Saatchi & Saatchi CEO Kevin Roberts toiled to make his firm a force among creative agencies. Now--in today's splintered advertising universe--he's scrambling to keep it relevant
Kevin Roberts may well be the most successful adman of his generation. Over the past decade the British-born chief executive of Saatchi & Saatchi Worldwide has transformed his agency from one of Madison Avenue's biggest jokes into one of its brightest stars. Roberts has been signing up clients at an impressive clip--adding J.C. Penney (JCP), Wendy's International (WEN), and Ameriprise Financial (AMP) to a blue-chip roster that already included Procter & Gamble (PG) and Toyota (TM). His agency has been scooping up awards for its creative work. Saatchi is back in the black and expects operating profits of about $117million this year on $780 million in revenues. Not bad for a guy who, prior to becoming Saatchi's chief in 1997, hadn't worked a day in advertising.
And yet it's not enough. Despite the brutal hours, the nonstop schmoozing with clients, the hopscotching around the planet chasing the next piece of business, Saatchi is eking out 6% revenue growth. That's better than other traditional agencies but not so impressive at a time when there are more places than ever to stick ads--online, on cell phones, on the men's room wall.
Despite Roberts' best efforts, Saatchi is not getting enough of that new business. He may be flirting with irrelevance.
Here is what Roberts sees when he looks at the world: TV viewers are using digital video recorders to blast through the commercials that are Saatchi's bread and butter. Marketers are stampeding online, where Saatchi lacks the tools and talent to compete. Digital boutiques are proliferating, staffed with '90s tech vets and Gen Y video artists dedicated to making ads for social networks and whatever comes after them. Meanwhile, chief marketing officers are looking for data to justify their ad budgets to the bean counters.
Where does that leave Roberts? Buying time--working to keep clients coming in the door as he experiments with new marketing services, shops for acquisitions, and even contemplates moving away from traditional advertising altogether into "green communications" and retail design consulting. "We've got to reinvent and transform the way we work," says Roberts.
Still, Roberts often finds himself outmaneuvered by fleeter rivals. His own boss even wonders if a creative agency like Saatchi should continue to manage a client's branding efforts. Perhaps the digital specialists should do it, says Maurice Levy, chairman and CEO of Publicis Groupe, the French giant that owns Saatchi. Levy expresses nothing but affection and admiration for Roberts. But he warns: "It is no longer necessarily the creative agency dictating what's best for the client."
Saatchi deliberately selected an outsider when it named Roberts its CEO a decade ago. Roberts had run the international divisions of such consumer-goods giants as P&G and PepsiCo (PEP). He knew what marketers wanted from their creative agencies. He was a zealot about hitting his numbers, a rare skill on Mad Ave. But no one--not even Roberts--could have predicted how dramatically the ad industry would change.
For most of the 20th century the so-called creatives ruled the industry. They didn't worry about where or how an ad ran. They didn't analyze market niches. They were about Big Ideas that would connect a brand, emotionally, with millions of consumers.
Today, you might say, the Small Idea is ascendant. Ads are targeted at individuals or communities of consumers. That's because the media universe is so fragmented--into blogs, social networks, television, magazines, and so on--that finding the right medium is fast becoming more important than the message itself. And the people on Madison Avenue who may be best equipped to deal with this new world are not the creative agencies but the direct marketers and media buyers, which both won more autonomy during a 15-year industry consolidation.
THE NEW HEAVYWEIGHTS
Direct marketers invented junk mail, the 1-800 number, and the mail-in magazine insert as a way to collect information about your buying habits and judge the effectiveness of their ads. That makes them perfect for the Web. After all, writing ads for search engines like Google and analyzing who clicks on them isn't so different from mailing out postcards to likely prospects and seeing who writes back.
The media buyers are no less powerful. Once consigned by the creative agencies to back-office obscurity, they also have scads of consumer data, which they use to help clients figure out where they should spend their advertising budgets--be it on specific TV shows, magazines, or Web sites. Now they are using their buying power to persuade broadcasters to air television shows chock-full of product placements--a direct threat to the venerable 30-second TV spot.
Kevin Roberts isn't one to shy away from a fight. This, after all, is a man who, after being kicked out of school at 17, tried to break into professional rugby, a full-contact sport played without pads or helmets. When the media buyers come up, his indignation is visceral: "A media agency couldn't emotionally touch the consumer in a million years," he rails "They have no f---ing idea. They don't have feelings. They're media people." Roberts' position is clear: He still believes in the power of the Big Idea--that emotional connection to the consumer--and he sells it tirelessly.
