Microsoft's ad umbrella

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Not so long ago, marketing at Microsoft Corp. was a kind of blood sport in which highly autonomous business units and product groups set their own priorities and budgets, each competing for influence over strategy and decision-making.

Ad and marketing dollars were deployed to support initiatives of each feudal fiefdom-efforts that often bore little or no relation to one another. Such marketing programs became islands without connection, increasingly inefficient, and detached from any sense of brand Microsoft.

That scenario is no more.

Over the past year, the world's biggest software company has tried to change the decentralized nature of its marketing to achieve more consistency. While kinks remain, a global campaign for the MSN Internet network that began in 2000, with the umbrella positioning "Make it Your Home" on the Web, demonstrated that the change was working on some levels. Another notable effort is the "Agility" campaign, Microsoft's first unified message about the relevance of its software for the enterprise that debuted in the U.S. earlier this year and extends globally this fall. Both the "Agility" and MSN efforts were envisioned as three-to-five-year marketing platforms.

"Continuity has not been Microsoft's hallmark until now," said Mike Delman, Microsoft's general manager, advertising and events. While Microsoft divisions and business units remain largely unfettered, they now communicate with a group known internally as the Central Marketing Organization that has helped sharpen and unify ad and marketing efforts.

The strategic shift is responsible, in part, for Interpublic Group of Cos.' McCann-Erickson Worldwide, San Francisco and New York, enlarging its already robust Microsoft portfolio. McCann won additional duties earlier this year for advertising in more than a dozen global markets including France, Germany, Italy and Japan. The win, without a review, ended relationships Microsoft had with Havas Advertising's Euro RSCG and Omnicom Group's DDB Worldwide. McCann and Microsoft executives declined to reveal the amount of the additional billings McCann received.

A coup for Agency

The consolidation was a major coup for McCann, the software giant's agency of record for more than two years. It attests not only to Microsoft's desire for a cohesive brand image under a single agency network, but the strength of its relationship with McCann. With McCann, Mr. Delman said Microsoft is learning to be a better client.

"It's a collaborative experience, and there's a genuine sense of wanting to get the right result," said Michael McLaren, exec VP and client director at McCann and the go-to guy on the Microsoft business. "Obviously every dollar counts, but in a market that's stagnant, the pressure's on. The pressure's on the [Central Marketing Organization] as well. Obviously, as their partner, we share in that responsibility."

The agency won duties for the $400 million account in North America in May 1999 after Microsoft separated from lead agency Wieden & Kennedy, Portland, Ore., vowing to rally around a single global network. Last year, McCann picked up $500 million in global marketing responsibilities including media for Microsoft's Xbox video game console, due Nov. 8. McCann, New York, leads the Xbox effort.

The Central Marketing Organization, created more than a year ago, marshals a global budget well in excess of $1 billion, covering everything from media spending to customer seminars and events, and representing an estimated 80% to 90% of Microsoft marketing spending.

Ad spending for the fiscal year 2002, starting July 1, will remain flat with the current fiscal year, Mr. Delman said.

Microsoft won't reveal its current-year budget, but it spent $1.1 billion on advertising globally in the year ended June 2000, according to Securities and Exchange Commission filings.

Microsoft spent $461.1 million in U.S. measured media in calendar 2000, according to Taylor Nelson Sofres' CMR.

Based at the company's Redmond, Wash., headquarters, the Central Marketing Organization employs about 450 people who perform brand management, research, advertising, direct marketing, public relations and other marketing functions. VP Marketing Mich Mathews runs the organization.

"The formation of the [Central Marketing Organization] was a chance to get a consolidated view to see how Microsoft markets to its [various] customer sets and was a fairly big step for the company," Mr. Delman explained, adding, "One of the biggest dividends has been in the advertising product and our relationship with McCann."

The first litmus test came with the MSN campaign, which ultimately helped drive Microsoft's agency consolidation in Europe and other global markets, as well as affirm the work of Central Marketing. "MSN is the best body of work we've done. While we call it brand [advertising], those MSN spots are laden with features of the product-Hotmail, Messenger," Mr. Delman said.

Microsoft and McCann are now installing talent around the world as campaign development moves into high gear on Windows XP. Microsoft will spend at least $400 million on the global campaign to launch the new operating system due Oct. 25. Apart from Windows XP, its biggest and most important marketing push since Windows 95, Microsoft priorities for the fiscal year starting July 1 are to roll out "Agility" globally, launch the Xbox and run sustaining programs for Office XP, MSN, Windows 2000 Professional and developer outreach. Minor efforts include PocketPC, UltimateTV and Macintosh software.

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