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Ogilvy's Big Bet On Big Blue


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OGILVY'S BIG BET ON BIG BLUE

Charlotte Beers was--to put it mildly--in a bind. Several months ago, David Ogilvy, the legendary founder of Ogilvy & Mather Worldwide Inc., sent the ad agency's chairman a memo suggesting she hire a worldwide creative director for the agency. Ogilvy--who just turned 83, doesn't fly, and lives in a 12th century French chateau--proposed himself for the job.

Beers, the first head of Ogilvy to come from outside the agency's ranks, knew he wasn't a serious candidate. But she has tried to give him a role in the agency. Recently, for example, she scheduled a board meeting at his castle and gave the former chairman a chance to address the senior executives. In this case, however, Ogilvy says she ignored his proposal. Ogilvy, who adds that he is a fan of Beers, now laughs off the whole episode: "I'm rather relieved she never accepted the suggestion."

It's clear David Ogilvy bears no ill will toward Beers. But two years into her job, the 58-year-old Beers is still struggling to put her stamp on a shop steeped in the legacy of its founder and his successors. "I get letters from five ex-CEOs," says Beers ruefully, "At times, it makes it very difficult to steer the course because I have a lot of sophisticated second-guessing."

"KIND OF SPOOKY." The second-guessing isn't likely to end soon. On May 24, Ogilvy landed the biggest new assignment in advertising history: the worldwide account of IBM, with billings of $400 million to $500 million. But almost immediately, Ogilvy lost its other high-tech clients: It resigned both Compaq Computer Corp.'s $40 million account in Europe and Microsoft Corp.'s $70 million worldwide account. Its direct-marketing arm lost Hewlett-Packard Co. and Intel Corp. Most damaging, AT&T pulled $100 million in billings, primarily in direct marketing (table, page 73).

The IBM victory may also be less than it seems. One Big Blue insider says the company has sharply curtailed its 1994 marketing budgets in the U.S. and overseas. As a result, he says, IBM's worldwide billings are closer to $200 million. Even if IBM were to pay Ogilvy a historic 15% commission on billings--almost unheard of these days--that would generate revenues of only $30 million. By contrast, the agency pulled in revenues of $38 million on the AT&T, Compaq, and Microsoft accounts, according to one insider. What's more, IBM is undergoing the most wrenching restructuring in its history. "It's kind of spooky," says a top Ogilvy executive.

Beers won't disclose what IBM is paying Ogilvy. But agency insiders insist the compensation will more than offset lost revenue. And anyway, says Beers, IBM's billings are bound to grow: "I'm betting personally on [Chairman] Lou Gerstner's vision for this company," she says. Indeed, few rivals on Madison Avenue fault Beers for gambling: "If you have a great deal of confidence that you can pull it off, you'd be crazy not to consider it," says John Doig, a former Ogilvy executive.

For Beers, who became the highest-ranking woman in advertising when she joined Ogilvy in April, 1992, the IBM win is also a way to silence critics who say she has produced more press than profits. Before IBM, Ogilvy had scored few new business victories under Beers and lost one big account, Hardee's Food Systems Inc. Several top creative and account executives departed. And rivals say Beers failed to revive the agency's lackluster creative image.

True, Beers did lure back some blue-chip clients that had left: American Express, Shell, and Pond's. Ogilvy says that--plus increased spending by its multinational clients--boosted the agency's worldwide revenue by 5.3% in 1993 (Ogilvy's British parent, WPP Group PLC, won't disclose the unit's revenue or profit figures). But Advertising Age magazine estimates that Ogilvy's revenue dropped 2%, to $740 million, on billings of $5.8 billion.

Beers says she could have boosted revenue further but decided early on not to chase new business because she wanted to shore up existing relationships. That certainly helped with AmEx. Yet Ogilvy has continued to have troubles with other key clients. Compaq, for example, fired the agency from its U.S. business in late 1991, and relations between the two grew increasingly sour. A year ago, Beers says, the company canceled a meeting with her after she

had flown to its Houston offices. Compaq declines comment.

AT&T is another sore point: Agency insiders say they didn't expect the company to react so negatively to the IBM announcement. In a bid to salvage the account, Ogilvy even offered to set up a separate subsidiary within WPP to handle AT&T. But in the end, the company decided IBM was an insurmountable conflict. "This wasn't done out of pique," says Dick Martin, vice-president for corporate advertising at AT&T.

