Ogilvy builds on blue chips

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Sitting in her homey office on the 10th floor of a midtown Manhattan building, Shelly Lazarus leaned forward and laughed.

"So we're a `well-oiled machine,' hey?" says the chairman-CEO of Ogilvy & Mather Worldwide, when told that someone used that phrase to describe the WPP Group agency in New York and its ability to create successful integrated programs for global blue-chip clients. "Oh, you should see how well-oiled we are on some days around here."

Ms. Lazarus can laugh at the sometimes day-to-day foibles that occur in any office, but it's an apt description. Ogilvy is one of the few shops-some might say only-to successfully integrate its 360-degree branding program.

For being that "well-oiled machine," for its ability to garner a wealth of new business in a fractured economy and for understanding better than any other agency that it's not always about the 30-second spot, Ogilvy & Mather is Advertising Age's U.S. Agency of the Year for 2001.

If Ogilvy were a newspaper, it would be The New York Times, the old lady of stature sometimes derided, but , for its arrogance.

ALWAYS RESPECTED

If anything, Ogilvy is consistent and steadfast. It is neither the hare that races at breakneck speed, blowing past opportunities, nor is it the tortoise that moves at a lethargic pace. "Put it this way," says one West Coast agency executive. "Just like nobody ever got fired for [buying] IBM, nobody ever got fired for hiring Ogilvy."

Ogilvy took in $700 million in net new billings in 2001, the bulk of which came from two significant accounts: a victory in the $400 million AT&T Wireless pitch in the early summer, and $100 million in business from Coca-Cola Co., which gave Ogilvy its Sprite, Diet Sprite and Fanta accounts without a review in October.

Those accounts alone illustrate the opposite ends of the spectrum from which Ogilvy is able to operate.

For the AT&T Wireless account, Ogilvy went to its vast resources-"Bench strength," New York Co-President Bill Gray calls it-to deliver an integrated pitch that went all the way down to the store level. The agency called in John Ricketts, director of m.Ogilvy, its technology unit in Tokyo, to come to New York to work on the pitch.

"I'm not sure there were other agencies involved that write applications for i-Mode," Steve Hayden, Ogilvy vice chairman-worldwide, says of the wireless technology that allows mobile phone users to access Web sites and receive e-mail via wireless handset. "The fact we were addressing things that AT&T Wireless was already talking about, the technology and strategies, it was clear we spoke the same language."

"That's what Ogilvy is able to do best, trot out those big guns they have," says a consultant who asked not to be identified. "They do that like [baseball's] Yankees are able to spend money. That's why other agencies hate going against them."

BEHIND THE SCENES ON COKE

For the Coca-Cola business, won without a review, Ogilvy let its reputation play the lead role as Ms. Lazarus and WPP Group Chief Executive Martin Sorrell worked behind the scenes with Steven J. Heyer, president-CEO of Coke's New Business Ventures unit.

"We weren't going to jump in there prematurely," admits Tro Piliguian, Ogilvy CEO-North America, "but, yes, there was a dialogue going on with Coke at senior levels for a long time."

It was even rumored that Ms. Lazarus was dealing quietly with Coca-Cola Co.'s board, which she said was untrue.

"That was totally bogus," she says. "It had nothing to do with the board. In some senses it was out of the blue. There wasn't a pitch and there really wasn't a whole lot of conversation. But there are lots of people at Coke who knew of our work, who we knew, people that we worked with indirectly. And this was a case really where there was a desire to hook up with an agency whose whole existence is based on brands and a company whose whole reason for being is brands.

"They weren't looking at it soft drink to soft drink. IBM and American Express were more important to us winning Coke than anything."

For his part, Mr. Heyer, who did not return phone calls for this story, was clearly sending a message to Coke's longtime ad partner, Interpublic Group of Cos. Equally as telling, however, is the fact that the Sprite and Fanta brands need reviving, something Ogilvy does well.

"We're just now getting into it," says Rick Boyko, Ogilvy co-president New York and chief creative officer-North America. "It wasn't something we pitched so we're really immersing ourselves into it. Fanta, which is a lot of things in a lot of countries, is going to be interesting."

But not everything was rosy for Ogilvy. A cloud still hangs over the agency since late 1999 when Ogilvy ran into accounting and billing problems with the White House Office of National Drug Control Policy. The agency was accused of overbilling the government on the account, which has since gone back into review.

Ogilvy could face civil and criminal penalties in probes now being conducted by the FBI and the U.S. attorney for the Southern District of New York. One issue in the probes is whether Ogilvy acted with intent, or whether as it claims the billings were a mistake.

"From the very beginning, the problem was a technical billing problem," Mr. Piliguian says. "We were a first-time government contractor. We had no idea how difficult it was to bill according to the government, and when we discovered that we went to them and said, `Hey, come on, we need help.' And that was it. We stood firm on what we had done. ... They continue to appreciate the work we've done."

ONDCP has never complained about the results of the creative, particularly with a 30% decrease in marijuana use by 10-to-13-year-old children and a 60% increase in parents who talk to their children about drug use. In fact, Ogilvy is participating in the new review for the $152 million account. The drug office has repeatedly heaped praise on the ad agency's commitment to do extra work in planning media, getting media companies to commit to matching ads and doing research about needed messages.

Separate from the probe, government officials are auditing Ogilvy over unsettled billing issues.

The government "came in and audited and we welcomed that," Mr. Piliguian says. Asked if he thought the agency would have to answer to civil or criminal charges, Mr. Piliguian says, "We do not. We'll hopefully be settling with the different government bodies."

The controversy didn't seem to bother Ogilvy's ability to do creative, earn new business or keep clients. It rolled out a new campaign for IBM, taking a complex issue and keeping it fresh and humorous, particularly with its "Heist" TV spot.

"We have tremendous freedom to experiment with IBM," Mr. Hayden says. "They've allowed the agency to do so, and these things don't happen in isolation. The work we did last year would have gotten us fired six years ago. ... What I mean is they were willing to try different things."

IBM, like many of Ogilvy's clients, has been with the agency for a while, eight years now. Ogilvy last year only lost Jaguar's $125 million global account and mutually agreed to part with financially strapped Amtrak and its $35 million account.

"It's not a star system here, and we don't have promiscuous clients," Mr. Gray says. "They're blue-chip brands. They're innovators who hit bumps in the road like everyone but they don't throw people overboard. And we don't rob one client to work with another."

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