498 Seventh Avenue
It is a paradox of change that the more things do change, the more things stay the same--the more 'the fundamental things apply' as the song says. So while we embrace and seek to master the forces of accelerating change in our industry, we also guard the fundamental things that drive our network. We seek to blend the craft skills appropriate to the New Millennium with the principles and proprietary techniques that make the Bates brand: a desire to become synonymous with sales-effective creativity in all the communication channels that make up today's new 'communicopia'; a desire to be judged primarily by the success of our clients' brands rather than by the accolades of our peers in the industry; a hard-headed insistence on judging our product by what it does, not by how good it looks or how good we think it is; an attachment to the Unique Selling Proposition (U.S.P.)--because the best foundation for strong, effective communications is a strong, effective selling proposition; and, adherence to our operating philosophy of 'Think Global, Act Local'--because our global reach does not blind us to the fact that in the final analysis, every sale is a local sale.
Bates Worldwide, Inc., the primary subsidiary of Cordiant Communications Group plc, is one of the leading advertising and integrated communications networking companies in the world, with more than 156 offices in more than 70 countries and annual billings in excess of $7.7 billion in 1998. Headquartered in New York City, the company provides its clients with a full range of marketing communications services. Among its largest clients in the late 1990s were British American Tobacco, Warner-Lambert, Estée Lauder, and Hyundai.
1940s Birth of the Unique Selling Proposition: 1940s
Both brand name and international marketing were traditions that went back to Bates agency founder Theodore L. Bates, who established Ted Bates & Company in 1940. A 1924 graduate of Yale University, Ted Bates worked in advertising for several years, serving as a vice-president and director at Benton & Bowles before forming his own agency. Ted Bates began with two clients, Colgate-Palmolive-Peet and Continental Baking, and four brands to advertise: Colgate Dental Cream, Palmolive Shaving Cream, Hostess Cup Cakes, and Wonder Bread. Within the agency's first six months, gross billings stood at $5 million, an accomplishment largely attributed to the Unique Selling Proposition (USP) developed by Ted Bates and Rosser Reeves, the agency's chief creative officer.
USP focused on identifying a unique feature of each product and connecting it in the minds of consumers with the brand name. Moreover, early USPs emphasized the potential health benefits of a product. One early company publication described how the agency contracted with five leading universities to undertake dental research in discovering some new quality in Colgate Dental Cream. Conducted by recognized authorities, the tests continued for many months and provided the medical proof for the USP message: The Colgate Way Stops Tooth Decay Best. That declaration, repeated thousands of times in every medium, sent Colgate sales soaring in the United States. In another example, an advertising campaign for Continental Baking told consumers that Wonder Bread Helps Build Strong Bodies 12 Ways. The USP principle would later be applied in Bates ads for Minute Maid Orange Juice (Better For Health Than Oranges Squeezed At Home) and Royal Puddings (Give More Food Energy Than Sweet, Fresh Milk).
After ten years and a world war, the agency was working with 41 of its clients' brands, its billings approached $28 million, and, by one estimate, sales of the four original brands promoted by Bates had increased by 368 percent. With the agency doing so well, Ted Bates surprised the advertising industry in 1948 by dissolving the incorporated firm and converting the business to a partnership. Fourteen senior officers became members with equal shares, equal rights, and equal responsibilities.
Continued Growth: 1950s-70s
During the 1950s, Bates and Reeves were the first to take advantage of the advertising potential of television. 'Advertising,' Reeves wrote, 'is the art of getting a Unique Selling Proposition into the heads of the most people at the lowest cost,' and television offered the best way to do that. While most of their competitors had announcers reading ad copy and holding up the product, Bates introduced unique spot commercials, such as one for Anacin that featured hammers pounding on the heads of headache sufferers. As Paul Foley, of the Interpublic Group of Companies, later told the New York Times, Bates's 'use of television in the early days developed a whole new advertising form.'
Always looking for new ways to get USPs to more people, Bates was also quick to realize the potential of overseas markets. Europe was beginning to recover from the economic devastation of World War II, and a few American companies began setting up overseas branches or entering joint ventures. In 1956, Bates set about building an international network. Three years of negotiations with Hobson & Partners., Ltd., one of England's most successful agencies, resulted in the establishment in London of Hobson, Bates & Partners, Ltd. in 1959. This arrangement provided Bates's American clients with a fully operative overseas office and gave British clients access to the American market. Within a single year, Hobson's billings leaped from $5.4 million to $14.2 million.
The Bates agency was growing as well, adding both M & M/Mars and Nabisco, Inc. to its client base in 1954. In 1959, when Chase Manhattan Bank became a client, the agency began moving beyond its traditional packaged consumer goods accounts into services.
