The Ogilvy Group, Inc.
The Ogilvy Group, Inc.
Billings: $3.8 billion worldwide
Sales: $560 million
Market value: $495 million
Stock Index: NASDAQ London
David Ogilvy is the founder and patriarch of the expansive Ogilvy Group. After leaving Oxford without a degree he became a salesman of various products in England, occasionally writing advertising copy. Most notably, he wrote an instructional pamphlet, “The Theory and Practice of Selling the Aga Cooker,” which won him a position with the London ad agency, Mather & Crowther, where his brother was an account executive.
Soon after going to work there, Ogilvy persuaded Mather & Crowther to send him to the United States for a year to study American advertising techniques. Ogilvy was so enthralled by what he saw in America that his yearlong sojourn turned into permanent residence.
He studied advertising intensely, going so far as to convince the executives at NBC to allow him to go behind the scenes to watch radio commercials being written and produced. During this time Ogilvy found himself divided between two advertising techniques or philosophies: the “image” school of MacManus and Rubicam, which stressed product “personality,” and the “claim” school of Lasker and Hopkins, which relied more heavily on straightforward, product-benefit copy. “My admiration for those two opposites tore me apart,” Ogilvy remembered. “It took me a long time to reconcile what I learned from both of them.”
Interestingly enough, Ogilvy did not immediately enter the advertising business after his arrival in America. Instead, he went to work for George Gallup’s research organization in Princeton and Hollywood. In three years, he conducted over 400 national opinion surveys, became closely acquainted with American tastes and customs, and made a lifelong friend in Mr. Gallup. The research fascinated Ogilvy with its insights into human behavior. He became aware of its value as a tool in advertising.
After his apprenticeship with Gallup, Ogilvy left the professional research business, but again did not seek a position in advertising. He bought an Amish farm and moved there with his wife and son. After a couple of years, by 1947, he had come to understand that advertising was what he wanted to do. He would have liked to work for the Young & Rubicam agency and apply his research skills to its “image” philosophy, but thought that at the age of 36 he was too old to be hired, so he never applied. Instead, he took $6,000 of his own money, borrowed major capital from Mather & Crowther and another London firm, S.H. Benson Ltd., and established his own advertising business in New York. Ogilvy then hired Anderson F. Hewitt away from J. Walter Thompson to be president, and appointed himself vice president in charge of research.
In September of 1948 the Hewitt, Ogilvy, Benson & Mather agency officially opened for business. The timing could not have been better. The Depression and World War II had driven all but the largest, well-established, advertising firms out of business and had discouraged attempts by newcomers to break into the market. However, with the war over and the American economy expanding with unprecedented vigor, and a greater public awareness of the media and its influence, advertising became a necessary element in any business practice. The potential for growth was almost limitless.
Still, the agency of Hewitt, Ogilvy, Mather & Benson did not become successful overnight. Competing with such long-standing industry leaders as J. Walter Thompson, Young & Rubicam, Leo Burnett, and BBDO was difficult. Yet Ogilvy combined good timing, a bit of luck, and some fresh ideas, and managed to make a name for his company in the early 1950’s. He did it with highly innovative campaigns for three small accounts: Hathaway shirts, Schweppes quinine water, and Rolls-Royce. The Hathaway ad featured a model (”a cross between movie star Clark Gable and author William Faulkner”) wearing a Hathaway shirt and an eye patch. Ogilvy called this a “story-interest” ad which imbued the product with mystique. What’s more, the eye patch created immediate product identity for the consumer.
Ogilvy also created the “man from Schweppes.” The British beverage company was having trouble selling its quinine water in the American market, and looked to Ogilvy for help. Ogilvy again sought product indentity through a character model. Employing the bearded, aristocratic face of Schweppes advertising manager, Commander Edward Whitehead, he was able to sell eccentric sophistication in the form of a tonic water. Not long after the campaign ads appeared in U.S. magazines, Schweppes was finally able to gain a foothold in the American beverage market.
