THREAD ---The Wall Street Journal -- June 3, 1998
Marketing & Media -- Advertising:
Compaq Startles Madison Avenue
By Switching to DDB Needham
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By Sally Beatty and Evan Ramstad
Compaq Computer is switching creative duties on its entire $200 million global advertising account to Omnicom Group's DDB Needham, rattling Madison Avenue's belief that in these days of megamergers, the acquiring company's ad agency usually wins.
The loser is Interpublic Group's Ammirati Puris Lintas, which has held Compaq's global account for only a year. The personalcomputer market has been rocked by an onslaught of PCs priced below $1,000, and Compaq is behind schedule in launching a much anticipated new global ad campaign.
Enter DDB Needham, the agency behind Digital Equipment, which Compaq in late January agreed to acquire for about $9 billion in cash and stock. The New Yorkbased agency, whose other clients include McDonald's and Anheuser-Busch, has been running ads for Digital that play with Digital's logo, which features bold blocks around each letter of the company's name. The agency walked in the door unsolicited with a new idea for Compaq, which is said to rely heavily on "visuals" rather than text; details weren't disclosed.
Andrew Salzman, Compaq's vice president of world-wide advertising, said DDB Needham's first task will be a massive new brand-awareness campaign to begin after the Digital deal closes, which is expected to be next week. The campaign "strikes a resonant chord on a personal and emotional level as well as rational level," he said, but declined to be more specific. "We had a great deal of concentrated study before deciding DDB offered the right approach," Mr. Salzman said.
It is common for ad accounts to travel following a merger, as advertisers try to get more bang from their combined ad bucks by consolidating their accounts with fewer shops. In almost all cases, though, it's the agency that works for the company doing the acquiring that walks off with the combined prize.
That's what Madison Avenue expected to happen this time, too. Speculation had been rife that DDB Needham would lose the Digital account to Ammirati once the merger was completed. Compaq has announced plans to eliminate 15,000 of Digital's 53,000 jobs after the deal closes and has said it will disclose other restructuring plans and product strategies when the deal is complete. There also has been turnover in Compaq's marketing ranks, often a prelude to agency reassignments.
DDB Needham Chief Executive Keith Reinhard apparently threw the conventional wisdom for a loop by resorting to a tried-and-true agency tactic that isn't always easy to pull off: pitching an unsolicited campaign to Compaq Chief Executive Eckhard Pfeiffer, according to one person familiar with the process. Mr. Reinharda storied adman who wrote McDonald's old jingle "Two all-beef patties, special sauce, lettuce, cheese . . ."-used a similar ploy to win back the McDonald's account 15 years after his agency's role was reduced. Mr. Reinhard never lost an opportunity to shower McDonald's executives with ad ideas, and in the end, he won back the business.
"Obviously, we've enjoyed a very good relationship with Digital and would be very happy to continue that relationship in a way that serves either Digital or Compaq," said Mr. Reinhard, who said he wasn't privy to any decision making by the computer maker.
DDB Needham is picking up Compaq's ad duties at a difficult time for the big computer company. To meet aggressive sales goals in the fourth quarter of 1997, Compaq stuffed dealers' shelves full of products. When demand didn't match expectations, Compaq slashed prices and curbed production.
As a result, Compaq earned $16 million in the first quarter of 1998, compared with initial Wall Street forecasts of $500 million, and forecast a break-even performance for the second quarter. The company also instituted a hiring freeze, resulting in the attrition of 1,000 of its 31,000 jobs in the first quarter.
Operating out of a slick Manhattan headquarters, Ammirati creates highly polished ads for United Parcel Service of America, Burger King and Ameritech. It is perhaps best known for a slogan it created for a client it no longer handles: "The Ultimate Driving Machine" for BMW.
Ammirati also has been running a series of ads for various Compaq products. One features a nervous couple at an adoption agency. As a kindly woman asks the pair if they have their visas and passports ready, an announcer breaks in with a pitch for Compaq's computer-imaging center, which captures and sends images. Next we see a video of a small Asian baby. "Say hello to your new daughter," says the adoption agency official to the new parents.
In a statement, Ammirati Chief Executive Martin Puris said: "The two companies' respective agencies made proposals to Compaq about how each agency would handle initial advertising to position the merged entity. We believe that the advertising recommendations presented by APL were very powerful and would have been highly successful in positioning the combined company. Compaq's management, however, preferred the advertising proposal of Digital's agency, DDB Needham. We agree that this decision is in the best interests of all parties involved, so that Compaq can move forward expeditiously."
Although Ammirati had worked for Compaq since 1991 in North America, the agency only landed the global job a year ago. Ammirati is retaining direct-marketing, interactive and media-buying duties on the big account
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