Ketchum Communications Inc.

views updated

Ketchum Communications Inc.

Six PPG Place
Pittsburgh, Pennsylvania 15222-5488
U.S.A.
(412) 456-3520
Fax: (412) 456-3588

Private Company
Incorporated: 1919 as Ketchum Publicity, Inc.
Employees: 1,200
Sales: $979 million

Ketchum Communications Inc. is an integrated communications conglomerate that includes the country’s fifteenthlargest advertising agency, its seventh-largest public relations firm, and its third-largest telephone directory operation. Privately held by its employees, the company got its start in Pittsburgh, Pennsylvania, and has retained a strong loyalty to that city throughout its history. In its first five decades, Ketchum grew steadily and, in the 1970s and 1980s, embarked on a program of aggressive expansion through acquisitions in other fields and in other areas of the world.

The company was founded by George Ketchum in 1919. Ketchum had worked in New York City for a fund-raising firm before joining the U.S. Air Force during World War I. After returning to his home in Pittsburgh following the war, Ketchum founded a public relations firm, Ketchum Publicity, Inc., with his brother, Carlton, and another partner, William Arther. The firm’s first major project was fund-raising for the Jewish War Relief Fund, after which the three were able to rent an office and hire a stenographer in September of 1919.

One year later Ketchum and his two partners fulfilled their ambition of entering the advertising business when they purchased the F. A. Ensign Company for $6,000. The business remained small, and in 1922 the Ketchum brothers sold out to Arther. Although they had not encountered overwhelming success with this particular advertising venture, Ketchum and his brother had gotten a taste of the business they would eventually come to dominate in Pittsburgh. They got a better sense of that business later in 1922, when the Ketchum firm picked up advertising work for two clients, Colonial Trust Company and Union National Bank. The company had achieved a certain level of solidity in its field by this time, with an expanded staff and roster of clients.

On May 22, 1923, the Ketchum company split into two parts to handle different aspects of its business. The fund-raising arm became simply Ketchum, Inc., and the advertising operations were renamed Ketchum and MacLeod Advertising Agency. The latter operation was named in part after Norman MacLeod, who had joined the firm in July of 1920, but ironically worked only for Ketchum Inc. and never was active in the agency that bore his name. In 1924 the firm’s name was changed to Ketchum, MacLeod & Grove, Inc. (KM&G), to reflect partner Robert Grove’s joining of the firm. George Ketchum and Bob Grove set out to run “a complete advertising agency business,” as they stated in their charter of incorporation.

Advertising business came slowly in the early days of the firm, and KM&G did not turn a profit for five years. The agency concentrated on clients in the Pittsburgh area and hired two experienced advertising people to provide the necessary expertise for the business. Throughout 1925 and 1926 the agency underwent upheaval as it was reorganized to affect more efficient operation; new departments were inaugurated, including an art department, a production department, and, two years later, a media department.

Early KM&G clients included National Radiator, Koppers Tar Products, Farmers’ Bank, and H. H. Robinson, a construction firm. In 1927 the agency began placing advertising on the fledgling medium of radio when it arranged for client Haller Baking Company to underwrite a continuing show. Its work for the National Fireproofing Company (called NATCO), a firm that manufactured clay tiles, brought KM&G more exposure in the national media.

By the end of the 1920s KM&G had developed its system of integrated account servicing, undertaken its earliest market research survey, and developed professional industrial trade paper advertisements. The firm had made significant progress in its efforts to convince Pittsburgh’s industrialists that they did not need a big New York advertising firm to get value for their promotional dollar.

Although the New York stock market crashed in October of 1929, KM&G did not start to feel the effects of the economic crisis until the early 1930s. The firm lost out on two counts: as a gesture of confidence in its clients, KM&G had held many stocks in companies it worked for—companies that became worthless after the crash; in addition, much of KM&G’s work was centered in the building industry, which was devastated by the Great Depression. Between 1931 and 1934 KM&G struggled to stay afloat. The company reduced salaries repeatedly to avoid laying workers off, and its four top officers went without salaries for four months in 1934.

In an effort to enroll paying customers, KM&G set out to diversify its client base away from the building trades in the 1930s, looking instead to insurance and natural gas. Altogether the company had 73 clients, which did business in 34 different fields. By 1934 KM&G had begun to show some signs of financial life, and two years later the company began to raise salaries toward their previous levels. In 1937 the agency’s billings topped $1 million for the first time. The company used vigorous self-promotion to remind business people of the benefits of advertising, as it attempted to carve out a specialty for itself in the world of industrial advertising and help its business grow even beyond its levels of prosperity in the 1920s.

In late 1937, however, the economy took another sharp drop, and KM&G was once again fighting for its life. The company worked to add new products from current clients to its roster of accounts. By 1938 40 percent of the company’s business came from one account, Kloppers, a chemical company.

