Philips' decision to place its $600 million media buying and planning account with Aegis Group's Carat International (AdAge.com, June 20) goes well beyond an account shift and underscores a sea change in the way Philips intends to conduct its marketing in the future. Philip's decision places Carat squarely at the helm of a mammoth global marketing push, creating a relationship whereby the company's new creative agencies-Omnicom Group's DDB Worldwide and Bcom3 Group's D'Arcy Masius Benton & Bowles-take their cues from the $3.5 billion independent media entity. Philips awarded its creative business to DDB and D'Arcy in December 2000.
"We want to turn the process on its head," said Mark Kerray, VP and head of Philips' Global Brand Management in Amsterdam, adding that Philips is looking to Carat to help it find more nontraditional advertising and media vehicles. Philips, like many other companies with big budgets, has relied heavily on TV and print, and now is looking for new avenues.
"We are looking for a more fully integrated communications plan that leads to sales. Carat's role in that is absolutely essential," Mr. Kerray said. By partnering with Carat, Mr. Kerray hopes to create an organization that is more consumer-focused and more brand-centric. The media agency is expected to help the marketer better understand media consumption habits and new media opportunities.
While reining in costs is paramount, Mr. Kerray said the internal savings derived from the consolidation is only about 10%. "Very little comes from buying consolidation, but a lot of it comes from consistency of process, and we are looking for those sorts of internal efficiencies." Philips' $600 million global media heft is only a portion of its overall marketing spending, which is closer to $1 billion, according to Mr. Kerray.
The Dutch consumer electronics maker's move is an endorsement of a theory Carat's CEO David Verklin has evangelized for years. Mr. Verklin has long preached media planning and buying is where advertising's true creativity lies. With Philips, he's got a client willing to let him prove it.
"This is the next innovation that Carat wants to bring to the U.S. marketplace, communications strategy and planning," Mr. Verklin said. "Before we figure out advertising strategy we need to figure out communications strategy. For example, maybe given a limited budget, we should do only trade advertising for a client. Or maybe it is better not to use advertising at all and just use public relations. We are trying to help a client figure out the appropriate communications strategy and then turn it over to the advertising agencies." Carat's good fortune on Philips comes even as parent Aegis Group warns of tough markets in the U.S. and Europe due to the slowing economy. Aegis shares dropped 18.6% on the London Stock Exchange following Aegis' warning last week, hitting its lowest price since 1998.
Asked about the reaction of the creative agencies to Carat's new role, Mr. Kerray said, "The agencies are embracing it. What we want creative agencies for is their creativeness. We want to pay for creativity; we don't want to pay for huge overhead."
"In a lot of ways, trying to get a well-rounded and intuitive understanding of your consumers and their lives and where and when and how your brands come in and out of them requires strategic planners and media planners working closely together," said Abigail Hirschorn, exec director of planning and chief strategic officer at DDB, New York.
"We try to help [the creative agencies] understand what the best communication channels are," said Mr. Verklin. "Once that's determined, we don't write headlines."
As far as working with DDB and D'Arcy, "It will take a little bit of learning and a little bit of getting used to each other, but with a committed client we find that a relationship rapidly moves to collaboration," he said.
Creative agencies, especially in the U.S., are not accustomed to having media agencies take the lead. Traditionally, media departments were the neglected stepchildren of advertising agencies, exiled to backrooms where employees crunched costs-per-thousands with calculators. As media budgets increased, media departments evolved into bankers for clients, and their influence over advertising decisions increased. And as media choices proliferated, from Internet to cable TV, media agencies began building impressive research and planning services to help sift through the different modes of communication.
In 1999, Unilever announced a review in order to consolidate its media buying and planning at one agency. Unilever put forth the notion of "channel planning," which made media planning a No. 1 priority. WPP Group's MindShare, which combined the buying and planning departments of Ogilvy & Mather and J. Walter Thompson, won that business. Bcom3 Group's Starcom MediaVest, which won the estimated $2.9 billion General Motors Corp. media planning account in fall 2000, also was given a mandate to lead the advertising direction for the client.
Until last December, creative for Philips Electronics was with Havas Advertising's Euro RSCG Worldwide network for approximately a decade. North American shop Messner Vetere Berger McNamee Schmetterer/Euro RSCG, New York, handled print buying. Messner Vetere's contract with Philips expired June 22.
"I continue to be delighted with the Messner-led creative in the U.S.," Mr. Kerray said. "What I'm suggesting is as a brand develops a relationship, you need to move the focus a little bit more away from building awareness to building preference."
The goal is to build Philips' U.S. sales. Its North American sales in 2000 were approximately $9.5 billion, according to Merrill Lynch figures, about a quarter of its $37.86 billion in global tally. Sony Corp.'s global sales were $58.5 billion, $17.4 billion of that in the U.S., while Matsushita Electric Industrial Co.'s sales were $61.45 billion, with $9.2 billion of that in the U.S.
As it prepares to launch a major new campaign through DDB and D'Arcy later this summer, Philips expects to burnish the "Getting better" theme, but focus more on its core technologies. New efforts are expected to include a more corporate message requiring marketing that goes beyond TV and print ads to include more direct marketing.
"We have to become almost a household name [in the U.S.] that we are everywhere else in the world," Mr. Kerray said.