Clients need to restructure: Reinhard

Keith Reinhard, chairman of New York-based agency DDB Worldwide, advises those client marketers who have griped about 'flawed' agency models recently to take a long hard look in the mirror. Before agencies can serve a brand with true integration, he says, corporations must break down their own internal barriers.

Keith Reinhard, chairman of New York-based agency DDB Worldwide, advises those client marketers who have griped about ‘flawed’ agency models recently to take a long hard look in the mirror. Before agencies can serve a brand with true integration, he says, corporations must break down their own internal barriers. Only then can cluster organizations like those that DDB (whose annual billings in 2000 totaled US $18.7 billion) has instituted in some of its 206 offices worldwide really thrive. In his first feature interview with a Canadian trade publication, Reinhard chats about the current state of the industry and where it’s headed.

You have said that clients need to reconfigure their own operations. Can you expand on that?

An ideal structure would be one where the walls are removed between the communications disciplines, so that somebody in charge of a project or a brand is able to coordinate and synergize all the disciplines – direct, interactive, conventional advertising and to some extent public relations.

So many times we see a client where they have a wonderful Internet site, and a pretty good direct mail operation, and the two don’t even talk together. It’s frustrating from an agency standpoint.

I had one client invite me to talk to 50 or 60 people who were [creating] Web sites and responsible for several brands. They happened to be meeting in the same town as the headquarters, and I dropped in on the CEO. He didn’t even know there was such a conference and none of the brand managers knew. So it was completely segregated – it’s like a ghetto. They’re failing by their structure to realize the synergies that could be possible.

There has been much debate about the ideal agency structure. I understand you are a proponent of a ‘cluster’ or integrated organization. How far along is DDB in this regard?

This all started years ago, when we published a paper inside the organization about the cluster approach. Some of the offices are further along than others. Paris is completely integrated. They have 32 profit centres at DDB Paris, and they are all well integrated so that [the interactive component] Tribal DDB, and [direct marketing company] Rapp Collins all work together on a particular project or a brand. In Chicago, our Budweiser account executives, planning and media people are all in one physical part of this huge agency.

In certain places, like the Scandinavian countries, we’re very well integrated. One of the reasons is that TV arrived late to those markets and the top creative talents grew up thinking in terms of ideas and event marketing, and completely integrating the communication voices that were available. So when TV came along, it was [just] another channel.

But in Western Europe and in the U.S., for years people were taking a brief and running for the storyboard pad. So there was a disadvantage versus the countries where TV wasn’t available from the beginning.

We use [Vancouver-based] Palmer Jarvis DDB as a model for many things including the ability to organize talents around a project. The Bud Light Institute [by PJ DDB Downtown in Toronto] is a pretty good example of integrated thinking because it’s not an ad, it’s an idea which finds its expression in everything, [starting with] the sign for the future home of the Bud Light Institute.

It was just a construction site, and then there were the newspaper ads saying we hired so-and-so as chairman or head of this or that. Then, of course, the TV advertising. So it’s a whole integrated approach in the sense of traditional media, and then ambient media, out of home and so forth (see media plan p.B-9). [But] we still have to make some progress.

Why is it such a slow process?

What will hasten the progress is an increase in client demand for integration. What typically happens, particularly in the big client companies, is that when you talk to the CEO, you get this absolute unqualified support. Niall FitzGerald, the head of Unilever, said four years ago, ‘I see an alarming discrepancy between what our brands are going to need and what agencies are good at.’

You hear a lot of that from the top, but when you get to the brand management level, that’s where you find the silos, because a brand management system has never really been so much about brand management as career management. And so, what these brand managers want to do is retain control over what they’ve been charged with and do a brilliant job of making their numbers for a couple of years, so they get promoted to the next spot.

If we could generate more client demand for truly integrated communications programs, then the agencies, certainly in our group, would comply.

How do you promote integration across the network?

The first thing you have to do is create a culture that thinks in terms of integration, then try to encourage structures that promote integration and even offer some incentives, and signal your satisfaction when it actually happens.

We have three awards in our company – two of them directly support this integration concept. One is the Chairman’s award, which I give every year to the best example of an integrated communications program, and the other is the Paco Award.

Paco Torres was the head of our operation in Spain. We bought his agency, which was called Tandem, in the early ’80s, and he believed in teamwork and integrated communications.

So of the three top awards – the other being the Bill Bernbach Award for excellence in traditional advertising – two of them are directly supportive of this integrated approach.

Who won the 2001 Chairman’s Award?

Last year’s winner was DDB Argentina for a program called ‘Walter’ …where we created a cult hero by imagining that this character who was frozen in 1980 and came back to life 20 years later, was completely disoriented. It was for Telefonica, a high speed Internet access company, but it involved newspaper publicity, live music concerts featuring bands that were popular before Walter got frozen, MTV specials and T-shirts. The budget was substantial. But in terms of the impact, it was way out of proportion to the media budget expended. So that was the winner.

There’s an argument that agencies shouldn’t get involved in the creation of brand strategy but focus solely on execution. What’s your response to that?

I would disagree and suspect that it’s coming from brand and other marketing consultants. The more we know about the clients’ business [the better]. We certainly understand what makes a strong brand. We’ve created along with clients some of the world’s strongest brands. I think that the most important discipline within the agency of the future may well be the brand planner.

We are in a service business and have to be flexible enough so that we can be global and local and bundled and unbundled at the same time. So if someone comes to us, just for execution, we have to be able to give them the best in class of whatever it is they want.

But the most efficient way to work will be when there’s a close partnership characterized by mutual trust at the top and throughout both organizations and when the agency’s brand planners act almost as consultants and say, ‘this is what your brand should be in the future,’ ‘this is how it should behave’ and ‘this is how we should get there.’

The [Vancouver-based youth beauty brand] Caboodles case is a good paradigm. It’s a wonderful example of how the client and [Palmer Jarvis DDB] work together to really create a brand, and then how the agency gets involved in every aspect of not only strategic thinking, but brand implementation, including instore display, working with merchants and even product development. [Helping to decide] what should be a Caboodles product and what shouldn’t be.

What do you foresee as the major trends in the industry going forward?

I think we’ll see more consolidation [from] the client side, and I think that’s good for those agencies where the business is consolidated into their shops and bad where they’re consolidated out. It’s incumbent upon all of us who serve multi-agency clients to make sure we’re in the top spots, so that if they want to consolidate, we’re a beneficiary.

Some of the motivation for consolidation is reduced expense on the part of the client and I think some of them are unreasonable in saying, ‘we want the same amount of work for half of what we are paying now. Now let’s have a jump ball and see who wants to do that.’

One of my own hobby horses within the past year has been compensation – I think we need to prove the value that we add, and figure out how we can get paid for our thinking, as opposed to how many hours we spend, or how many GRPs we can buy.

Those are obsolete compensation models, but the industry got so rich on them over the past 50 years, that it was reluctant to do any compensation reform and therefore we became a commodity and, when you become a commodity the customer sets the price. Further consolidation within the ad industry will take place.

I think as personal video recorders become as easy to use as cellphones and they are built right into TV sets, and also satellite radio [becomes popular], I think we will start to see branded content become more important.

And therefore I think you’ll see some mergers or consolidation of talent and content-creating agencies with marketing communications and media companies. That will be very interesting to see – how we create or generate brand-embedded content, where people say, ‘Wow, I really want to watch that, I really want to engage with the brand in that way.’