CAMPAIGN REPORT ON GERMANY: Rising to the challenge - Although German ad agencies are riding out the storm in these tough times, there could still be some further clouds on the horizon. Friedhelm Gieseking reports

Early in March, the creative cream of the German ad agency scene travelled to Berlin for the annual Art Directors Club award ceremony. It was the usual suspects who took home the most awards. This year, Jung von Matt came in first place while its long-term Hamburg rival, Springer & Jacoby, came in second, with Scholz & Friends taking third place.

The jury in Berlin evaluated and awarded the better part of a tough year's crop of the ad industry. As a result of the economic downturn, the expenditure for traditional media advertising shrank by 6.3 per cent in 2001, according to AC Nielsen. It was a year of cutbacks on spending and reduced profits.

Agency heads' opinions differ on the impact of 11 September on economic developments. Was it "the biggest excuse for mistakes made before", as Hubertus von Lobenstein, the chief executive of Saatchi & Saatchi in Frankfurt/Main, sees it? For Rolf Korner, the boss of the Euro RSCG Group Germany, however, has little doubt that it was a date that did have an effect on his business plans. "Our objective for 2001 was 18 per cent growth,

he says. "That we ended up with just 12.8 per cent was wholly due to the last quarter of the year."

Missing your growth target by 5.2% is not really such a bad outcome considering the economic circumstances. Despite the recession, German ad agencies did relatively well last year. Only two of the top ten networks reported losses in revenue (Scholz & Friends and DDB Group Germany). Others such as the long-serving number one, BBDO Group Germany, still enjoyed double-digit growth. There were lay-offs in the ad agency business, but they were few and far between.

Nevertheless, the ad community is experiencing the pressure of new challenges in an era of change and uncertainty. And it is only partly owing to the troubled economy that agencies have to react to the new needs of their clients and are facing more demands on their services.

Many agency heads see integrated marketing services as today's hot issue.

Clients have become much more serious about integration, which has been the buzzword of the business for quite some time. And agencies don't find it easy to come up with solutions that work.

"We understand the concept of integrated marketing services as working with the widest possible range of disciplines,

Korner says. "We see ourselves as the all-media agency network.

He points out, however, that improving effectiveness is not the sole reason for clients demanding integrated services.

Since advertisers have cut back on staff in their marketing departments, they have found themselves unable to control the work of the many specialist communications shops needed to implement an integrated campaign. So they let their agency do the job.

Florian Haller of ServicePlan agrees that there is a trend among advertisers to charge a lead agency with co-ordinating the contributions of communications specialists to an integrated campaign. "The big agencies, which are the only ones able to do this, have learned that it means restructuring their organisation and that considerable additional costs are involved in this process,

Haller says. He will become the managing director of the ServicePlan group in Munich when his father, Peter Haller, retires this summer. The agency is Germany's biggest independent since Springer & Jacoby sold a 35.5 per cent share of its business to True North. It has now established 18 companies offering integrated services under one roof in Munich.

Integration is an important issue in Hubertus von Lobenstein's view, too, but he sees something else as the overriding task for the ad agencies.

"The big challenge for us is to develop the quality of our work to a degree that our clients' chief executives will deal with us as equal partners who can make a valuable contribution to the progress of their businesses."

Another big question is how much advertisers are willing to pay for the service they expect from their agencies. "Clients tend to put pressure on agency remuneration and this is even more common in difficult times," Lothar S Leonhard, the chairman of the Ogilvy Group Germany and president of the GWA, the German ad agency association, says.

"I hope that agencies don't use the income from well-paying clients to make up for losses with others,

Leonhard adds.

But for many agency heads the problem is not advertisers trying to cut back on agency compensation. "Clients are expecting more service for the same money,

Peter John Mahrenholz, the manager at Jung von Matt in Hamburg, says.

"If we keep extending our service in terms of campaign integration, strategic planning and monitoring effectiveness, we will reach a point, sooner or later, where there has to be a plus in agency compensation too."

Sebastian Turner, the chief executive of the Scholz & Friends Group, supports his colleague's view that premium service deserves premium reward. "Quality has had its price since it was invented,

he says.

As salaries represent the bulk of agency costs, the financial officers of the shops can hope for a bit of relief now. Since the beginning of the economic slowdown, the market for agency staff is not as tight as it was in the boom era and new people may be hired for slightly lower salaries.

"The market for agency staff is certainly more relaxed, but you can never have enough top people,

Rainer Zimmermann, the chief executive of BBDO Group Germany, says.

Since everybody knows everybody in the relatively small German ad community, top creative people and consultants are very often found through personal contacts. Potential recruits are approached through agency links with universities and colleges while young talent within agencies is nurtured.

The willingness to invest in creative excellence is becoming stronger in the German market because agencies and their clients realise that there is a close relationship between ceativity and the effectiveness of their campaigns.

Today, for many in the German ad agency scene, improving the creative performance is as much, if not more, of a challenge than developing integrated marketing concepts.

And the creative community here has become more self-confident about the quality of its work. "The average German TV ad need not fear comparison with the equivalent ads from countries like Britain,

Matthias von Bechtoldsheim says. But really outstanding work is still rare in German advertising.

Von Bechtoldsheim is one of the founders of the young Berlin agency Heimat, which was crowned New Agency of the Year 2001 by a jury from the annual Jahrbuch der Werbung.

"Creative excellence breeds financial success,

von Bechtoldsheim adds.

"We are always looking for clients who share this view with us. And we would love it if some were from Britain."

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