A Big Blue Twister Rocks Madison AvenueJonathan Berry
It was like the Madison Avenue portrayed in the movies, in which account-hungry sharks read over people's shoulders on trains and eavesdrop on lunches for hot tips. An intense, month-long series of meetings often ran late into the night. The client was only referred to by a code name. Presentations were kept in a laptop computer. And when, on May 24, the news broke that IBM will consolidate its $400 million to $500 million in worldwide advertising at one agency, Ogilvy & Mather Worldwide Inc., a new reality hit adland with the force of a four-martini lunch.
Ogilvy, led by Chairman Charlotte Beers and key lieutenants North America President Rochelle B. Lazarus and President/Worldwide Client Services G. Kelly O'Dea, had pulled off the biggest account grab ever. The jobs of up to 400 people working on IBM accounts at 40 other agencies around the world were in doubt. Ogilvy, meanwhile, was instantly under pressure to perform. "People tell me we are going to be living in a fishbowl," says Beers, who clearly relishes the spotlight.
The reason for the pressure is clear: The consolidation is the biggest example yet of a major trend--multinational clients paring back agencies to gain economies of scale and forge a more consistent brand image worldwide. Rival marketers want to see if it can work. And IBM wants results--yesterday. Indeed, within minutes of the announcement, an IBMer in Helsinki called Ogilvy's local office wanting to "come over right away" to get started.
DAUNTING TASK. Ogilvy has a lot to prove. The WPP Group PLC unit, which had $5.8 billion in billings last year, up $300 million from 1992, is taking on an account that produces and places thousands of ads--taking into consideration the languages and cultures of dozens of countries. It has to demonstrate that the IBM name--battered by the company's downsizing and low-cost competitors--can be marshaled to sway sales in an industry that has been driven by the latest technologies and the lowest price. The first ads are expected this fall.
Ogilvy faces a daunting task just getting up to speed. Unlike most agency reviews, it did not present consumer research or ideas for ads. Instead, meetings between the two focused on the agency's approach to managing brands--dubbed "brand stewardship"--and reviews of products and services Ogilvy handles globally. "We know that it is a world-class brand that is in the process of redefining itself," says Worldwide Client Services President O'Dea.
IBM, which has been running vastly different campaigns from unit to unit, acknowledges that "we were underutilizing a great brand," says Abby F. Kohnstamm, vice-president for corporate marketing. What caught IBM's eye at Ogilvy is the agency's success at so-called "global branding." Since Beers took the helm in 1992, Ogilvy has steadily picked up international assignments. For instance, it has expanded its assignment on Lever Bros. Co.'s Dove soap from the U.S. to 33 countries. With Lever's Pond's creams and lotions, Ogilvy has gone from a handful of countries to 40. It also recently launched a global campaign for American Express Co.--the former home of both IBM Chairman Louis V. Gerstner Jr. and Kohnstamm.
Ogilvy has already roughed out an international structure for working on the account. It expects to have three layers of management, direction to be set by a management team in New York. On the next level, offices in Paris, Tokyo, and probably Florida would coordinate the business for Europe, Asia, and Latin America, respectively. Individual offices would then localize ads in the countries. The agency has 270 offices spread across 56 countries.
MAJOR LAYOFFS. And the losing agencies? Many say they agree that IBM had to consolidate its accounts, but they find the move devastating nonetheless. Major layoffs seem inevitable. The biggest losers include Interpublic Group's Lintas Worldwide, which had $85 million to $90 million in IBM billings, and DDB Needham Worldwide, which had about $50 million in billings, including European advertising for the PC. Another casualty: Merkley Newman Harty, a creative boutique of Omnicom Group Inc., which had just launched a $40 million campaign for IBM PC Co. that accounted for about half of its billings. "I feel like a guy standing on the deck of a sailboat who just got swept off by a wave," says Kenneth Olshan, chairman of Wells Rich Greene BDDP Inc., which handled $50 million in IBM billings.
Competitors wonder if Ogilvy won't get fouled up by the IBM account's complexities. Indeed, a rival computer executive calls it "the toughest ad challenge in the computer industry." That's because Ogilvy must create a unified image for a company with many competing and overlapping products. IBM's mainframe, for instance, competes with its minicomputer, which overlaps and competes with its PC.
Ogilvy is gearing up for a "brand audit" of IBM--intensive research of the company's customers to define its brand image. "We feel we'll be tested, stretched, and challenged," says Beers. Scores of rivals will be watching to see if they can pull it off.