TIME: Almanac 1995

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<text id=91TT1501> <title> July 08, 1991: Marketing:Feeling a Little Jumpy </title> <history> TIME--The Weekly Newsmagazine--1991 July 08, 1991 Who Are We? </history> <article> <source>Time Magazine</source> <hdr> BUSINESS, Page 42 MARKETING Feeling a Little Jumpy </hdr><body> 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. </body></article> </text>