Some Big Companies Consolidating Ad Work With One Agency

Some big advertisers facing pressure to cut costs are betting that they can reach customers effectively by having fewer agencies craft their messages.

The trend, which gained steam this last year, is working to the advantage of larger agencies with global networks but against smaller ad firms with few offices and limited connections.

“This has been happening for several years, but it really manifested itself this year, and I believe it will continue in 2001,” said Stephen A. Greyser, a consumer marketing professor at the Harvard Business School.

In early November, the financially struggling Chrysler Group of German-U.S. auto maker DaimlerChrysler fired one of its two longtime agencies, True North Communications Inc.’s FCB Detroit, and consolidated all advertising for the Chrysler, Dodge and Jeep brands with the other, Omnicom Group’s BBDO Worldwide.

Toy maker Hasbro Inc. in late November dismissed the three agencies handling domestic advertising for such brands as G.I. Joe, Tonka and Play-Doh and gave the job to Omnicom’s DDB New York, which had done some of its international work.

UAL Corp.’s United Airlines and the Guinness brewing unit of Diageo of Britain, both of which have been using multiple agencies, are each nearing decisions on giving a single agency their global ad-making business.

Along with strategic objectives, there are financial and operational reasons behind the companies’ moves to trim their ad rosters.

Advertisers figure they can save money by dealing with one agency, rather than two or more that each bear the costs of maintaining an office and staff. Chrysler executives said saving money by eliminating such duplicative costs was a main driver behind its ad consolidation.

“Obviously, we wouldn’t have taken the trip if we didn’t think there would be savings,” top Chrysler Group marketing executive Bud Liebler told analysts after completing the auto maker’s two-month ad review.

Dealing with a single agency also can make it easier to ensure that a consistent corporate message is delivered, be it via traditional ads, direct-mail promotions or event sponsorships.

Hasbro figures DDB New York will provide “a fresh look, new focus and energy” that will create a buzz for its core toy brands, which also include Mr. Potato Head, Action Man and Playskool.

United Airlines, which since 1996 has been using Fallon Worldwide of Minneapolis for domestic ads and Young & Rubicam Inc.’s Y&R; Advertising of New York for international work, plans to pick one to do it all.

“We want to create some efficiencies of scale and reduce costs, and use one voice around the world,” spokesman Matthew Triaca said.

He said the airline, based near Chicago, hopes the choice will mark “a real starting point for a partnership between United and this agency.”

The cost of consolidation with a single agency, however, is that an advertiser may be limiting the creative resources at its disposal.

Brewing giant Guinness has been using five major agencies to promote its flagship stout brand around the world, but in seeking a single agency it has effectively eliminated its U.S. agency of 11 years from consideration.

Weiss Stagliano Partners of New York doesn’t have the global network to represent Guinness effectively, said marketing executive James Thompson of Guinness Bass Import Co. in Stamford, Conn.

Adam Stagliano, president and chief strategic officer of the independent agency, finds that frustrating and said companies that insist on a global agency “may not be connecting perhaps as compellingly as they might” by using a smaller agency such as his.

“I don’t think bigger agencies have any monopoly on ideas,” Stagliano said.

But Kelly O’Dea, president of FCB Worldwide, the loser in the Chrysler review, said the emergence of the Internet has raised pressure on advertisers to present a consistent message for their brands worldwide.

He said advertisers found in the late 1980s and early ‘90s that using multiple agencies left them with “a Babylon of conflicting ideas and creative executions” around the world.

But he said the Internet created a global village of consumers and underscored the “absolute critical necessity of having a well-integrated brand and the difficulty of getting one.”

Coca-Cola Co. recently hired one of the world’s biggest agencies, Interpublic Group of Cos. of New York, to coordinate communications about its flagship soft-drink brand.

Though Coca-Cola is letting its regional managers decide who will create the ads in each region, Interpublic’s involvement could lead to a cut in the number of agencies used by the Atlanta-based beverage company, which has employed eight to 10 agencies in the U.S. alone on the Coca-Cola Classic account.

“We need to have a consistent story that we tell about our brands,” Coke spokesman Rob Baskin said.