Such growth prompted Ted Bates to change the company's ownership structure again. In 1955 he dissolved the partnership and reconverted the company to a corporation. With several hundred employees on the payroll, a corporate structure made it easier to create appropriate levels of responsibility. Ownership in the corporation's stock was limited to Bates employees, and Ted Bates became honorary chairman of the board as well as chairman of the executive committee. Rosser Reeves became vice-chairman and eventually chairman and CEO. Bates continued to direct the agency's expansion into Europe, Southeast Asia, and Australia. When Bates died in 1972, Ted Bates & Company was among the five largest agencies in the world.
New Management in the 1980s
The company continued to prosper, developing a huge network of global offices and promoting its products with USPs. A new slogan, 'Think Global, Act Local,' introduced in 1984, reflected the company's philosophy that local affiliated offices should take full advantage of the economies of scale and resources of a worldwide network while responding to the local culture and market to sell messages.
In 1986, Saatchi & Saatchi plc purchased the company, then called Ted Bates Worldwide, for $450 million and merged it the following year with another U.S. agency, Backer & Spielvogel Advertising, which it had acquired for $65 million. In the first years after the merger, Backer Spielvogel Bates Worldwide (BSB) prospered, winning such clients as Wendy's, CPC International, and Burroughs-Wellcome. In fact, in 1988 BSB was named the top ad agency in Europe. However, Saatchi & Saatchi required BSB to drop its large, longtime Colgate business to avoid potential conflicts of interest with the clients that Saatchi & Saatchi retained at the time.
Under new parentage, Bates's tradition of research continued. In a 1990 American Demographics article, Rebecca Piirto reported that the agency had invested more than $2 million in Global Scan, an annual worldwide customer lifestyle study that analyzed markets and consumer desires in 17 different countries. Identifying five global 'psychographic' personality types--strivers, achievers, pressureds, adapters, and traditionals--Global Scan helped agencies like BSB recognize cultural and economic differences that could make or break an international ad campaign. The companies could therefore tailor their advertising strategies to suit consumer preferences and ideals.
The company had also developed several other proprietary systems, including Brand Essence, a study that identified and refined distinctive and competitive brand positionings; Ad Scan, a pre-testing method of the relevance of advertising before production; and Brand Scan, which evaluated advertising over time and provided information on its real effect and cost.
However, the late 1980s and early 1990s also brought severe challenges to BSB's parent, Saatchi & Saatchi, which was debt-laden following its acquisitions and began losing new business bids. While Saatchi & Saatchi worked to recover and underwent several management shake-ups, BSB remained a core asset for the company.
Focus on Renewed Globalization in the Early 1990s
In January 1993, CEO Carl Spielvogel named Michael Bungey president and chief operating officer of Bates Worldwide. The following year Bungey became CEO and assumed the position of worldwide chairman at the end of the year when Spielvogel retired. Bungey had been with BSB for several years, having served as chairman of BSB Europe as well as chairman and CEO of BSB Dorland in London; he had a reputation for winning new accounts. 'I learned how to do new business because I started an agency and we didn't have any business,' Bungey told Stuart Elliot in a 1993 New York Times article. He was referring to Michael Bungey & Partners, which he started in 1971 and which eventually became part of BSB Dorland. In 1987, Bungey set out to build a creative reputation for Dorland and to develop new international business. By 1992, the company finished first among 20 top British agencies ranked on net billings gains, despite the unexpected loss of its $35 million Rover car account.
As chairman of BSB Europe Bungey restructured the company's European network. The local offices, the former Ted Bates affiliates, 'were a mass of unwieldy local agencies still largely controlled by their local manager-founders,' according to Noreen O'Leary in ADWEEK. Tim Corrigan, a BSB colleague, told O'Leary, 'Michael has successfully changed the management of every single agency and created a whole new culture and new ways of doing things.'
In assuming the worldwide position, 'Michael's challenge now is no less than to take an organization built around a cult of personality and make it into the integrated global marketing concern it was always envisioned as,' a Saatchi colleague told O'Leary. After moving from London to New York City, Bungey spent much of 1993 meeting with key clients, familiarizing himself with the New York office, and mapping out plans for the company's future. He established an account planning department and promoted Frank Assumma to president of Bates USA.
Bungey also began a year-long survey of clients, prospective clients, and agency management regarding the company's brand identity, resulting in the name change to Bates Worldwide in 1994. Although Bates had strong local agencies throughout the world, it was known by different names in different countries. To enhance brand recognition, every agency within the Bates network was expected to include the name Bates in its name to adopt a single brand name on a global basis. 'The name change signals that Bates is now a reconstituted agency. In the past few years, they haven't been top of mind when you think of major agencies. Now they're becoming a contender,' said Arthur Anderson, managing partner of agency search consultancy Morgan, Anderson & Co. of New York, in a 1994 Advertising Age article.
