Tuesday, June 27, 2000 - 1:34 p.m. EDT
(Also participating were Army Major General John G. Meyer, Chief of Public Affairs; Linda Wolf, Chief Executive Officer, Leo Burnett; Victoria Hudson, Executive President, Cartel Creativo and Bob McNeil, President, Images USA)
Meyer: Ladies and gentlemen, the first thing we want to do today is sign the contract. Then we'll talk. So what's happening right now is the secretary and Ms. Wolf are going to sign this partnership agreement, and then we will start the official activities. Let's hear it for the contract. (Applause.)
Good afternoon, ladies and gentlemen. Thank you for joining us today as we formally announce a major recruiting announcement, our new advertising partnership. Today's announcement culminates a business process Secretary Caldera and the Army leadership team initiated last August.
You all remember that we announced in January major changes to our recruiting and marketing communication efforts. Today's partnership is the latest in a series of recruiting initiatives that will lead our Army into the 21st century. We have the chief executive officers and presidents of our new advertising partners with us today, and they will be introduced momentarily. Now I have the privilege of introducing our own chief executive officer, the seventeenth secretary of the Army, Louis Caldera. (Applause.)
Caldera: Thanks. This is a "hooah" day for the Army. Today we are entering into a new dynamic partnership with a world-class U.S. advertising agency, Leo Burnett Worldwide, Inc. Leo Burnett's minority partners include Cartel Creativo, an independent 100 percent Hispanic-owned company that specializes in Hispanic advertising, and Images USA, a full-service marketing communications firm specializing in African American marketing.
Today's announcement culminates a year-long effort to reenergize the Army's marketing strategy, reposition the Army as a high-tech trainer and educator of America's youth, and transform the relationship we have with our advertisers.
Today's announcement is the realization of a six-month-long business process to identify the absolute best agency in the nation to help us sell young Americans on opportunities in the Army.
During this period, we invited full-service agencies and consortiums with at least $350 million in annual billings to provide information on their capabilities. Thirteen agencies responded. And after an intensive review of each agency's response, we visited six agencies that offered the kinds of capabilities best suited to our needs. Eventually through tough rigorous competition we narrowed this impressive field down to our ultimate choice: Leo Burnett Worldwide. We are confident in selecting Leo Burnett and its partners that we will have in place the agency team that will best help us to attract the right numbers of quality young men and women needed to meet the Army's recruiting needs.
Leo Burnett was named by Advertising Age as the 1999 global agency network of the year, and boasts a global network of over 280 operating units, including 94 full-service advertising agencies and numerous special marketing services covering direct, database and interactive marketing, sales promotion and public relations. Leo Burnett's clientele include world-renowned companies such as Kellogg, Nintendo, McDonald's, Coca-Cola and Walt Disney.
We are equally excited about the quality of the minority-owned agencies in the Leo Burnett partnership. It was clear to us that these agencies are truly full partners with Leo Burnett and that they will enable us to reach effectively those young African American and Hispanic American men and women who make up a major part of our marketing effort and our army.
This partnership will offer under a new more flexible performance-based contract with an estimated annual value of at least $95 million, or approximately $380 million over the contract's expected four-year life span. The new contract offers the Army greater flexibility to work with other specialty or niche firms when our marketing strategy so dictates, and it establishes a compensation structure that will reward Leo Burnett for strong performance.
To complement this new partnership, we have undertaken several new strategies. We have created a marketing strategy group staffed by private sector experienced marketing professionals to help guide the Army's marketing strategy. Likewise, we have developed a robust market research capability to help us keep our finger on the pulse of America's youth -- their attitudes, aspirations and needs. This research will also help us better understand to whom these young people turn to for career advice.
And we have expanded our efforts to target new markets with major new efforts, to help would-be soldiers qualify for enlistment, to offer opportunities of special interests for college students, to guarantee recruits good civilian jobs once their enlistment ends, and to help soldiers obtain technical skills certification and educational degrees while they serve.
