The Big Ten Still Shine

Pan Am Makes the Going Great, Eastern Airlines is No. 1 to the Sun, TWA is Up, Up and Away, and each of the three has a superlative advertising campaign going. So does Ford, which has a Better Idea and a light bulb to prove it. Or Excedrin, whose headaches (one of the latest is Exced rin No. 1040--just in time for the income tax deadline), have become family catch phrases.

All such campaigns represent the bright approach that has recently come to be associated with brash agency newcomers such as Mary Wells or Carl Ally. However, all of these campaigns spun out of the long-established agencies--the ones that were supposed to be drowsing.

The biggest agencies are bigger than ever. They have had some troubles: Interpublic, a combination of 24 advertising, public relations and service agencies built around the corporate structure of second largest agency McCann-Erickson, has to be taken apart, shorn of some of its less productive components, and put together again without Founder Marion Harper. Even so, in spite of uncertain economic conditions, the ten largest agencies* have been doing very well. Last year, with total advertising-agency business slipping to an increase of less than 2%, the top ten--that jointly bill $3.27 billion--not only increased their business but generally managed to come out ahead in earnings.

Fewer People, Better Paid. One reason they did is that, like their blue-chip clients, the big agencies have been able to take advantage of economies of size. "Bigness is really an asset," says Young & Rubicam President Stephen O. Frankfurt. All are using computers, which not only tot up possible profits but also give a broad idea of agency problems. With the help of the expensive computers, and with payrolls representing 70% of total expense, the agencies have been able to cut back on clerical help and thus reduce such other overhead as floor space. As a result, they have been free to pay more money to the creative people they most need. J. Walter Thompson, biggest of all agencies, with total billings last year of $590 million, has even turned the situation into an intramural campaign. Chairman Norman Strouse refers to the new look at J. Walter as "fewer, better people, better paid."

The bigger agencies have cut back on other services they formerly offered. Clients heretofore demanded, and got, not only advertising but market research, promotion, even product placement as well. Now agencies are no longer willing to do so much--at least not without fatter fees. "What's happened," says B.B.D. & O. Executive Vice President James Schule, "is that we have a better balance between services like market research, product development and testing and public relations v. pure advertising."

A Matter of Keeping Lean. The better balance means that big agencies can operate more efficiently. They are generally opposed, for instance, to the flat 15% commission that had been an advertising tradition for over 40 years. More and more agencies are switching to an adjustable fee that reflects the work they have to do for clients. Schule and B.B.D. & O., using their computer, have gone one step beyond that. The agency now has an E.I.C. (for Efficiency Incentive Compensation) system, which ties charges directly to agency profits. If the profit is less than anticipated, the client pays. If the profit is higher, the client receives a rebate. Ultimately, says McCann-Erickson Chairman-President Paul Foley, "Accounts may be billed on an incentive system based on increased sales."

Keeping close watch on costs and profits, the big agencies have learned to roll with one of the biggest blows in advertising--the loss of clients. Doyle Dane Bernbach, one of the top ten, last year lost seven clients, including Broxodent Tooth Brushes, Ocean Spray Cranberries, Rheingold Beer and Warner Bros. At the same time, DDE picked up 14 new ones, including the Sylvania division of General Telephone & Electronics, Parker Pens and American Tourister Luggage. The net gain in billings was $10 million and DDB scarcely stopped to worry. Says Foote, Cone & Belding's Founder, Fairfax Cone: "We can have a cancellation tonight, without anyone batting an eye, of a $1,000,000 account. This means $150,-000 of gross income we had counted on that's gone, and there isn't a goddam thing we can do about it. We don't have any inventory to sell, we don't have a product that we can mark down in price and move at the lower figure. So in this business, it's become a matter of keeping as lean as you can."

Leanness, plus stern cost accounting and higher-paid creative people, is enabling the big agencies to concentrate on better advertising. They must. "People are better educated," says Leo Burnett's Executive Vice President Leonard Matthews, "more sophisticated and probably more cynical." Improving, they hope, on the soft sell refined by smaller agencies, the big boys are tailoring their ads to attract the consumer and sell him faster than before. Which is, in the end, what advertising is all about.

*J. Walter Thompson; McCann-Erickson; Young & Rubicam; Batten, Barton, Durstine & Osborn; Ted Bates; Foote, Cone & Belding; Leo Burnett; Doyle Dane Bernbach; Grey Advertising; and Ogilvy & Mather, according to Advertising Age's ranking.

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