With regard to new business, Bungey aimed at adding more global company accounts. He told Penny Warneford in the Australian that multinational advertisers 'rather than local national advertisers represent the future for agencies as the number of advertiser companies shrinks worldwide and national companies are swallowed by multinationals.' Moreover, O'Leary reported that Bungey had targeted 'clients that already worked with the company in one or more countries--brands like Mercedes, Avis, Chanel, Estée Lauder, Nissan, 3M, and Goodyear&mdash well as international business from marketers like Energizer, British American Tobacco, and Electrolux which have not already aligned themselves with agencies on a regional or global basis.' Bungey also reemphasized the Bates Unique Selling Position, a strategy that had been downplayed somewhat under BSB. During 1994 key agencies, including AC & R, McCaffrey & McCall, and CME/Houston, became part of Bates Worldwide.
By the end of 1994, things had improved considerably at Bates USA. As reported in ADWEEK, the agency won a bid for Warner-Lambert business valued at $70 million as well as Miller's estimated $40 million Lite Ice beer account. The $60 million Texaco account was transferred to Bates, and Miller and North American Phillips made new media-buying assignments. As a result, Bates USA business increased by more than $200 million.
Bates Worldwide showed record growth in 1994 and was ranked seventh among the top 20 U.S.-based agency networks by ADWEEK, with total worldwide billings of $5 billion, an eight percent increase over 1993 billings. This figure included $850 million in new business, such as the Compaq business for Europe, Africa, and the Middle East awarded to Bates Europe and British American Tobacco Company's Lucky Strike account and global creative assignment.
With regard to creativity, in 1993 and 1994 Bates won over 400 creative advertising awards worldwide at the top ten regional competitions. At the International Advertising Festival at Cannes, Bates ranked number two in 1995, with ten awards. Furthermore, two Bates agencies, Bates Hong Kong and Delvico Bates, placed in the top ten overall standings.
Bungey continued to expand the company while restructuring its organization. During 1994, Bates added new agency affiliations to the network in Argentina, Bangladesh, Chile, Croatia, Fyrom (formerly Macedonia), India, Israel, Latvia, Mexico, Pakistan, Paraguay, Peru, Slovenia, Sri Lanka, Turkey, Costa Rica, El Salvador, and Panama. Structurally, each of the regional directors in the company's four regions reported directly to Michael Bungey.
Bates Americas, headquartered in New York, included Bates North America (United States and Canada) and Bates Latin America, and had 700 million consumers. With 38 offices in 13 countries and billings of $1.7 billion, it handled 333 brands and had nine clients in four or more countries. During this time, Bill Whitehead became chief operating officer of Bates North America, as well as president and chief operating officer of Bates USA. Dan Reid was named chairman of Bates Latin America.
Bates Asia-Pacific, headquartered in Sydney, had 31 offices in 14 countries, with 3.3 billion consumers. The region had $900 million in billings, advertising 762 brands. Nineteen of its clients were in four countries or more, and it had the most member agencies in a local country's list of top five agencies. The largest non-Japanese-based agency network in the Asia-Pacific region, Bates was the first international advertising agency to be granted a license in Vietnam. Alex Hamill was regional director of Bates Asia-Pacific and chairman of George Patterson Bates in Australia.
Bates Europe, headquartered in London, had 85 offices in 29 countries, including a growing network of 13 offices in Central Europe and Russia. It had 1.1 billion consumers and billings of $2.5 billion, advertising 1,373 brands. Twenty-three clients were in four or more countries. Jean de Yturbe was chairman of Bates Europe and chairman and CEO of Bates France.
By 1995, Bates Worldwide also included several specialty shops with particular areas of expertise: HealthCom, with offices in London, Milan, New York, Canada, Australia, and Spain; Bates Alliance, specializing in retail advertising; Bates Direct for direct marketing; BKS/Bates Entertainment, for TV programming development, production, marketing and distribution; Bates Manhattan, specializing in prestige, fashion and luxury advertising; and Decision Shop, a strategic research consultancy in London.
At the beginning of 1995, parent company Saatchi & Saatchi Company PLC changed its name to Cordiant plc following the departure of the Saatchi brothers, who had built the agency, and named Michael Bungey to its board of directors. Unfortunately, in February of that year, Bates Worldwide lost its 40-year-old account with Mars, Inc., a $360 million billing. That loss led to some reduction in staffing levels in Bates's offices around the world. By mid-1995, however, Bates Worldwide had already recorded nearly $500 million in new business for the year. This included the Coles Myer media buying account, the largest media win in the history of Australian advertising, as well as the Jamont pan-European advertising program, Eurocard, and Optus Vision. Despite the Mars loss, the benefits of Bungey's rebranding effort were evident in the new business won in 1994 and 1995, especially from multinational and global companies.
