OLIVETTI PUTS ALL ITS EGGS IN BASKET OF ADVERTISING:NEWER, SLIMMER COMPUTER GROUP MAY DISMANTLE DIVISION FOR PCS BY END OF '96

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Few tests of advertising effectiveness are as ruthless as Olivetti's: The company's PC division is threatened with closure if it continues to lose money in 1996.

"The stated corporate goal is we have to break even by the end of the year," said Robert Scott-Moncrief, the new director of marketing communications at Olivetti Personal Computers. "How we communicate with the market and encourage people to buy our products is crucial."

Olivetti is in the process of reinventing itself as a computer and telecommunications giant. In January, it split into five separate companies-Olivetti Personal Computers; Olivetti Lexikon for printers; systems and services; Telemedia for online and multimedia activities; and the Omnitel mobile phone network.

Mr. Scott-Moncrief, no stranger to red ink, moved to a rapidly restructuring Olivetti in February from Digital Equipment Corp., which lost more than $6 billion from 1990 to 1994 before recovering in a slimmed-down form.

"For me the excitement of Olivetti is that I'm no longer under the direction of a U.S. parent company," he said. "You think you've made a decision and it doesn't fit with someone else's strategies. [At Olivetti] I make the decisions."

PROMISING BEGINNINGS

By May, after leading a brisk agency review of Olivetti's $45 million international PC account, he was running ads in the European business and computer press created through an unusual virtual network that relies heavily on the Internet and two innovative advertising partners.

Even before the new ads started, early sales reports looked promising. Olivetti announced that the PC division lost $12 million in January 1996 but made modest pretax profits of $210,000 in February and $900,000 in March, a performance Carlo de Benedetti, Olivetti's chairman, called "better than expected." Shipments of new computers rose by 28% in the first quarter of 1996. Previously, analysts had been questioning whether Olivetti should be in the PC business, competing with giants like Compaq, at all. Olivetti ranks fourth and has a 5% share of the European PC market.

"There's very little chance that things will go dramatically wrong," Mr. Scott-Moncrief said. "The PC market is a very volatile one, but none of us would have joined the business if we didn't feel there was a future for it."

His first major step at Olivetti was to look beyond agency networks for an unconventional solution.

For the pitch, he assembled a parade of international agency networks including Ammirati Puris Lintas, Leo Burnett and Foote Cone & Belding-plus his own entry. He paired SMI Group, a London-based agency specializing in new technology clients, with World Writers, an international, multilingual copywriting business, also based in London.

"I've used traditional agency networks and they take a lot of time to get all their offices up and running," he said.

Software company Adobe, a SMI client, recommended SMI and its founder and chairman Alex Letts to him. And he heard Simon Anholt, World Writers' founder and managing director, give a wry talk on the pitfalls of international advertising last year at a conference organized by International Data Group. The two men are longtime friends.

They came up with both a strategy to differentiate Olivetti as a brand, by combining old-fashioned Italian craftsmanship and stylish design with high-tech credentials, and a method for handling the account and presenting creative work almost entirely on the Internet.

Neither SMI nor World Writers has an office outside London. SMI threshes out a creative concept, which World Writers copywriters develop in each language. The ads are sent on the Internet to Olivetti managers in each country in their own language and to Mr. Scott-Moncrief, who shuttles between his headquarters above the Olivetti PC factory in Scarmagno, Italy, and company offices around Europe, clutching a mobile phone and a laptop. Feedback comes in the form of electronic Post-It Notes on the visuals and Internet discussion forums.

"It fits with the philosophy that PC clients have to do things with the tightest possible budget," he said. "There is no fat in the margins to make mistakes or justify large numbers of people."

The final step, when the computer and business titles Olivetti spends the bulk of its ad budget on are ready for it, will be to send the ads directly to the publications on powerful high-speed data transmission ISDN lines.

ADJUSTING TO THE INTERNET

Mr. Scott-Moncrief meets frequently with Messrs. Letts and Anholt, and World Writers copywriters drop in on local Olivetti managers during visits to their native countries. But doing almost everything on the Internet is still a big adjustment.

"There's no budget for our people to fly to Norway, Sweden, or Spain or for [Olivetti country managers] to fly to us," Mr. Letts said. "This is the only way they'll see the ads."

The bulk of Olivetti's ad spending will be devoted to laptops, its most successful product. The company got off to a late start last year with the November launch of Envision, a multimedia PC aimed at the family that is sold without a screen and can be hooked up to either a television set, a fax machine or an answering machine.

Mr. Scott-Moncrief also brings substantial direct marketing experience to his new post. At Digital, he developed the Digital Outside co-op program, a play on the famous Intel Inside concept, to encourage sales partners to use the Digital look and feel in promotional materials.

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Born: 1955 in Scotland.

Education: Law degree from Edinburgh University.

Career highlights: Ran his own direct marketing agency, Midas Direct, from 1985-90, handling Hewlett-Packard. Became chairman of Saatchi & Saatchi Direct when S&S Direct acquired his company. Joined Olivetti in February

1996 as director of marketing communications from Digital Equipment, where

he was Geneva-based European marketing communications manager.

Family: Married, three children.

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