Why Philips left Messner

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Philips Electronics' slogan was "Getting better." But the relationship between the Dutch marketer and longtime shop Messner Vetere Berger McNamee Schmetterer/ Euro RSCG Worldwide, New York, apparently was getting worse.

The decision to pinkslip Messner late last month, Philips executives said, was driven by the company's desire to accelerate the pace of its brand efforts around the world and improve their consistency. A lack of chemistry between Philips executives and Messner, however, most likely was responsible for the ultimate demise of the relationship with Messner and parent Euro RSCG, said those close to the companies.

The consumer electronics company abruptly informed Messner on Dec. 19 it intended to end its relationship as of June 20, 2001, and split the estimated $600 million consolidated account prize between DDB Worldwide and D'Arcy Masius Benton & Bowles, both New York.

DDB was tapped to handle advertising for Philips' consumer electronics, components, semiconductors and the Philips Group, the company's corporate entity.

D'Arcy extended its relationship with Philips, adding responsibilities for the company's lighting and medical systems units to a portfolio that already includes domestic appliances and personal care. Philips executives declined to clarify approximate billings for each agency's assignment. However, in 2000, according to Competitive Media Reporting, the company spent $47.9 million in measured media through September. In 1999, the company spent $156 million in measured media in North America. Although Messner disputes that the account is worth $600 million, Philips executives indicated that consolidated billings could come close to that figure.

"We are looking for where we can get better. ... It's a signal that we think we can do better," said Ed Volkwein, senior-VP advertising and promotion, consumer electronics, adding, "We need a fresh perspective to get to the next level."

The pre-Christmas announcement stunned Messner, the company's lead agency of 10 years. An internal electronic memo obtained by Advertising Age was circulated to Messner and the Euro network's employees on Dec. 20. Written by Bob Schmetterer, Euro RSCG Worldwide's chairman and CEO, the memo states: "Given all the positive feedback we've received from Philips over the past few months, we are shocked and disappointed by this news. We were never told that Philips was considering, or even talking to, other agencies. And though we live in a time where change is inevitable, it is still disappointing to lose a client that we have worked with so successfully for a decade."

Mr. Volkwein declined to comment on the status of the company's relationship with the agency.

Messner is credited with building Philips' brand presence in the U.S.-where it was sorely needed-with the three-year-old, award-winning "Getting better" campaign. The decision, Philips executives said, represented the culmination of a nine-month process that dovetailed with structural realignments within the Dutch consumer electronics giant's management and business units. Philips is now focused on core strengths in display and optical storage technologies.

According to Cahners Research, the brand ranks No. 3 globally in consumer electronics, after Matsushita Electric Industrial Corp. and Sony Electronics. It ranks No. 42, just before Samsung Electronics, on Interbrand's World's Most Valuable Brands 2000 survey out of 75 companies listed.

Philips' decision to go with DDB should not have come as a surprise, observers said. "It was shocking, but not surprising," said one agency executive, who added, "There never was any chemistry under the new management [at Philips]." That the relationship was on the decline is evident in that the client repeatedly denied a review was underway. The agency, nonetheless, was clearly taking steps to improve the relationship, said the executive.

"The signals were there ... but it's not about deficiencies with the current relationship. ... It was kind of a case of business as usual vs. what business can be," said a Philips executive who spoke on condition of anonymity. By all accounts, the company plans to extend the positioning Messner built. DDB came to Philips with "smart, clear and focused thinking," the executive said.

Industry insiders said Philips wants to become No. 1 or 2 in all or most of the business segments in which it competes. When it debuted high-profile TV advertising for an eye-catching flat-panel TV and associated digital innovation with lifestyle, Philips essentially paved the brand positioning for the entire industry. Rivals including Sony, Matsushita and Thomson Multimedia each have appropriated the digital lifestyle mantra, though Sony's brand has always had a hipper cachet. "It's as if they [Philips] bought ads for the industry," one insider said.

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