SHOCK THERAPY FOR PHILIPS: NEW LEADERS VOW TO REMAKE DUTCH GIANT

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Eindhoven, netherlands] great products, awful marketing. That's the image Philips Electronics is struggling to change under new, marketing-oriented chairman Cor Boonstra, who has already installed his chief ad agency ally in the new post of senior director of marketing at Philips.

Mr. Boonstra, who was president and chief operating officer of Sara Lee Corp. before joining Philips two years ago, and Gerard Dufour, 47, until mid-October executive VP of Euro RSCG Worldwide, one of Philips' two worldwide agencies, worked together on the global ad campaign the Dutch electronics giant has been running for the past year. Philips spent $619 million on advertising in 1995 according to Ad Age International figures. The company ranks 25th in ad spending outside the U.S. and 81st in the U.S. market (See Ad Age International's global marketer ranking,.page I-15.)

Now the marketing mission is clear: Promote Philips as a brand, rather than a disparate collection of products from different divisions. And make that brand image evoke the company's human link with customers and employees rather than technological prowess. The first step is the ongoing campaign by Euro RSCG themed "Let's make things better".

It won't be easy. Within weeks of taking over as chairman last month, Mr. Boonstra had to announce third-quarter numbers so bad that a Reuters headline announced "Analysts reel from Philips shock".

Net profit for the third-quarter plunged 77% to $72 million compared with the same period last year. Europe and North America, where pressure on prices was strongest and demand for Philip products weakest, performed particularly poorly.

Mr. Boonstra has insisted that the company can achieve double digit income growth in 1997 and has impressed analysts by vowing to tackle Plilips' problem more aggressively.

"When the roof is lacking, fix it before you buy a new kithcen," Mr. Boonstra told reporters. "I will come back to you on the subject of corporate strategy; we're looking at it, but first things come first."

Old habits, however, apparently, die hard. To the conserternation of other Philips execs, Mr. Dufour is incommunicado, sending messages through the company swithchboard in Eindhoven that he won't be ready to talk about company matters for about six months.

At Euro RSCG, Mr. Dufour was credited with masterminding a veritable revolution, which saw Philips scrapping decentralized marketing for various divisions and products in favour of the company's first worldwide corporate campaign. A frenchmen who spent much of his career in New York at Young & Rubican working on global accounts including Colgate-Palmolive, Johnson & Johnson, Gillette and Kodak, Mr. Dufour moved several years ago to Euro RSCG and back to Paris. He reports to Mr. Boonstra, who before stepping up to chairman last month worked on the worldwide ad campaign in addition to directing group activities in the Asia-Pacific region. (Asia is Philips' best-performing region, accounting for 20% of sales but almost two-thirds of income during the first nine months of this year.)Mr. Boonstra replac ed former Philips president Jan Timmer, who tried to revive Philips' financial performance by consolidating production and cutting costs. Marketing was the responsibility of each production unit, which picked its own agencies and c ampaigns."Basically, as of the late 1980s, Timmer took the human heart from Philips and made technology its major concern, along with the supreme goal that the group and its divisions show a positive bottom line . . . and it [show ed] in the ads," a Philips insider said. "Now we are returning our attention to people."Mr. Dufour will work closely with all Philips' product divisions to help instill the new consumer-focused corporate culture. His responsibil ities include improving the quality and creativity of Philips' marketing strategy and taking charge of corporate marketing communications."I don't think you can accuse a group with $35 billion in sales of lousy marketing," the Ph ilips source said."It is true, however, that Philips has not always developed products or sectors to full potential, and this is something that we want to change. . . . The brand image has not been consistent. Indeed, the entire c oncept has changed: We are a single group with a single message about who we are, and how our products can improve people's lives.'

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