That's how he won the J.C. Penney account. In November of 2005, the retail giant's chairman and CEO, Myron "Mike" Ullman, saw Roberts speak at the Women's Wear Daily CEO Summit in New York. Ullman was impressed with Roberts' branding philosophy. Before long, the two men were having secret dinners at the Dragonfly restaurant at the Hotel ZaZa in Dallas. Over copious amounts of beer and wine, Roberts recalls, they discussed brands, understanding the consumer, and whether Penney should ditch its longtime creative agency, DDB. Over and over, Roberts brought the conversation back to his version of the Big Idea: Lovemarks.
Lovemarks reflects a long-held notion on Madison Avenue that the consumer is a woman who must be seduced. In his 379-page coffee table book, Lovemarks: The Future Beyond Brands--an ornate read with a decidedly '60s vibe--Roberts explains that a Lovemark is a brand consumers don't just trust, but love. "Think about how you make the most money," he writes. "You make it when loyal users, heavy users, use your product all the time.... So having a long-term love affair is better than having a trusting relationship."
In case clients and staff missed the point, Roberts had big red hearts painted in the reception areas of Saatchi's downtown New York offices. He also bought a shirt, which he has worn during Lovemarks speeches, embroidered with lyrics from the Beatles' All You Need Is Love.
In truth, Lovemarks is a little bit like slapping "New and Improved!" on a familiar box of laundry detergent. After all, Mad Ave has been claiming an emotional connection to the consumer at least since the Leo Burnett agency invented the Pillsbury Doughboy in 1965. But Lovemarks resonated with Ullman, and on Aug. 31, 2006, Penney named Saatchi its creative agency, an account worth over $20 million in annual revenue.
Eager to put Lovemarks to work, Mary Baglivo, who runs Saatchi's New York office, put the agency's top creative talent on the case. Immediately they threw out DDB's old, product-focused slogan, "It's All Inside." The new slogan needed to tug at Americans' heartstrings, and the team settled on "Every Day Matters." They crafted a series of television ads that would romanticize everyday life. In one, a young family inhabits a slowly spinning dollhouse. Moments of their day--a snatched kiss between husband and wife, a game of ping-pong--were set to an enchanting melody. When the ads began appearing in March of this year, industry critics showered praise on Saatchi. "How can it be that our impression of a déclassé American retail institution can be altered in the space of 60 seconds?" wrote Advertising Age reviewer Bob Garfield. "[It's] thanks to one TV commercial."
When Baglivo next met with the Penney marketing people, they told her they loved the ads. But there was just one problem: The commercials weren't working. The retailer's analysts had concluded that, against spiking gas prices, the campaign was doing little to compel shoppers to visit Penney's stores. "Here I am with a powerful idea," says Baglivo. "And the Penney guys go crazy with gas prices. It's crazy, right?"
Penney's reaction was a reminder--if one were needed--that Lovemarks could take Saatchi only so far. Yes, most clients still believe in creating an emotional bond with consumers. But Roberts had come to the conclusion that many companies are desperate for an über-consultant--a "brand navigator"--who, in a fragmented media universe, can help them make that connection across multiple media.
In Roberts' formulation, the brand navigator devises an overall message, then subcontracts the work to the relevant people--interactive shops, direct marketers, and so on. He is attracted to the concept, in part, because Saatchi would get paid based on the performance of the entire campaign rather than on the hours spent making ads. That would help him extricate the agency from the flagging traditional ad business. Roberts isn't the only advertising executive scrambling to reposition his agency as a brand navigator. Big names like TBWA, BBDO, and Ogilvy & Mather are doing so, too.
SAATCHI'S NEW ROLE: "A WORK IN PROGRESS"
Three years ago, when Roberts was considering poaching Baglivo from rival agency Arnold, he asked her what she would do with the New York office. The brand navigator concept came up right away, and Baglivo used a pop music metaphor to explain what that would entail. The New York office was like a classic song that needed to be remixed, she explained, even if that meant bringing in new musicians. If Saatchi was going to harmonize many types of marketing into one hit song, it needed musicians who could play a number of different instruments. Roberts liked what he heard so much he made Baglivo CEO of Saatchi New York, and she began recruiting Web ad makers, event planners, public relations people, direct marketers, brand experts, and so on.