Significant Changes in the Late 1990s
Cordiant suffered through sagging profits in 1995 but managed to return to profitability the following year. Still, the company struggled to recover from the loss of some large clients that resulted when the Saatchi brothers left the company to form their own agency. Bates, too, continued to work to overcome the hole left by the loss of the Mars account. Though Bates won a number of new clients, including Bayerische Motoren Werke AG, Mattel Inc., and Deutsche Bank AG, it failed to secure new major assignments. In addition, Bates lost the Miller Genuine Draft account in late 1996, and in mid-1997 the company lost its Compaq account in Europe, as well as its Texaco account, valued at $35-$40 million. Bates was not discouraged by the account losses, however, stating that it had gained $350 million in new business during the first half of 1997. Among the new business won by Bates were Toyota in Greece, CVS, the second largest drugstore chain in the United States, the pan-European Energizer business, and Europcar, a rental car business.
In April 1997 Cordiant announced its intention to spin off Saatchi & Saatchi and Bates into two individual companies. Bates Worldwide would function within the newly formed holding company, Cordiant Communications Group plc (CCG), along with German agency Scholz & Friends and other marketing communications operations. CCG and Saatchi & Saatchi would jointly own Zenith Media, which handled media buying and planning. The demerger was finalized on December 15, 1997, and CCG went public on the New York and London stock exchanges.
Bates viewed the split positively and was anxious to launch an expansion strategy after gaining its independence. Bungey, who became CEO of CCG after the demerger, discussed Bates's future in Times of London and said, 'A wall of fire has been built up within the company. Everyone wants to get going.' Bill Whitehead, CEO of Bates North America, agreed. Whitehead told Jennifer Comiteau of ADWEEK, 'The agency is reinventing itself.' Bungey also explained that Bates would expand internationally and that it hoped to establish agencies in at least six Latin American countries, including Brazil, Mexico, Colombia, Chile, Argentina, and Venezuela. Bates also planned to set up offices in eastern and central Europe and search for strategic acquisitions, primarily in the United States. Bates had already expanded its operations in Asia, acquiring a stake in Clarion Advertising Services, based in Calcutta, India, in mid-1997. Strengthening U.S. business was a key goal for Bates, where during the first half of 1997 revenues fell, mostly as a result of the loss of the Miller account.
In 1998, its first year as an independent company, Bates enjoyed a record year in terms of new business acquired, and CCG's revenues climbed five percent, to £301.8 million. In the spring of 1999 Bates won the pan-European SEAT car account, with billings of US$140 million. The account represented Bates's largest single win in its history. SEAT was the Spanish operation of Volkswagen AG. Other significant new business gained in 1999 included Hyundai's pan-European business; the Cervejarias Kaiser Beer account in Brazil, with estimated billings of US$70 million; and the Ballantine's whiskey brand, Allied Domecq's key global brand. Bates also secured additional business from existing clients, including the Kool and Capri cigarette brands of Brown & Williamson Tobacco Company and Warner-Lambert's Lipitor brand.
As promised, Bates implemented its acquisition strategy. In North America, Bates acquired Churchill Public Relations, based in Houston, Texas, and The Criterion Group of Atlanta, Georgia. Criterion was a marketing communications agency that focused on the hospitality and travel sectors. In Europe, Bates launched Bates Poland, and Bates Holland was combined with a new acquisition--a Dutch creative shop named Not Just Film. In Latin America, Bates purchased Fernando Fernandez, a creative agency in Argentina, and bought a stake in Newcomm Bates in Brazil.
Entering 1999, Bates faced rumors that CCG was a target for acquisition by a larger advertising agency conglomerate. Bates denied that it was for sale, but speculation fueled trading activity, and CCG's share price climbed 16 percent on the New York Stock Exchange. In March the company opened the doors to its new headquarters in New York City, and in August CCG announced promising first-half financial results. Revenues increased 8.9 percent, to £158.6 million, compared to £143.6 million for the first half of 1998. More than US$200 million in new business was generated, including such key wins as DuPont Co., Mercedes-Benz, and British American Tobacco PLC. Michael Bungey stated in Wall Street Journal Europe, 'Everything we have been doing so far has been geared to proving to the world at large that we can deliver on our numbers. ... Now we feel that we're going to make use of the newfound confidence of this company. ...'
Bates planned to step up its acquisitions to grow more aggressively at the turn of the century, and it got an early start in late 1999 by acquiring Healthworld, a marketing communications company that specialized in the healthcare field, and Interactive Edge, Inc., another marketing communications company focused on the Internet. To further reinforce Bates's goal to be a dominant global player with a unified vision, in December 1999 Bill Whitehead became CEO of Bates North America; Ian Smith, president of Bates Worldwide; and Jean de Yturbe, group president. The trio would work together with Bungey to operate the company centrally.
Principal Divisions: Bates North America; Bates Latin America; Bates Europe; Bates Asia Pacific.
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