Many of these initiatives are well under way. Others will be ready to implement in the very near future. Together they encompass a major revamping in how the Army communicates with America's youth. I am confident that these efforts will help us successfully meet the recruiting challenges of this new century. The partnership that we form today will prove to be a major factor in that success, and for that reason I am pleased to welcome our new agency partners, Mrs. Linda Wolf, CEO of Leo Burnett, Mr. Bob McNeil, president of Images USA, and Ms. Victoria Hudson, executive president of Cartel Creativo. Ladies and gentlemen, let me introduce Ms. Linda Wolf, the senior member of the Army's new agency team. (Applause.)
Wolf: Thank you. Thank you, Secretary Caldera for the opportunity. And the Army team -- I will tell you we are so excited about this opportunity -- not only because obviously it's a wonderful business opportunity, but frankly the opportunity to work with U.S. Army, a premier U.S. institution, is absolutely something that we have thought about and wanted to do for a number of years.
We worked very hard during this entire review process. As a matter of fact, it was a wonderful team. And the review process is something that at times can be frustrating. In this case it was one where the Army was so aligned on what they wanted to do, and with their entire mission of how they wanted to take the Army forward. So from the beginning it was a process that we found very exciting, with a whole lot of potential. And we think together we can really find the right target at the right time and the right medium and really move the Army marketing forward.
So we are really proud again to work with this institution, an institution that has been around for 225 years. And we think that going forward into this new millennium people will be very surprised at all that we are able to do with this wonderful institution. So thank you very much.
Now I would like to introduce Victoria Varela Hudson, who is the executive president of Cartel Creativo. I got the name right. (Laughs.)
Hudson: When you are a recent immigrant in this country you get used to people mispronouncing your name. But nice to meet you guys. I am Victoria Varela Hudson. (Speaks in Spanish.) It is really an honor to be here today, as a Latina, as a citizen of this country. This review process has been very, very interesting -- you get to know people really well during the review process, and you get to know their soft underbelly. Well, I've got to tell you folks you have got to be real proud of having these people, because they really believe in the diversity of America. They believe in reaching out to all of our youth and helping build them into leaders. And so I am very honored to work on this team. Thank you. (Applause.)
Wolf: And now I would like to introduce Bob McNeil, who is the president of Images USA.
McNeil: Good afternoon. The secretary said it's a great day for the Army, and I think it's a great day for the minority advertising community. For three world-class firms to come together and form a partnership for a great institution I think really shows how collectively our strengths can promise us a great opportunity in the future. Images USA is an independent ethnic advertising agency. We are headquartered in Atlanta, Georgia. We have been in business approximately 11 years. We currently share McDonald's as a mutual client with Leo Burnett, and have had an opportunity through this review process to really understand our true partnership, and to really understand how a partner thinks. And I think that's going to lead to our success in this relationship.
So we look forward to a mutually-beneficial relationship with Leo Burnett, with Cartel, and with the United States Army. Thank you. (Applause.)
Meyer: And now Secretary Caldera will moderate the questions.
Q: Why didn't you stick with your current advertiser?
Caldera: Well, we -- both the Department of Defense looked at many things related to recruiting, including advertising, and we did our own marketing and advertising study. And there's a number of things that we found that we wanted to do business in a different way, that we wanted to have a performance-based contract that gave the advertiser an incentive to put their very best people on our work, because there was an upside to them. And so as we changed many things about how we did advertising -- the research foundation for the advertising, the marketing strategy, some of our many initiatives, we thought it would make good sense to go out there and look and see who was the best agency that could help the Army communicate the opportunities we have for young Americans. And so we decided to compete our business. We invited our existing agency to compete for the business, as well as communicated to many other agencies that we are very serious about doing a complete, thorough, top-to-bottom review to find the best partner out there available. Our current agency decided not to compete in this process. But we found an agency that we think is going to do a terrific job for the United States Army.
Q: What does a performance-based contract mean here? Does that mean if you get more recruits they get more money?
Caldera: Absolutely. It means you tie the compensation not just to how many commercials you produce, how many times they are shown on the air; but we want to find ways to tie it down to, did we meet our enlistment goals? Were we successful in doing what it is that we need to do? -- which is putting young people in uniforms, getting them trained out there, serving around the world.