By the early 1940s the inevitability of American entry into World War II had become clear, and KM&G began to plan for the conditions this would bring about, exploring ways its clients could exploit wartime emotions and shortages to increase their sales. In December of 1941, when the United States declared war against Germany and Japan in the wake of the bombing of Pearl Harbor, KM&G was prepared for the transition to a wartime economy. Nearly half of the company’s workers were drafted, and the salaries of the remaining staff were frozen at the command of the federal government. Nevertheless, the agency grew substantially during this period, reaching 57 employees by 1943. In the following year the agency’s billings increased by 26 percent.

At the war’s end, the enlarged KM&G moved into better office quarters in Pittsburgh’s Chamber of Commerce building. The agency continued to grow dramatically in postwar years. In 1946 it earned more money than any other agency in Pittsburgh, racking up billings of $3.9 million. By the following year Ketchum had more than 100 employees and ranked as the nation’s 19th-largest purchaser of advertising space in business publications. The company reached this level by adding divisions of several major national accounts, including Westinghouse, Alcoa, Pittsburgh Plate Glass, Rubbermaid, and Heinz.

KM&G boasted an extremely high rate of client retention, which helped the company to solidify its position as the largest advertising agency in Pittsburgh in the late 1940s. The agency’s ties to its brother company, Ketchum, Inc., which handled fundraising and was a competitor in public relations, became more and more awkward; during the latter partof the decade, the two concerns began a gradual and amiable separation. In 1949 this trend was formalized when Ketchum, Inc., divested itself of most of its stock in KM&G.

To meet its clients’ needs, KM&G began to establish more heavily specialized departments within the organization. Research and personnel departments were formed in the 1940s. By the end of the decade KM&G’s staff had more than tripled. In 1948 a radio and television department was established, signifying the growing importance of these new mediums in the advertising world. KM&G executives felt that they had waited too long and had acted too conservatively in embracing the use of radio. The company vowed not to make the same mistake with television.

In the 1950s Pittsburgh’s economic base began to boom, and KM&G grew along with it. The increasing use of television accounted for a large part of the agency’s growth. In 1951, when KM&G lined up the sponsorship of the first nationwide telecast of the National Collegiate Athletic Association football games for its client Westinghouse, the agency moved finally into the first ranks of the nation’s advertising agencies. Television allowed the company to shed its regional limitations and establish itself as a national presence in the industry.

After the Westinghouse broadcasts pushed agency revenues up by 43 percent in just one year, KM&G arranged nationwide radio and television coverage of the political conventions and election results on behalf of Westinghouse in 1952. Anchored by Walter Cronkite on CBS, the broadcasts featured commercials for Westinghouse products performed live by Betty Furness. With the increased activities this endeavor generated, KM&G billings topped $1 million a month for the first time in that year. Four years later the convention coverage was repeated. KM&G opened a branch office in New York City to help service its Westinghouse and American Gas Association accounts. For many years the New York office would lag in profitability behind its Pittsburgh parent and other company locations.

With its growing involvement in television, including the first national telecast of a professional football game, KM&G began to shift its focus away from the advertising of industrial products and toward consumer products. This shift mirrored the change in Pittsburgh’s business climate that was occurring during this time. By the end of the 1950s, 60 percent of the agency’s work was done to promote consumer products.

In 1958 KM&G continued its geographical expansion by purchasing an advertising agency in Washington, D.C. Field offices had also been opened in Baltimore, Maryland; Harrisburg, Pennsylvania; Columbus, Ohio; and Richmond, Virginia. By the following year the company had 62 clients, 350 employees, and annual billings of $29 million. In 1960 the company opened an office in Houston, Texas, to handle its account with the Gulf Oil Corporation. In that year the company also moved its own Pittsburgh facilities to a new, more spacious location.

The 1960s proved to be a decade of strong growth for KM&G as well. The company’s clients, by now thoroughly diverse, ranged from Calgon and Blue Cross of Western Pennsylvania to aluminum industry giant Alcoa. Rather than grow by seeking out new clients, the company expanded its existing accounts, developing further business from customer relations it had already established. KM&G also established a Yellow Pages operation in 1964 to place advertisements in telephone directories. These strategies resulted in a doubling of revenues during the first five years of the decade and a tripling to more than $92 million just five years later.

During the 1960s KM&G’s advertising campaigns, reflecting currents in the industry and in American culture on the whole, became more innovative and creative. With its background in industrial promotion, KM&G was not a natural participant in the unorthodox campaigns that earned the period its reputation as the “Golden Age” of advertising. The company developed a theory that every advertisement should provide its viewer with a “double reward”: the first reward was the quality of the product being touted; the second came in the method of presentation, which itself was supposed to be clever or pleasurable in some way.

