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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.