Agency Mergers Make It Harder for Clients to Be Sure Who’s on First

It is a striking commercial. When a pilot comes on the loud speaker and announces Northwest Airline’s new no-smoking policy, a planeload of passengers break into applause. And if that’s not raucous enough, a new ad to air next week shows passengers erupting in loud cheers.

Hundreds of miles away from Northwest’s headquarters in Minnesota, the corporate officials at RJR Nabisco didn’t stand up and cheer when they saw the commercial.

RJR, of course, is short for R. J. Reynolds--the maker of Winston cigarettes. And Nabisco is--what else but?--cookies. And it didn’t take long for the people at RJR Nabisco to realize that the advertising agency that makes the anti-smoking ad for Northwest was also getting $84 million a year to do ads for Nabisco.

Zap. RJR Nabisco fired the ad firm.

Advertising industry experts point to that firing of the New York ad firm, Saatchi & Saatchi DFS Compton, as just one example of how complicated it is these days for big businesses and the increasingly big ad firms that serve them. In fact, executives say, giant-sized ad agencies are losing business at least partly because of their own huge size.

In the past few weeks, actions taken by several ad firms owned by giant holding companies not only resulted in RJR dumping its ad agency but also left International Business Machines wondering who would create its commercials.

“Agencies and their clients have gotten so big and unwieldy,” said Jerry Della Femina, president of the ad firm Della Femina Travisano & Partners, “that it’s almost impossible to know who is doing what anymore.”

With the flood of recent mergers both inside and outside the ad business, client conflicts have become second nature. “Sure, our business has become more complicated by mergers and acquisitions,” said Marvin Sloves, chairman of the New York ad firm, Scali, McCabe Sloves, “but that’s really no different than everyone else in the corporate world.”

Just ask executives at IBM. A few weeks ago, they got caught in the aftershock of an 18-month-old ad agency merger. For years, the giant computer maker has looked to the New York ad firm, Lord, Geller, Federico, Einstein to create its corporate image. And the agency responded with several highly successful ad campaigns, including one that featured a Charlie Chaplin look-alike character.

But even the antics of Chaplin couldn’t begin to compare to the zany brouhaha that the ad agency is in the midst of right now. Once again, experts say, a merger was at the root of the problem. Lord Geller is a unit of the ad firm J. Walter Thompson. But Thompson, in turn, was purchased in a hostile takeover last year by the British ad giant, WPP Group.

Lord Geller executives wanted no part of WPP. And they were unable to see eye to eye with the chairman of WPP Group, Martin Sorrell. So, in a highly unusual move last month, six top executives literally walked away from their $250-million agency and started their own shop. And IBM suddenly didn’t know who was handling its $125-million advertising business.

For the moment, Lord Geller is handling most of it. But the newly formed agency, Lord, Einstein O’Neill & Partners, last week was assigned a small piece of IBM’s advertising. Which--if either--agency IBM will eventually choose, is still not known. “We will not speculate on what we’ll do in the future,” an IBM spokeswoman said.

But Robert L. James, chairman of the New York ad firm McCann-Erickson Worldwide, doesn’t think that IBM will put up very long with the two squabbling ad firms. “It’s getting too hot and dirty for IBM,” predicted Robert James, “I think eventually they’ll drop both firms.”

If IBM does eventually go elsewhere, some predict that the computer giant may completely avoid agencies that are merger candidates or agencies owned by giant holding companies. That way, at least, IBM will know where it stands.

“Let’s put it this way,” said Alan J. Gottesman, analyst at the New York investment firm, L. F. Rothschild & Co. “If you’re the largest client of an ad firm and they merge with another big agency, you can suddenly yourself No. 8.

“IBM was Lord Geller’s No. 1 client. It’s not about to climb behind the eight ball.”

Lorillard Unhappy but It Stays With Saatchi

If a cigarette maker wanted to vent its anger over the Northwest Airlines advertisement, it seems Lorillard Inc. would have been the most likely candidate.

After all, the ad firm Saatchi & Saatchi DFS Compton creates ads for True cigarettes, a brand made by Lorillard. But Lorillard didn’t fire the agency--a division of one of the world’s largest advertising conglomerates, Saatchi & Saatchi Co.

“We weren’t happy with the anti-smoking ad, but we’re satisfied with the advertising they’re doing for us,” said Sara R. Ridgway, vice president at Lorillard.

