the things that Subaru represents. We've
always been called bulletproof. If we can find a way to
communicate that to more consumers, we think we are poised for
a real good decade."

    Beyond concerns about the tone and methodology of
advertising, though, is a far more profound shift in the
industry balance of power, from the sellers (agencies) to the
buyers (clients). Vast changes in entertainment and other
technologies since the mid-1970s have fundamentally transformed
the task of delivering ad messages to U.S. consumers. The
explosive growth of cable, specialized publications and other
media has helped splinter the mass market into thousands of
audience shards, scattering consumer attention in all
directions.

    That search has raised the cost and frequency of
advertising. On TV, more than 900 commercials interrupt network
programming every day, up from 814 in 1987, according to the
Television Bureau of Advertising's Arbitron data. Despite the
current plateau in ad spending, U.S. companies have doubled
their outlays, from $63 billion in 1984 to last year's $129
billion. At the same time, the great array of new products
flooding the American marketplace has made it harder for
individual brands to distinguish themselves from the pack.

    Computer advances that enable companies to gather vast
amounts of consumer data have helped advertisers track down
their targets. Marketing firms can now identify the customers
most likely to buy a particular product, tailor advertising
content for them and even track which ads actually lead to a
purchase. More and more, advertisers are pressing agencies to
prove that their ads deliver customers and market share.

    Clients have become much smarter shoppers in other ways
too. General Motors now has an ad czar, Philip Guarascio, who
controls an estimated $900 million corporate marketing and
advertising budget. By negotiating huge coordinated media buys
for all GM divisions as well as multi-year deals at discounts,
he is saving the company about $100 million annually. Guarascio
insists, though, that effectiveness, not necessarily price
alone, is his first consideration. Says he: "The most important
aspect of an agency's performance is to create ideas for us that
build business."

    Agencies are scurrying to meet the new demands made by
haggling clients. Last December the New York agency Avrett, Free
& Ginsberg won the $45 million TWA account by offering to work
for a 5% commission on the business, roughly half the going
rate. This month Sean Fitzpatrick, McCann-Erickson's chief
creative officer for North America, will move from New York City
to Detroit in order to keep a closer watch over his agency's
$500 million account with GM.

    Author Martin Mayer, in his new book, Whatever Happened to
Madison Avenue?, describes how the agencies have been stripped
of their power and influence. "What has been devastating the
advertising industry," he writes, "is the growing feeling among
advertisers and retailers that the selling job should be done
predictably through the weight of money rather than
speculatively through the employment of imagination." As a
result, Mayer has said, agencies are in danger of turning into
little more than "vendors competing on price." Stanton of
Simmons Research agrees: "Agencies are being used like travel
agents, who work to get the client the cheapest flight and get
paid less for their pains."

    Most agency chiefs, though, take issue with that grim
view. Says Leo Burnett chairman Hal ("Cap") Adams: "It still
comes down to the impact and value of ideas. Good ideas will
attract support, and really good ideas are irresistible."

    That is certainly true; but there have been too few of
those good ideas around lately. Advertising Age, the industry's
leading journal, was so disturbed by the quality of Madison
Avenue's work during the past year that in March it declined to
award its vaunted "Agency of the Year" prize for the first time
since it began the practice in 1973. Said the editors: "While
there was a goodly amount of clever recycling around, conceptual
innovations were in short supply." Ad Age concluded, probably
correctly, that the main reason for the relative dullness of
recent work by agencies was that clients had been harassing them
so much during a tough business cycle. The good news: as the
economy begins to improve, both clients and agencies will be
under less suffocating pressure.

    Meanwhile, the stampede of account switching has put a
premium on the industry's creative talent. Gordon Bowen, a top
creative executive at Ogilvy & Mather, hardly raised an eyebrow
last week when six dozen roses were delivered to him as he ate
breakfast in a Manhattan restaurant. Rival agency
McCann-Erickson sent the bouquet as part of its campaign to
persuade him to switch shops. As the principal executive on the
restless American Express account, Bowen conceivably could leave
home with the business. If that were to happen, $300 worth of
roses would go down in advertising history as one very creative
and cost-effective idea.