Bayer AG's plan to launch its ketoprofen brand, Actron, in the U.S. next month with $60 million in marketing support played a crucial role in a close race that saw Bayer consolidate $225 million in global consumer-care advertising at BBDO last week.
Executives for the marketer in the U.S. didn't want to change Actron agencies midstream, and that carried the day for BBDO over fellow finalists DDB Needham Worldwide and True North Communications' Foote, Cone & Belding.
BBDO "had a very small edge," said Helmut Ewers, Bayer's advertising coordinator-consumer care. The decision "had much to do with brand experience and creativity and knowledge of the product categories in our business group."
The decision, coming one week after Colgate-Palmolive Co.'s consolidation of $550 million in billings at Young & Rubicam, could foreshadow a trend among package-goods giants mirroring the one that spread through the technology industries earlier this decade.
Bayer, which announced plans to trim its 48-agency roster several months ago, initially decided to go with two agencies. It wasn't until managers from around the world gathered two weeks ago for a conference in Spain that one agency became the choice.
"Though mathematically it would be possible for us to divide our brands into two nice packages, 98% of our colleagues preferred one network worldwide," Mr. Ewers said.
Once that decision was reached, FCB was eliminated because its work for S.C. Johnson & Son created a conflict with Bayer's insecticide brands.
That left DDB Needham and BBDO, both Omnicom Group shops that joined Bayer's roster in the past 12 months.
Before the consolidation, BBDO had only about $25 million in Bayer billings. Now, by adding more than $200 million, Bayer becomes the agency's fourth largest client behind Chrysler Corp., PepsiCo and Mars Inc. Most of its Bayer billings will be concentrated in about 10 countries.
Both DDB Needham and BBDO made compelling pitches that included highly competitive compensation offers. Though the two agencies were very close, in the end the four German managers and 10 from outside Germany who made the decision were unanimous in their choice.
"What it came down to between DDB and us, I don't know and I don't care. I'm just glad to have the business," said Allen Rosenshine, BBDO chairman-CEO.
As Colgate did with its $550 million consolidation two weeks ago, Bayer won a contract that it hopes will cut its overall agency fees. BBDO will be paid on a commission plus incentives basis. Mr. Rosenshine wouldn't reveal the commission rate, but he said "a great deal" of the total package is performance-based.
"More and more clients want to [link compensation to results], and any agency should be willing to accept it," he said.
Executives said price wasn't the determining factor in the selection of BBDO, though-a point underscored by some simple math. A lucrative agency contract nets an agency 15% of total media billings, more if the agency performs many so-called "below the line" services. With Bayer's consumer-care budget, 15% amounts to about $34 million. While BBDO is unlikely to earn that much from Bayer, it's also highly unlikely the agency will earn less than 10%. That means the maximum Bayer could be saving on fees is about $11 million. While that's not small potatoes, Bayer earned more than 100 times that amount in 1994.
Colgate stressed the savings it can realize from working with one agency in explaining its consolidation. But Colgate's contract is different in that it is based on costs plus incentives, not commissions plus incentives. Theoretically, one agency handling all of a client's business worldwide would have lower overhead and fixed costs than two or more agencies.
For Bayer, the real issue is simplicity.
Bayer's big concern was making the advertising process more manageable.
"We're not looking for one campaign around the world but to learn from each region," said Gary Balkema, president-consumer care, Bayer U.S.
Whether other package-goods giants follow the lead of Colgate and Bayer remains to be seen.
IBM Corp.'s decision in May 1994 to fire 80 agencies and award its $500 million global account to Ogilvy & Mather Worldwide, New York, was the biggest agency consolidation to that point. But IBM followed a trend advanced by such tech marketers as Unisys and Apple Computer.
Tech marketers have consolidated in part because they sell identical products to customers who behave remarkably alike. Package-goods marketers, some with scores of brands, also have been consolidating agency assignments. But with a few blockbuster exceptions, big spenders have not opted to reduce their rosters to one agency.
Instead, several major marketers have aligned their bigger brands with one agency globally. Saatchi & Saatchi Advertising, for example, handles Procter & Gamble Co.'s No. 1 detergent brands-Tide in the U.S. and Ariel elsewhere-globally. Other companies that have made similar assignments include Kraft Foods, Kimberly-Clark Corp. and Unilever.
P&G uses four agencies on an international basis today: Saatchi; D'Arcy Masius Benton & Bowles; Grey Advertising; and Leo Burnett Co., and five additional agencies in the U.S. Executives close to the marketer say it has been considering giving one of the five U.S. agencies, probably Tatham Euro RSCG or Wells Rich Greene BDDP, international assignments and eliminating most of the rest.
Kimberly-Clark is also a candidate to trim its roster, which will grow from three agencies to six with its pending acquisition of Scott Paper Co.
But agency executives and marketers alike consider it unlikely that others will follow Colgate's and Bayer's examples.
"I don't know what the advantage is to drive multiple brands to one agency, except maybe price," said Shelly Lazarus, president-chief operating officer, O&M Worldwide.
Bayer markets more than 20 consumer brands in all, including pain relievers, stomach aids, insecticides, vitamins, sweeteners and cosmetics. Many of the major agency networks-including Grey Advertising, Lintas Worldwide, McCann-Erickson Worldwide and O&M-handled some of those.
Most of those agencies couldn't compete for the global assignment because of conflicts. Lintas is the biggest loser, to the tune of about $40 million in billings.
Assignments involving industrial products or Bayer's Agfa film products and processing division aren't affected by the consolidation. Nor does the consolidation affect media buying, assigned on a country-by-country basis. Botway Group, New York, handles U.S. media buying.
In the U.S., BBDO adds only a few brands, such as Alka-Seltzer and Alka-Seltzer Plus, to Bayer aspirin and other analgesics. Tatham hangs onto One-A-Day and Flintstones vitamins, Midol and Mycelex-7, while FCB retains a corporate branding effort.
Contributing: Dagmar Mussey, Michael Wilke, Jeanne Whalen and Bradley Johnson.
Bayer's agency roster
Who Where How much
FCB Publicis 4 countries $65 million
Lintas Worldwide 25 countries $40 million
Tatham Euro RSCG 1 country $30 million
BBDO Worldwide 6 countries $25 million
Grey Advertising 22 countries $20 million
McCann-Erickson þWorldwide 1 country $20 million*
Ogilvy & Mather þWorldwide 11 countries >$5 million
Saatchi & Saatchi þAdv. WW 6 countries >$5 million
D'Arcy Masius Ben-ton & Bowles 8 countries >$1 million
DDB Needham þWorldwide 1 country >$1 million
Who Where How much
BBDO Worldwide $225 million
Tatham U.S. only $30 million
FCB U.S. only $30 million
*McCann handles Bayer's Agfa film account internationally; Agfa and other accounts outside consumer care are unaffected by the consolidation.
Source: Advertising Age research