history; sponsorship and event management of Team Suzuki motorcycle racing; and on-premise and retail posters.; Build up: Beyond DDB's "Rock Tour" for U.S. Gypsum Co. includes construction-site visits that feature chances for workers to win a Chevy CK pickup . BEYOND ADVERTISING: STRATEGIC SHIFT: LARGE AD AGENCIES ADOPTING THE TOTAL COMMUNICATIONS SOLUTION; AT LONG LAST, SOME EXECS SAY

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A philosophical shift is sinking in deep at some major ad agencies, now embracing a way of doing business that doesn't always involve advertising.

And, like the great reversal of the late 1980s-when promotion spending suddenly surged ahead of traditional ad budgets-the emphasis on integrated marketing looks to be a permanent change in the business.

MEDIA FIXATION

"The big shift here is a movement toward ideas and away from our tendency to fixate on the media solution," said John Marchese, who joined Bates USA less than two years ago from promotion powerhouse Alcone Marketing Group, and who in June was named president of integrated communications for Bates North America, New York. "In the long run, it will result in better outcomes for our clients and more profits."

In many cases, the long-promoted concept results in low-cost, highly effective campaigns and strategies using event marketing, sponsorships, sales promotion, direct marketing, the Internet and targeted radio, with only peripheral use of print and TV advertising.

`FUNDAMENTAL CHANGE'

"Agencies are finally realizing that our job is to create branding solutions and, while those may involve advertising, it's not necessarily about advertising. That's a fundamental change in the way we operate," said Brian Heffernan, president of J. Walter Thompson USA's Chicago office, home base for the agency's new 35-person Total Solutions Group, which is the blueprint for TSG units to be formed in all larger offices around the world.

Another agency that has adopted an integrated marketing approach successfully, Fallon McElligott, Minneapolis, is now reshap- ing-under President Bill Westbrook-a New York office that will be "integrated from the start," Chairman Pat Fallon said recently.

"We're talking about the concept of marketing communications, not advertising, not above and below the line [but] . . . the strategic process of putting together the relationship between the brand and the customer," said Peter Georgescu, chairman-CEO of Young & Rubicam, parent of Y&R Advertising and Wunderman Cato Johnson.

"What unites everything together is that the brand expects and demands an integrated solution that uses the most efficient pathways to reach the consumer."

FEES ARE STRONG

Despite fears the new approach would result in lower profits through the loss of fat media commissions, agencies say fees on integrated marketing remain strong.

"Profits from media commissions aren't what they used to be anyway, so this transition has been a lot easier than it might have been five years ago," commented Mr. Heffernan.

Just two months ago, a survey by the Association of National Advertisers revealed 53% of clients now base their agency compensation on labor-based vs. media commissions. In 1994, only 35% of clients reported their compensation was labor-based.

Y&R's Mr. Georgescu said the rise of new forms of compensation will speed the use of integrated marketing techniques.

"This is why we've been so vociferous about the power of incentive-based compensation, so we align our fate with that of the brand," he said. "In the old world of selling products, you went for the sexiest pathway," usually TV advertising. "We weren't selling results. The sexiest pathway [today] is the one that ensures the best results."

DDB Needham Worldwide made its big move into integrated marketing earlier this year when it established Beyond DDB, a 140-person unit taking hold within its U.S. offices, with a charge to pursue new business using a consulting-based approach, independent of the general agency.

Beyond DDB already has won marketing responsibilities for U.S. Gypsum, cable TV's Cartoon Network and Whirlpool Corp., noted Ray Gillette, an agency managing director who leads the unit.

MAXIMIZE EACH DISCIPLINE

Specialist departments such as those dedicated to promotion, direct marketing and interactive advertising will continue to exist within agencies developing integrated-marketing operations. But agencies say their long-term goal is to merge specialties for seamless campaigns and to maximize the best practices of each discipline.

"If someone comes to us and wants direct marketing only, that's great and they can go to our direct marketing folks," said Mr. Gillette. "But for new accounts and for general marketing solutions, we're starting with a general approach that may draw on any or all of our communication options."

GLOBAL BRANDING HELPS

Conveniently, the rise of global branding and its attendant need to create iconography and images adaptable to a variety of media channels, cultures and languages also give rise to such media-neutral thinking.

A key example of the kind of marketing campaigns emerging through new integrated marketing operations, said Bates North America CEO Bill Whitehead, is the global campaign for B.A.T Industries' Lucky Strike cigarette brand.

"We took an entirely different approach in devising the Lucky Strike campaign in what's become our first major effort using integrated marketing principles across the board," he said.

Instead of beginning with the idea of an ad campaign, Bates took a sales promotion-style approach by devising marketing strategies to reach the target audience of young adults through underground and lifestyle channels.

"We started with below-the-line tactics, point-of-sale materials, events, sponsorship, bar promotions, poster campaigns, gas station and convenience store efforts, because that's where our target audience was. Magazine ads and billboards are part of the effort, but the emphasis was less on advertising and more on place-based messages," said Mr. Marchese, who oversees North American activities of Bates' year-old 141 Worldwide unit, which developed Lucky Strike campaigns for B.A.T around the world and its Brown & Williamson Tobacco Corp. unit in the U.S.

JWT'S SOLUTION

At JWT, the Total Solutions Group is the "core new-business engine" for the Chicago office and has primary oversight of JWT's Princess Cruise Lines, Northwestern Mutual Life Insurance Co. and Heinz Pet Products accounts.

Mr. Heffernan credits the unit with a major role in winning Dell Computer Corp.'s $70 million account and the execution of its new "It's best to be direct" global campaign.

"The campaign involves advertising, but that wasn't the starting point. . . . This is a brand that sells $4 million a day over the Internet, so we'd be crazy to assume TV advertising is the main channel of communications here," Mr. Heffernan said.

Beyond DDB's integrated campaigns include one for Comedy Central promoting the animated kids' TV series "Dexter's Laboratory," for which the shop created a mobile marketing effort crisscrossing the U.S.

This spring, Beyond DDB launched "The Rock Tour" for client U.S. Gypsum Co., promoting its brand of wallboard, USG Sheetrock, to construction workers on sites with a contest to win one of nine Chevy CK Rock Tour pickup trucks. Those pickups are part of a 10-week, 110-city nationwide sweep of job sites this summer.

The effort included radio spots aired at 4 a.m., or "construction drive time," said agency executives, and ads in construction trade publications.

CROSS-TRAINING STAFF

At each of the major agencies with integrated marketing units, staffers are being retrained in the involved strategies, including teaching direct marketing experts about point-of-purchase and educating Internet gurus about event marketing, for example.

"We're initiating training at all levels to make sure everyone understands the concept and knows how to maximize our resources and efforts," Mr. Marchese said.

At JWT, training will consist of "education and meetings" at offices adopting the Total Solutions Group. Its offices in New York, Detroit and Dallas are rapidly evolving TSG units, said Mr. Heffernan.

Ironically, for many agency veterans, the integrated marketing push sounds like the old definition of sales promotion taken to a higher level.

Said Dennis O'Connell, an executive director at DDB Needham, Chicago, and a key executive at Beyond DDB: "I almost cried when I heard the advertising agency guys telling me they were going to start using the principles of sales promotion in order to get new business. It's what we've been trying to tell them for decades."

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