Q: If I could follow up on that, could you give us a little more detail. I mean, would it based on the number of recruits or do you have a formula in place that you can describe for us? And then as a follow-up also, could you describe a little bit about what division you might have if you have one at this point for what kind of advertising changes you will make?
Caldera: Sure. There were many things about the way that we used to do our old contract. And some of this, frankly, I am going to have to tell you is just technical government jargon. It was a requirements contract, which means you have got to have an order before the order can be filled. It limits the flexibility of the agency for example to go out there and invest some of their own resources in coming up with something that they want to pitch to you because they won't get compensated for it. So wanting to get away from that requirements contract was part of our goal. It limited our flexibility. It did not allow us to go out and hire a cartel if we wanted to, because all of our business had to be directed to one agency whatsoever. This new contract has more flexibility for the Army. If there is an Internet company that we want to do business with that is not part of this team, we can talk to them independently if there is something we want them to work on. And so it was restructuring in that way and finding ways to build in performance bonuses that was at the heart of this new kind of a contract.
And now having gone through the selection process of course, at this point what we will do is we will begin to marry up our marketing professional from our marketing strategy office, the research that to date has been done by Rand on youth attitudes and needs, and the creative capabilities of our new advertising partners; and through that process begin to start to shape what will be a campaign. And you will see new advertising on the air by this fall.
Q: Was there a particularly catchy slogan or idea that made you decide on them?
Caldera: I can tell you that I personally was not part of the selection process, just in the way that we are structured, and so I can't answer that question for you.
Q: May I ask Ms. Wolf then --
Caldera: Why don't we ask -- yes, absolutely.
Q: Is there a particularly -- you know, is there a slogan you have got in mind or --
Wolf: Actually, you know what, during the process it's really all about our thinking and basically how we go about looking at a situation and coming up with new ideas. So really the purpose of the process is to get an understanding of how we work. So in terms of a specific slogan, it's not about that. It's about our overall thinking on how we would go against this target to really get results.
Q: Do you have a specific slogan?
Wolf: We had some recommendations that we came up with, but again they were only to show our process of thinking, and not to say, This is exactly what you need to do. Because the one disadvantage of a new business process, if you don't get to work totally together all the time -- and that's the way we work with our clients day in and day out. So you want to be able to now -- now is the place where we start getting together day in and day out with the Army and together coming up with what we think the solution is.
Q: Can you give us a couple of examples of what those were?
Wolf: Actually, no, I really wouldn't, because there were a number of different examples, and I think that probably right now we don't know where we are going to land, and I think it would be premature frankly to do that.
Q: Will you change the current slogan, "Be all you can be"?
Wolf: Actually I don't have an answer to that yet either, because again looking at the target, understanding what they are all about, the point is being relevant to your target. And we still have more work to do there to find out what is the most relevant message and slogan to that target. So we don't have an answer to that yet.
Q: It seems pretty clear that advertising is effective in getting consumers to choose Coke over Pepsi or McDonald's over whatever, and that's a decision that will affect lunch. But if you are asking people to make a much more profound and difficult decision, that's a different kind of skill, different kind of task. What are you going to do differently than you would do for McDonald's or whoever?
Wolf: Well, actually -- I mean, some of the marketing discipline in terms of thinking about what the connection a consumer, or in this case a potential recruit, might have with the Army or a brand, that whole process is something where as we understand it, when you come up with a relevant message it's a way to tap into and get some connection with in this case a potential recruit. So you are trying to build an emotional connection with them, a bond with them, and get them to start to be a believer in the Army. It's not -- obviously it's not a split-second decision; it's something that builds over time.
The other thing you want to do is be able to build a relationship with that potential recruit. So the nice thing about the world today is there are so many technologies and tools from a marketing perspective that you can use to build those one-on-one relationship, and it's over time. And it's also not just about the potential recruit; it's also about all the influencers on that recruit -- whether it's the parents, guidance counselors, recruiting people -- I mean, it's all those -- all that comes together, and what you want to do is have a seamless message out there that can constantly reinforce what we think the benefit of the Army is. So it is much more of a long-term kind of decision than a short-term as you are talking about.