In May, 2005, Baglivo and her team visited Amerprise's chief marketing officer, Kim Sharan, in her New York office. They were there to persuade her to hire Saatchi as the financial consultant's brand navigator. The agency had already concocted a message for Ameriprise: "Reinventing Retirement." Saatchi vowed that it would appear everywhere from coffee cups to employee training videos to the firm's wealth management Web site. Sharan liked what she heard, and a week later she gave Saatchi the green light.
Sharan was expecting Saatchi to create a seamless experience across multiple media. "When I say navigate the brand," she says, "I mean creating that experience where the consumer feels every message the company is putting out is fully integrated and building off of one another." But she rates the new branding effort for Ameriprise "a work in progress" because it has meant little more than making sure the stars of the 30-second spots (a red chair, the slogan "You Have Dreams. You Need a Plan," and the actor Dennis Hopper) also appear on Ameriprise's home page. It's difficult for Saatchi, Sharan says, "because they've grown up mainly in the world of TV, print, and radio."
It was the need to fill this gap that prompted Roberts to try and buy a digital agency. Last year he hired an investment banker to find one. By early 2007 he had settled on Blast Radius, an 11-year-old outfit based in New York's SoHo neighborhood. Blast Radius is best known for building Web sites for the likes of gamemaker Electronic Arts (EA), Nike (NKE), and Newell Rubbermaid (NWL) that foster enduring connections with consumers. Its site for the launch of Madden NFL, EA's monster video game, spawned a passionate online community.
Roberts and the firm's CEO, Gurval Caer, met at Saatchi's New York office, and Roberts made an impression. "He's a great guy," says Caer. "He understands that his agency and this industry have to change. He completely gets it." Caer and Roberts met several more times. By May talks had progressed to the point that Saatchi and Publicis made a formal offer.
Caer says the bid was very competitive. But he didn't go with Saatchi. Instead, on Oct. 24, he announced he had agreed to merge with Wunderman, one of the biggest direct-marketing agencies in the world. Roberts was publicly sanguine about the setback. But the loss had to be deeply troubling. Wunderman has the online expertise, and that's exactly why Blast Radius went with the direct marketer. "We saw a big chasm between us as an interactive agency vs. the more traditional agencies," says Caer. "With Wunderman, you had 30-plus years of customer data and insight and results. The traditional agencies were still very much about messaging' people."
Caer says he wasn't speaking specifically about Saatchi, but the point is clear. With direct marketers and media agencies muscling onto Saatchi's turf, it may be too late for an old-school creative shop to transform itself into a Web-era player. Roberts' boss, Maurice Levy, is certainly hedging his bets. The Publicis chief is about to restructure his company. Like Roberts, he sees a future where one brand navigator manages all of a client's business. That might be Roberts. Then again, it might not. Publicis owns several big media agencies, a large digital agency, and direct-marketing firms. "It has to be the person who best understands the brand and the needs of that brand," Levy says. In other words, the Frenchman is content to watch Roberts and his corporate siblings fight it out.
As Roberts girds for that battle, he's also trying to shift more of Saatchi's work away from traditional advertising--a move many creative agencies are making--into businesses that are growing at a decent clip. In the next few months he hopes to launch "Saatchi & Saatchi Sustainability," which would specialize in green communications.
Already he has Saatchi & Saatchi X, a retail design consultancy he created in 2004. The agency works for retailers and for consumer packaged goods companies, improving store layouts for the former and in-store displays and promotions for the latter. Roberts aims to use Saatchi & Saatchi X to bring his branding philosophy, Lovemarks, to a store near you. "Unless you're in Whole Foods (WFMI), it's a pretty average experience right now," he says. "And the amount of money that's spent in there is equal to the amount of money spent on media. It's all pissed away, and nobody really likes [the business]. So I like it."
Roberts has managed to woo several clients to Saatchi X. Last August the consultancy signed up Wal-Mart Stores, a major piece of business. Saatchi X designed the retail giant's new store layout, as well as a new shopper-friendly electronics department, which is rolling out now. Since then, Roberts has brought on board General Mills (GIS) and Wendy's (WEN) (both existing clients), as well as Hanes and Nestlé Toll House. Refreshingly, this is a market that's growing, and Saatchi & Saatchi X's revenues have been up almost 20% over the last year. The question, of course, is whether the new thrust will be enough. Roberts exudes his customary zeal. "I've inherited the most famous brand name in advertising. As the business moves into new media and more, so will we."