Still, Martin doesn't deny that AT&T had been growing steadily less enchanted with Ogilvy. In the last several months, Ogilvy lost bids for both its consumer long-distance account and a new direct-marketing assignment. Well aware of their fraying ties to AT&T and Compaq, Ogilvy executives felt pursuing IBM was a risk worth taking. "You have to stop and ask: `Is this a growing, long-term relationship?"' says Rochelle Lazarus, who runs Ogilvy North America and was a key player in the agency's supersecret talks with IBM.

Much of Ogilvy's success with IBM, and with its other clients, will hinge on Beers's strategy for the agency, which she calls "brand stewardship." For 18 months, Beers has pushed the concept tirelessly in speeches to clients. Stripped of its somewhat pretentious vocabulary, brand stewardship basically says an agency must determine the "character" of a brand before it can effectively promote it. To do that, it must figure out what role the brand plays in the consumer's life and self-image.

Some former Ogilvy executives deride brand stewardship as patently obvious. But after some resistance, Beers says 80% of Ogilvy's multinational clients now use it to develop their advertising. Kraft General Foods Inc. and AmEx are particularly enthusiastic adherents. Beers has even put the strategy on tape, and one IBM executive told Beers he jogs with a Walkman playing it.

GLOBAL BRANDPRINT. In IBM's case, brand stewardship will mean collecting reams of data from marketing executives at the company. Beers says the process has already begun. She hopes to develop a so-called "brandprint" for IBM in the next several months. Ogilvy may roll out its first commercials for the company by September, although Beers says it will take longer to develop a global image campaign.

Despite brand stewardship's lofty ring, IBM probably ought to worry more about mundane issues such as whether Ogilvy can crank out ads from Johannesburg to Helsinki within a few months. The agency says it will ramp up by reassigning staffers who worked on Compaq, Microsoft, and AT&T. Beers says she hasn't chosen the account's top managers yet. But executives close to the agency say Gerald D. McGee, who runs Ogilvy's Los Angeles office, will supervise the account, while Robyn Putter, chairman of its South Africa office, which already works for IBM, will be creative

director.

Ogilvy's far-flung outposts are one of its great strengths. But current and former executives question how well Ogilvy will be able to coordinate those offices in devising a global campaign for IBM. For one thing, several of Ogilvy's veteran worldwide account managers have departed--most recently, John Blaney, who managed Unilever. G. Kelly O'Dea, president of worldwide client service, says the exits merely reflect a changing of the guard.

Then there's Beers herself: Before Ogilvy, she was chairman of Tatham RSCG, a midsized Chicago agency. At one of her first Ogilvy staff meetings, Beers admitted she is no internationalist--joking that she'd better find El Salvador on the map before making her first trip to Ogilvy's office there.

Supporters of Beers dismiss as envy any charge that she is out of her depth. Martin Sorrell, the CEO of WPP who hired Beers, says rivals made the same comments about Burton J. Manning, the successful chairman of Ogilvy's sister shop, J. Walter Thompson Co., when he took the helm in 1987. "While David Ogilvy is irreplaceable," he says, "Charlotte shares many of his qualities." As Beers takes on the challenge of her career with IBM, she'd better hope that Ogilvy's legendary luck is one of them. WAS IT WORTH IT?

The accounts Ogilvy & Mather lost to get IBM were probably already at risk.

But it will be a challenge to keep IBM, too.

LOST

Billings Client The inside line

$100 million AT&T Ogilvy's star was fading at AT&T before IBM. The phone

giant had passed over the agency when it moved its

long-distance service account to FCB/Leber Katz.

$40 million COMPAQ Compaq pulled its domestic account

(Europe) from Ogilvy 21/2 years ago and gave it to Ammirati &

Puris.

$70 million MICROSOFT The software maker had begun a review for a second

agency.

WON

$400-$500 million IBM Ogilvy's international network is reputed to be the

jewel that lured Big Blue. The biggest question mark

may be the client: Will IBM--after years of indecision

and turmoil--be able to decide what its brand stands

for?

DATA: BUSINESS WEEK

Mark Landler and Jonathan Berry in New York


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