Caldera: Let me just add to that. Immediately after this announcement, they are going to go roll up their sleeves and get to work. There are members of their team who came down not knowing that this announcement was going to be made today, but they are literally going to sit down and start working on this account today.
The Army has a great product. We know that we have got a great product. We hire 80,000 young men every single year just for the active components alone, and we train them in over 250 different career specialties. Seventy percent of them have application to civilian jobs. So this is great preparation for life. We know we have got a great product. We have got record retention. So when they come into the Army they stay in the Army. Our challenge is to get those young people to come into the Army. It's to communicate what those opportunities are to serve in uniform, and it is to lower some of the hurdles for them that are the things that keep them from taking advantage of this opportunity -- understanding what life is going to be like as a soldier, that you are going to have friends, that you are going to be taken care of, that you are going to get to travel and see different parts of the world that many of your neighbors can only dream of visiting and seeing. And so both expressing what those opportunities are to those young people, capturing their imagination, building that personal relationship and lowering the sense of some of the fear and some of the hurdles that they have to overcome to make the decision to take advantage of those opportunities -- those are the kinds of things we are going to work on.
Q: Can you tell us about the disinclination of American youth right now to join the military, and the barrier that that currently presents to you in your task of getting the men?
Caldera: Well, take for example we have seen some of the trending down in terms of interest in military service. But as we go out and start looking at some of this research and start looking, there is actually a pretty high interest level in the military -- young people, many of them do understand that you can get great skills, training opportunity, leadership, get physically fit, get some self-discipline by being in the military. So parts of the proposal are something that they are very much interested in. They have other questions. They want to know, Is it going to be physically too hard for me? Is the pain worth the gain? Am I going to have friends? Does the drill sergeant yell at you? Sometimes it's lowering the hurdles on some of those kinds of concerns that they have.
Or we may not be communicating to the young person who is looking for that technical training, that in fact they can get the training in the Army, that if they go try and get it at a computer school they're going to end up paying $10,000 for exactly the same training -- we'll give them the training and the experience. It's communicating that that's important.
Q: You said you were looking for the best agency in the nation for the Army. And you excluded -- and your search excluded minority agencies as prime contractors --
Caldera: No, we didn't --
Q: -- as prime contractors in this search. Are you sure that you have the best agency considering your exclusion?
Caldera: Absolutely. First of all, this is a very large complex account. The products are not just for the Army -- they're also for the Army Reserve, they're for the National Guard, they are for ROTC. There are surge periods of the year, such as the end of the year as young people are graduating from high school that are critical periods. There are things that we produce to support our recruiters, the materials that they need to work with, all the way to the things that are interactive on our Web site. And so you have got to have a firm for which a $100 million account does not represent the entirety of their business, or that is too much a financial risk both for them and the army. You have got to have a firm that is sophisticated and experienced enough to handle the business of a $70 billion organization.
What we said is you needed to have a firm that had about $350 million in billables, so that at most we would represent about a third to a quarter of their work. But that could have been a consortium of firms including minority-owned firms who are not excluded from coming forward if they had those $350 million in billables.
Q: Forty percent of your recruits are minority, and you didn't look -- as a result of that $350 million you didn't look at any minority firms as prime contractors.
Caldera: -- there's no -- there are no -- a minority firm could have put together a consortium to come forward. But, as you can see, we have selected a team that has exactly the kind of representation capable as you want.
Yes, sir?
Q: So you say 100 million is the budget?
Caldera: Its average is about 110 million. I think right now we are projecting about $95 million. But it will be in that 95 to 110 -- maybe a little bit more over the next few years. If we have the ability we will -- as you know, media prices have been increasing. In order to just maintain your effort, you actually have to increase. But we will work through that as we develop the POMs [program objective memoranda].
Q: Is that the amount that's going to Leo Burnett?
Caldera: No, that's the amount that this contract is worth.
Q: Mr. Secretary?
Q: Or Leo Burnett?
Caldera: Well, there are costs obviously associated with that as well as their time in production and talent and the other kinds of things that this encompasses.
Yes?
Q: Where does the Army stand right now in meeting this year's enlistment?