To justify the growing costs of such high-powered advertising, the company began to emphasize its marketing and research efforts. In the late 1960s KM&G also expanded its Yellow Pages operation, which opened an office in New York City.

In 1969 Ketchum prepared the way for expansion into the international arena, buying Botsford, Constantine & Mc-Carty, Inc., an advertising agency with operations in the western United States, England, and Japan. With 160 employees and yearly billings of $22 million, the company became an autonomous subsidiary of KM&G, changed its name to Botsford Ketchum, Inc., and brought the agency a prestigious major airline account, Japan Airlines.

KM&G followed this acquisition with another move designed to increase the agency’s international reach, buying David Williams and Partners, a London agency, in May of 1970. Two more European firms, one in Germany and one in France, were added to the company’s operations by the end of that year, as KM&G attempted to establish a global presence that would allow it to retain and compete for business from the world’s largest companies.

In 1972 KM&G bought an advertising agency in Belgium, which it later sold. In addition, the company increased its holdings in the French market through a series of mergers. By the late 1970s the company had also expanded to Asia, increasing its Botsford operations in Japan and adding an office in Hong Kong. Along with its ownership of these international properties, KM&G formed alliances with advertising agencies in 38 countries around the world.

In addition to its geographical expansion, KM&G undertook a broadening of its domestic activities during the 1970s. The company bought Bachrach Advertising, which specialized in medical communications, and Meyers & Muldoon, which handled retail advertising. In July of 1978 the company purchased the public relations firm of a former KM&G employee who had started her own business. Carol Moberg, Inc., was engaged in consumer publicity. While KM&G was adding to its auxiliary services, the company’s core business, advertising, suffered a serious blow when it lost a major account, Stouffer’s, after the executive in charge of the client left KM&G for another firm. Stouffer’s was the largest account that KM&G had ever lost, 32 company employees followed the accounts to a rival agency.

Nevertheless, company revenues continued to grow throughout the 1970s. Operating in an atmosphere that stressed environmental concerns, consumer rights, and the necessity for accountability in advertising, KM&G began to evolve from its traditional role as a Pittsburgh company to a more global orientation. With its background in industrial and consumer products, KM&G also developed an expertise in handling food accounts.

By the end of the decade, KM&G billings had reached $271 million, and the company had 1,000 employees. It had become the 25th-largest American advertising agency, with clients such as Penn, which manufactured tennis balls, Hershey’s, and the Pennsylvania state tourism authority, for which KM&G formulated the slogan, “You’ve got a friend in Pennsylvania.”

With the company’s steady growth, KM&G’s corporate structure had become unwieldy. In 1979 the company reorganized itself to decentralize operations. It formed a holding company, KM&G International, Inc., to act as a corporate parent for 20 separate offices around the world, which were in turn given a greater level of autonomy. This reorganization was followed in 1982 by a further restructuring, as the company renamed itself Ketchum Communications Inc. The divisions of Ketchum Communications had their names standardized as well, to “Ketchum” followed by the unit’s function, such as “Ketchum Public Relations.” Units of the advertising agency also had their city’s names appended to their titles.

In addition to this switch, Ketchum continued to evolve geographically. The company’s public relations unit moved its headquarters to New York to make a stronger showing in the business’s center. In advertising, the focus had shifted away from Pittsburgh to operations on both of the coasts. Revenues from the West Coast, in particular, picked up. A big coup came in 1985 when the agency’s San Francisco office won a major automotive account, Honda’s luxury Acura line.

The advertising industry was swept by a spate of mergers in the 1980s, and Ketchum did not remain aloof. Beginning slowly in the early years of the decade, the agency increased its pace of purchases and acquired six separate companies in 1987. Firms bought included Hicks & Greist of New York and Mandabach & Simms of Chicago. In addition, the company purchased a sufficient number of companies to add to its public relations operations to give that branch of Ketchum explosive growth during the decade.

In 1988 Ketchum added a sales promotion agency, DiFranza Williamson, which was allowed to keep its corporate identity. The firm also bought Botto, Rossner, Home & Messinger, a health care communications concern. With its fast-paced and diverse program of acquisitions, Ketchum’s corporate structure had become unwieldy once again, and the company embarked on another program of streamlining and reorganization.

By 1990 Ketchum’s annual revenues had topped $1 billion for the first time, and the company’s activities were arranged into five basic parts: advertising, public relations, sales promotion, directory advertising, and international. In 1992 the company announced that, while its corporate headquarters would remain in Pittsburgh, its main advertising operations—after holding out in the company’s Pennsylvania founding city for more than seven decades—would be transferred to New York. As an integrated communications conglomerate with holdings around the world and a long history of profitable operations, Ketchum Communications Inc. looks forward to a bright future.