But some industry executives are speculating that there may be another reason why Lorillard didn’t dump Saatchi. That reason, however, is something like a connect-the-dots maze.

Lorillard is owned by Loews Corp., a New York holding company that also owns hotels and movie theaters. The chairman and chief executive of Loews happens to be Laurence A. Tisch. If Tisch’s name sounds familiar, that’s because he is also chairman of CBS. And CBS, like all networks, gets its revenue from advertising.

The question is, would Tisch want to be even remotely involved in firing an agency whose parent company, Saatchi & Saatchi PLC, annually places many millions of dollars worth of advertising on his network?

The chairman of one New York ad firm said: “CBS would be crazy to get on the wrong side of Saatchi.” But a spokeswoman for Tisch denied there was any connection. The spokeswoman said: “That’s really stretching it.”

FM Station Prefers Sting to Mariachis

Can a new Latino radio station lure listeners--and advertisers--by playing records by Sting and Michael Jackson?

Well, maybe it can, if those songs are in Spanish. Both Sting and Jackson--and other pop recording stars--have recently released Spanish versions of their hits. And the songs are proving popular with some Latino radio listeners. So, with that in mind, KSKQ-FM 98--a Latino station that has been on the air for less than two months--is promoting itself as a station that plays contemporary singers, along with other top 40 Latino hits.

“You won’t hear mariachi music on our station,” said Peter Bella, sales manager at KSKQ. “We’re aimed at the person who prefers to speak Spanish but who wants to listen to contemporary music.” The station has already landed some big advertisers such as Procter & Gamble and Anheuser-Busch. One problem: How to get out the word to potential listeners? Well, KSKQ-FM is advertising on Latino TV stations and in Latino newspapers.

But the best market in which it could advertise--competing radio stations--is out.

“They won’t accept our ads,” Bella said. “We’re the competition.”

Agency Pizza Hut Fired Is Hired by Pizza Inn

The ad firm Chiat/Day had pizza on its face last August when it was fired by its second-largest client Pizza Hut and lost the $22-million account. At the time, management of Pizza Hut was reportedly unhappy with a series of ads that featured comedian Rich Hall traveling the country in a van asking people why they ate at Pizza Hut.

But Chiat/Day is back in the business of advertising pizza. On Monday, the Los Angeles ad firm announced it had won the $12-million advertising account for Pizza Inn, a pizza chain that boasts of making “America’s most underrated pizza.”

The chain, a subsidiary of Pantera’s Corp., has 40% of its outlets in Texas and considers Pizza Hut its biggest competitor.

“The fact that they were with Pizza Hut means they understand the industry pretty well,” said Jack D. Harris, Pantera’s chairman. What’s more, he added, “it also means they understand Pizza Hut pretty well.”

Michael J. Fox Urges: Slam Door on Drugs

Michael J. Fox probably doesn’t get too many doors slammed in his face.

But in a new anti-drug commercial produced for the Advertising Council by the New York ad firm DDB Needham Worldwide, that is exactly what happens to the TV and film star.

In the 30-second spot--which will also be shown in some movie theaters--Fox is walking through a series of open doors. He remarks: “Life’s a series of choices: What you eat . . . how you look . . . whether you do drugs. If you make the right choice, there’s nothing you can’t accomplish. If you make the wrong choice, all you other decisions are made for you.” At that, the doors all slam shut.

Daihatsu Is Switching Ad Agencies in L.A.

It has only sold cars in the United States for five months, but already the Japanese auto maker Daihatsu has fired one Los Angeles ad firm and hired another to handle advertising for its Charade subcompact.

On Monday, Daihatsu said it dropped Abert, Newhoff & Burr and picked up Admarketing to handle its advertising, estimated at about $10 million in annual billings. “AN&B; is an excellent full service agency, but our expansion plans are such that we needed to make this change,” said C. R. (Dick) Brown, executive vice president and chief operating officer of Daihatsu America Inc.

Although the company did not explain further the reasons for the change, Admarketing has a reputation for creating and placing low-cost retailing advertising that gets results.

“Our ads will delve in more,” said Admarketing President Jack Roth, “to the benefits of the product,” Although Admarketing has not handled a national car account, it did formerly create ads for the Southern California Oldsmobile Dealers Group. Roth said he didn’t know whether his firm would keep Daihatsu’s current slogan, “You’ll think the world of Daihatsu.”