Both the Hathway and Schweppes campaigns were clearly image oriented, which was odd in that they came from Ogilvy, a man from a predominantly research background who tended to stress copy and claim over image. Their success taught Ogilvy the power of “image” but did not bring him to abandon his belief in the “claim” school. The third ad campaign for the young agency was the one produced for Rolls-Royce. Here Ogilvy was able to bring together both approaches, claim and image, to create an effective sales technique. Below a picture of a Rolls-Royce racing along the highway was a large print caption which declared: “At 60 miles an hour the loudest noise in this new Rolls-Royce comes from the electric clock.” Then, within the body of the ad, in detailed copy, Ogilvy listed 11 benefits and characteristics unique to the Rolls-Royce. Though the ad ran in only two magazines and two newspapers at a cost of $25,000, sales for the car rose 50%, and the ad became the paradigm for all subsequent automobile advertisements.
Ironically, these three highly original ads barely paid for themselves, at least in the short run. The accounts were small and therefore meant little in the way of commission. (Traditionally, agencies receive a 15% commission of the total billings revenue. For example, if a client purchases $100 worth of advertising space, the agency’s share would be $15.) The fledgling firm had to rely on larger, more conservative campaigns to pay the bills. However, over the long term, the Hathaway, Schweppes, and Rolls-Royce ads demonstrated the “Ogilvy style” and attracted a number of new clients. One customer, Shell Oil, increased the agency’s revenues by almost 50% when it started an account in 1960. Later, accounts were also secured from General Foods, Bristol-Myers, and Lever Brothers, to name just a few. Little of this success would have been possible, however, had it not been for the initial impression Ogilvy, Mather & Benson made in its first few years in advertising.
By 1962 the agency’s billings had increased dramatically, and Ogilvy had established himself as an innovator in the business. Indeed, the 1960’s and early 1970’s marked a period of expansion and innovation. In 1964 Ogilvy, Benson & Mather Inc. of New York merged with Mather & Crowther Ltd. of London to become Ogilvy & Mather International. Ogilvy’s firm, though, was not the only one expanding. In fact, it seemed every ad agency was undergoing some kind of expansion. The growth put new fiscal pressures on all the agencies, and one by one the companies began to sell shares of stock to mitigate expansion costs. In 1966 Ogilvy & Mather followed this trend and went public.
During this period Ogilvy & Mather also became more diverse in its range of advertising. It developed campaigns for large corporations (Sears, Weyerhauser), non-profit organizations (The United Negro College Fund, the World Wildlife Fund), whole nations (Puerto Rico, Singa-ore, France), and international clients whose markets were primarily outside the United States.
By 1975 Ogilvy & Mather had grown extensively. In addition to General Foods and its other base accounts the agency had established accounts with American Express, IBM, Merrill Lynch, Campbell’s Soup, Morgan Guaranty, and a number of smaller manufacturers such as Mercedes-Benz. Branch offices were set up around the world to handle the large amount of international business the firm had developed and subsidiaries such as S.H. Benson Ltd. and Carson/Roberts (both acquired in 1971) were consolidated under the umbrella of the parent company.
Growth on the scale experienced by Ogilvy & Mather can also result in adverse effects. Creativity tends to become stifled as the immensity of the operation creates bureaucratic impediments. Time is spent more on administration and procedure than on innovation. With larger and larger amounts of an agency’s shares under public ownership, firms have a propensity to become conservative. They feel an obligation to their shareholders to secure consistent dividends and minimize risks, and therefore shy away from the innovative in favor of going with “what has worked in the past.” Ogilvy & Mather, long thought of as an “idea shop,” became a victim of this kind of corporate syndrome. The agency successfully produced conservative campaigns for large companies but, creatively speaking, had stagnated. One former writer with the firm commented that Ogilvy & Mather was “working like a bank. It was a financial institution that was doing dull, predictable advertising.”
Ogilvy was aware of what was happening, and on the eve of his retirement he decided to make some dramatic changes. First, in 1979 Norman Berry was brought over from England to become creative director in New York. Berry had a reputation for being dedicated to original ideas and innovative people. He was to wrest the direction of the company away from the accounts management people and put it back in the hands of the production people. He also made it clear to clients that he would stand up for his staff on issues of creativity.
Second, Kenneth Roman, a veteran account executive with a sensitivity for the wants and needs of those on the creative side of the business, was appointed president of Ogilvy & Mather U.S.A. He took on the difficult task of healing the divisions within the agency and coordinating the “art” and “business” sides more effectively.
