NEWS ANALYSIS : IBM’s Agency Move Probably Won’t Be Cloned : Marketing: Few big advertisers will place their accounts with one firm, analysts say.
International Business Machines is known for many things, but marketing genius isn’t one of them, ad executives say.
That is one reason why other big marketers are generally not expected to follow IBM’s action to consolidate advertising business under one agency. The computer giant announced Tuesday that it fired 40 ad agencies and consolidated its estimated $450-million advertising business with Ogilvy & Mather, a moved that shocked Madison Avenue.
Cost-saving considerations--and a tendency by major marketers to increasingly try to advertise globally under a single brand image--may eventually result in some firms giving the biggest agencies larger slices of their overall ad business. In some cases, that is already taking place at companies such as AT&T; and Nissan Motor Corp.
But ad industry and marketing executives say they do not see major advertisers summarily following IBM’s agency blood-letting. Rather, most say, today’s complex and costly marketing environment will likely result in big advertisers continuing to use multiple agencies as the best way of marketing numerous products in many countries.
“People will not say, ‘Gee, IBM is doing it so maybe we should do it,’ ” said Alan J. Gottesman, an analyst at the New York investment firm PaineWebber. “IBM is not recognized as the paragon of marketing.”
With its unexpected move, IBM reversed its own strategy of recent months under which it had actually been adding agencies to its roster. (No Los Angeles agencies directly handled IBM advertising.)
By hiring a mammoth Manhattan agency, some say IBM may be making precisely the wrong move.
“IBM is going to the mainframe of ad agencies when everyone else is going to the PCs,” said Peter Sealey, former head of global marketing for Coca-Cola and now president of Sunnyvale, Calif.-based Interactive Network.
When Sealey oversaw Coke’s advertising two years ago, the soft drink giant turned away from giant McCann-Erickson for its commercials and turned instead to the untested Beverly Hills talent firm Creative Artists Agency, which proceeded to create most of Coke’s TV spots. At the time, Sealey said, Creative Artists created 24 commercials at less expense to Coke than eight commercials created by McCann.
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Some agency chiefs suggest that, ultimately, actions like Coke’s and IBM’s will both be pursued.
“No matter how many trends we want to invent,” said Ed Wax, chairman of Saatchi & Saatchi Advertising Worldwide, “clients will ultimately do whatever they believe fills their needs.”
Although AT&T; has recently consolidated some of its ad business, the company still has dozens of ad agencies worldwide. And it has no intention of asking one agency to handle all of its business, spokesman John Skalko said. “If you spread your business around a number of agencies, you keep them all on their toes.”
But IBM executives contend that agency competition caused disharmony. “Our experience found that to be a big distraction,” said Abby K. Kohnstamm, vice president for corporate marketing at IBM.
Although taking on such a huge client as IBM will certainly strain Ogilvy, the agency already has offices worldwide and will centralize the business in its New York office. So the real issue at hand is adding to staff--a problem somewhat mitigated by the fact that agency layoffs in recent years have resulted in the immediate availability of plenty of top talent.
Taking on such a huge client can, however, change the culture of an ad agency.
The Venice agency Chiat/Day was transformed from a creative boutique to a mega-agency when it picked up the $150-million ad business for Nissan in 1987. Since then, it has added nearly $200 million in additional Nissan business, including Nissan’s Infiniti division.
In two years, Chiat/Day added 200 employees, said Bob Wolf, chairman of Chiat/Day’s North American operations.
A single ad agency, however, will not necessarily solve IBM’s problems, Wolf said. “Unless the client and agency are singing from the same song sheet, it doesn’t matter,” he said.
