Trouble on Madison Ave. Ad agencies forced to regear as clients face difficult times

March 07, 1993|By Ian Johnson | Ian Johnson,New York Bureau

New York -- With three lean years behind them, advertising executives should be preparing for good times as the economy rebounds and companies roll out new marketing campaigns.

Some promising signs have appeared already. Billings for the $140 billion industry are expected to rise 6 percent this year. Television spectacles such as the Super Bowl and the mini-series "Queen" have sold out -- the first time in recent years that companies have been strong enough to compete for spots on prestige programs. And other media such as newspapers and radio report increasing ad sales.

Yet the uncertainty and anxiety that characterized the recession have not loosened their hold on America's ad agencies. Most agencies face the same corporate purgatory that is afflicting their clients -- they are being forced to cut costs, slash staffs and develop more nimble ways of doing business.

Advertising, always a volatile industry, is even less stable these days. IBM, General Motors Corp. and other blue-chip companies that once had steady relationships with major agencies are struggling,searching for a switch in marketing that will boost sales.

Meanwhile, Hollywood is proving that more creativity and a less bureaucratic approach may be just as effective -- and much more profitable -- than the traditional workings of New York's big shops.

"It's not enough anymore to say, 'We'll put your ad on in Niff-Naff, Ohio, and that's going to start the ball rolling.' Everyone is much more demanding, and there's much less certainty out there," said Fred Danzig, editor of Advertising Age magazine.

Nowhere is that uncertainty more evident than in the automobile industry. Porsche, BMW, Volvo, Subaru, Isuzu, Mercedes-Benz, Jaguar and Alfa Romeo are among the big names that have switched agencies over the past two years.

Some of these changes reflect the decline in luxury car sales and attempts to revise a marketing approach. But the biggest shock came last year when Oldsmobile considered switching its $140 million account from Leo Burnett, the Chicago agency that had made ads for the General Motors' division since 1967.

Last month, after a grueling five-month review -- the first of its kind by a GM division -- Burnett beat out 15 other agencies. But it won only after radically restructuring its operations and its style of working with Olds, which had seen sales drop 60 percent over the previous five years.

One concession: Burnett agreed to close its Southfield, Mich., office. That office, an hour's drive from Oldsmobile's Lansing headquarters, was criticized for being too bloated and distant from the car company. Today, work is handled in Burnett's Chicago office, with a coordinating staff of about a dozen people in Lansing.

The agency also agreed to replace top account executives and bring in a fresh team that will report directly to Burnett Chief Executive Office Richard B. Fizdale. "Oldsmobile is indeed getting a new agency," he said.

The review wasn't just time-consuming and heart-wrenching for many Burnett executives -- it was also costly. Some in the industry estimate that Burnett spent more than $30 million to keep Oldsmobile -- including demonstration ads, staffing changes and moving the office.

Although Oldsmobile was motivated by a drop in sales, other companies have reviewed ad accounts because of their own changes at the top. Porsche switched agencies after new management took over. International Business Machines Corp. is expected to put its account up for grabs after an internal shake-up. GM's new executives might switch its $1 billion account, too.

"When times are bad or difficult,one of the easiest things to do is to fire the ad agency. It appears as if you're doing something," said Jay Schulberg, creative director of Bozell Inc.

Although some ad agency firings appear to be little more than acts of desperation, others are sparked by a clear lack of creativity, said Mr. Schulberg, whose company handles the Chrysler Corp. account.

The best example: Coca-Cola Co.'s decision to use a Hollywood talent agency to make its latest ads.

The unprecedented move came after Pepsi's strong challenge to Coke throughout the 1980s, said Tom Pirko, of Bevmark Inc., a beverage industry consulting firm. While Pepsi had Michael Jackson moonwalking the drink to higher market shares, Coke was known as a drink for aging baby boomers.

"If a company's not getting results, it hops to the next lily pad," Mr. Pirko said.

Atlanta-based Coke hopped all the way to Hollywood, to Creative Artists Agency, a talent agency run by super-agent Michael Ovitz. CAA features top names, including director Rob Reiner, "Lethal Weapon" director Richard Donner and "Batman" special effects coordinator Michael Fink.

Coke set a few guidelines, such as requiring the "Always Coke" slogan and the 1940s-style logo. Then Mr. Ovitz asked his talent stable to develop a few dozen ads -- no unifying concepts, no ad jingle and no theme.

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