And third, the commercial writer and producer, Hal Riney, was instructed by Norman Berry to set up an Ogilvy & Mather office anywhere he chose. He opted for San Francisco, and before long was developing innovative advertising campaigns.
Soon Norman Berry had challenged Ogilvy & Mather into actively pursuing awards and recognition for creativity and originality, something that had been avoided and frowned upon in the recent past. In 1982 Ogilvy & Mather won its first Kelly award for the inventive and sexually suggestive Paco Rabanne men’s cologne campaign. In 1985 the agency for the first time started collecting its share of Clios (the Oscar of advertising), and its commercial for Hershey’s chocolate covered granola bars won a silver medal at Cannes.
What did all this emphasis on creativity mean to Ogilvy & Mather? Not only was the agency able to keep those clients who had exhibited signs of dissatisfaction, but also it attracted a large amount of new business. According to a 1984 Advertising Age survey, Ogilvy & Mather was operating in 41 countries, was ranked third in world advertising income with $363.2 million in revenues, and had amassed over $2.4 billion in billings.
In recent years, as Ogilvy & Mather has sought to deal with the problems of expansion, their approach to the advertising business has grown and changed accordingly. Not wanting to repeat the problems that hindered its creativity in the mid-1970’s, the agency has created a network of semi-autonomous subsidiaries that, while having access to the resources only a large company can provide, still work as in a “small shop” environment. According to the agency heads at Ogilvy & Mather, this method “abolishes the subsidiary stigma” and “promotes a competitive edge.” An example of one such member of this network is the Scali, McCabe and Sloves Company, which in 1985 reported $390 million in billings while retaining its reputation as an “original idea” shop.
In May of 1985 Ogilvy & Mather International Inc. became The Ogilvy Group. The name change reflects the agency’s increasing focus on comprehensive client services and shows a continued application of “Ogilvy Orchestration,” an agency orientation conceived in 1984 to bring together Ogilvy & Mather’s “many instruments and voices to form one big sound.” The purpose of the program is to provide prospective clients with complete advertising assistance through coordination of the services the agency can offer.
Coupled with “Ogilvy Orchestration” is the company’s persistence in diversification. This move illustrates the agency’s dedication to growth and its willingness to be prepared in the event of an economic recession. In 1985 the Ogilvy Group acquired two European medical advertising firms, Zoe (France) and Pharma (Germany), formed a health care marketing group in the United States, and expanded its role in public relations. The firm has also continued to develop its direct-mail marketing, a field in which it is now the leading agency.
In the late 1970’s and early 1980’s Ogilvy & Mather began to experience conflict of interest problems among clients and prospective clients, making it hard for the agency to expand. In other words, it became difficult for the firm to pursue additional clients in a particular industry (brewing, for example) when it was already doing the advertising for another company manufacturing the same type of product.
Ogilvy & Mather experienced this dilemma in 1979 when it attempted to procure the Lincoln-Mercury account. Upon hearing of the firm’s pursuit of Lincoln-Mercury, Mercedes-Benz USA, a long-time client of the agency, defected. Unfortunately for Ogilvy & Mather, Young & Rubicam ultimately won the Lincoln-Mercury account, leaving Ogilvy & Mather a double loser. The company is hoping that diversification through its semi-autonomous subsidiaries will “solve the perceived conflict-of-interest problem with competing accounts.”
The future looks bright for the Ogilvy Group. The firm was named agency of the year for 1982 by Advertising Age magazine and received acclaim for its campaigns for American Express, Gallo Wines, Hershey, and International Paper. In addition, the agency is financially sound. Both 1984 and 1985 were successful years, billings having increased successively in each. It would appear that the Ogilvy Group will follow along the same course it started at the beginning of the 1980’s. The company, while wanting to diversify still further, will do so selectively. Its interest now seems directed towards medical advertising, over-the-counter drug marketing, public relations and direct mail.
Ogilvy and Mather Worldwide; Scali, McCabe, Sloves Group; Cole & Weber, Inc.; SAGE Worldwide; Research International
“The Ogilvy of the Offbeat Ideas” by Carl Spielvogel, in The New York Times, September 7, 1958; Confessions of an Advertising Man by David Ogilvy, New York, Atheneum, 1963; Blood, Brains and Beer: The Autobiography of David Ogilvy by David Ogilvy, New York, Atheneum, 1978.