Playing catch up below the line


  • Business
  • Saturday, 25 Jan 2003

BY M. HAFIDZ MAHPAR

LEO Burnett Advertising Sdn Bhd is one of the country’s creative powerhouses and it services some of the biggest Malaysian corporations, including Petronas, Tenaga Nasional, Malaysia Airlines and Bumiputra-Commerce Bank.  

So one would think the agency hardly has anything to feel inadequate about. 

However, there is one area Leo Burnett feels it needs to play catch up in: “below-the-line” business. Grouped under the iLeo banner, it covers public relations, direct marketing, retail marketing, event management and promotion, design and interactive. 

Cadeli is aiming for iLeo's billings contribution to reach 50 per cent in two year's time.

Mind you, the agency has not done too badly in developing iLeo. Two to three years ago, below-the-line business made up just 20 percent of its total billings, but by the end of last year, the figure had risen to 35 per cent. 

“It is great growth for us,” managing director Charles Cadell tells BizWeek, “but some of our competitors like Ogilvy are up to 50 per cent. So we still have some way to go. We’re still playing catch up.” 

The focus this year, Cadell says, will be very much on iLeo. “I’m aiming for the contribution to reach 50 per cent in two years,” he adds. 

Cadell is frank about how Leo Burnett went about recruiting its non-mainstream advertising personnel, who now make up about 20 per cent of its 160-strong staff. “The start of it, is just like anything: you poach the best people (from other agencies) and then you grow the business, and the clients trust them, et cetera, et cetera, and you just deliver.” 

One of those “poached” senior people was former FCB Interactive general manager Tony Ong, who joined Leo Burnett late last year as strategic business planner overseeing the iLeo operations. 

Cadell says: “Previously we had someone overlooking iLeo as well, but not from the business perspective – that is, how to best allocate the clients’ budgets across the various marketing disciplines. We had people from brand management, but (unlike Ong) they weren’t really specialised in the disciplines so it’s more difficult for them to know exactly how much they should be spending and what’s the role of each unit.”  

He says one of the reasons for the agency’s strong growth last year was due to the success of the iLeo business. Cadell doesn’t reveal revenue figures, but says Leo Burnett Malaysia’s capitalised billings expanded by 28 per cent last year to RM222 million. That’s about triple the rate of growth for the overall industry. 

In 2001, Leo Burnett was ranked sixth among agency groups in Malaysia based on income, and Cadell expects his agency to move up to second or third placing due to its strong performance last year. As for this year, he still forecasts a good growth, albeit at a lower rate of 10 per cent. 

Leo Burnett Malaysia is the beacon for Leo Burnett's Asia-Pacific network right now. Last month, Leo Burnett’s head office in Chicago awarded the Kuala Lumpur office both its Bright Star and the Rising Star awards, which means Leo Burnett Malaysia is the network’s best as well as the most improved office in the region in terms of creative output, new business gains and market reputation. It is the first time an office has won both awards in a single year. 

Moreover, the KL operation also clinched Leo Burnett’s first Vision Award for its work for Petronas last year. This global award is for “a single piece of creative that represents the network’s global vision of superior creativity in building brands.” 

While Leo Burnett wants to catch up with its rivals in building up its below-the-line business, it has no plan to follow their footsteps by spinning off the various iLeo units into subsidiaries.  

According to Cadell, this is to avoid infighting. “If you break them into separate profit centres, there would be financial pressures which ultimately, in our view, affect the clients because each of them would try to get as much money for itself,” he reasons. 

About two years ago, Leo Burnett Malaysia began implementing the Competency Programme, a scheme that covers Leo Burnett offices worldwide. Management and staff are rated on their skills and performance, meaning that how much bonus a person gets is not linked directly to the company’s macro financial performance (i.e. there’s no flat amount for all staff) but instead it is tied to that individual’s own performance. 

Leo Burnett wants the disciplines to work together and contribute to a common revenue pool, but at the same time, its Competency Programme seems to encourage individualistic pursuits. Wouldn’t there be tension? 

“There would be tension if you don’t have a system which, at the end of the day, financially allows each unit to get revenue for its contribution,” Cadell replies.  

“What we have is an internal accounting system which makes no difference in the total number, but it does mean that everyone is helping everyone else because they know they get something for it.” 

On the progress of the Competency Programme, he says that just over half of the people at the KL office – from top to middle management – are now on incentive-based compensation. “This year we’ll put about 10 to 15 per cent more staff on that, and next year we’ll cover the whole agency,” he projects. 

Leo Burnett has done well at the local Kancil Awards for years, but it is now facing stiff competition from the likes of Saatchi & Saatchi and Naga DDB.  

Cadell is fully aware of this. “Last year was the first year in six years where the gap between us and other agencies closed. We want to put that gap back up. I have full confidence in (executive creative directors) Yasmin (Ahmad) and Ali's (Mohamed) (ability) to continue to drive towards that,” he says. 

Reorganisation to be announced 

LEO Burnett Advertising Sdn Bhd, whose clientele has expanded significantly over the years, is now looking at ways to address the inevitable issue of being faced with conflicting accounts. 

Managing director Charles Cadell says the agency expects to make an announcement by the middle of the year on a “reorganisation”, but he declines to reveal more. 

Parent companies of locally-based agencies sometimes handle the latter's globally- or regionally-aligned accounts, so the local offices have to let go of existing clients which are in the same business as the incoming clients.  

Various agencies have worked around the problem by setting up second-tier or sister agencies to service the clients involved. 

Although it is a multinational, Leo Burnett Malaysia’s billings come mainly from local clients (about 75 per cent). “We’ve never been in a position where we have to turn away a local client because of a multinational, though occasionally we have two competing multinationals and have to make a choice between them,” Cadell notes. 

Last year Leo Burnett Malaysia had to stop working for Carlsberg, its oldest client, because it took on the regional Anchor account. The previous year it had to give up its BMW account in order to handle Honda, also a regionally aligned account. 

 

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