Caldera: We're about 3,600 short as of today in the 80,000 that we had to recruit this year. If you will recall, we were about 6,000 short last year, when our goal was 75,000. This year our goal was 80,000, and at this point we are about 3,600 short. But we are making a major push throughout the summer. We think that we can make some of that up, and that we may come very close to meeting our recruiting goal for the year.
Q: Is your -- back to the performance-based contract, which I am still not exactly sure I understand -- if the Army does not meet its recruiting goals, are your contractors penalized?
Caldera: No, usually it's built in a sense of incentives for performance.
Q: You do make it plus -- what do they get?
Caldera: They get more money. (Laughter.) And in America that's a great incentive to do more.
Q: They help us --
Caldera: I'm afraid that I don't have the specifics, but we can get to that information, kind of a little bit more about how the contract is structured and what those specific incentives are.
Wolf: And I would just add -- I mean, in terms of the advertising business, incentive-based compensation is exactly what the business is all about now, and it is because the business is all about resolve. So from an advertising agency perspective we want that, because it shows that work we are doing is getting results and we want to be rewarded for doing that. And in terms of talking about the $100 million, obviously with Cartel Creativo and also Images USA, that money is also going to them. So this is not just Leo Burnett, when you were talking about the --
Q: Yeah, can you break it down some more?
Wolf: No, actually I can't break it down real specifically at the moment. But I can tell you that it's not all heading in one direction.
Q: Can we talk to the two minority representatives and ask how your strategy for the groups that you will be targeting, how you envision that -- how do you reach Hispanics? How do you reach young black kids who may not want to play?
Hudson: We are in the process, as Linda said, of really rolling up our sleeves and crunching all that. As we come up with the winning strategy, we will definitely share that with you at that time.
But I think that you would not respect us if we told you today we had all the answers.
Q: No, but hopefully you have some ideas?
Hudson: Yeah, we have all worked very, very closely in these past few months and done a significant amount of research. And actually when we leave you today we will be doing more --
Q: But the idea is I think we are looking for some concept --
Q: -- tell you his general approach in --
McNeil: I mean I think the idea of thinking process is part of the reason why we were selected to be a part of the team, and it's the idea process that I think has brought Leo Burnett and our team to this effort. We don't have ideas that we can volunteer to you today because they are still in the formulation stage. It's a part of us creating this process and coming up with a winning idea, and idea that works for everybody, an idea that is mutually beneficial for the Army -- that's the process that we are beginning right now. So I don't think it's -- I don't think we can share with you what those winning ideas are, because they are in a concept stage right now.
Hudson: The one thing I would add to that though is that what I feel has been unique about this process is that Hispanic hasn't been strategized or researched in a vacuum; either has African Americans --
McNeil: Correct.
Hudson: And actually we have worked very, very closely as an integral part -- not as just minorities, but in all aspects of grass-roots efforts of advertising, of marketing -- everything -- to make sure that regardless of language or regardless of shtick, you know, that really it is integrated across all parts.
Q: There's great diversity among the Hispanic community nationwide. Probably the message that might reach Hispanics in Miami is different than the one that is going to reach California. Has that been assessed already?
Hudson: Oh, yeah, I think you are absolutely correct. We can never assume that it's one size fits all -- absolutely. And, you know, as Linda was mentioning, with the advent of technology, with the advent of the growing outlets of minority media, we are able to reach and, you know, we are not going to be stereotyping in any one aspect.
Q: Has there been any commitment to increase the portion of the -- (inaudible) -- advertising aimed at minorities as compared with aimed to the general?
Hudson: Oh, yeah. There's no limits. I mean, nobody has set a barrier for us and said, "You will allocate X dollars" or this much. It's whatever it is going to take to do the work right.
Q: Maybe you misunderstood my question. My question is: Are you going to increase the percentage of Army budget right now that is going to minority advertising as compared with that that is going to general population advertising?
Caldera: Let me -- first of all, we have already increased the Hispanic advertising budget over the last couple of years, and -- but it is also an important part of our general marketing advertising, our efforts to reach out to minorities and the diversity of our nation isn't just limited to the piece that may be specifically focused on Spanish-language media or on specific specialty, African American magazines or stations or those kinds of things. And so we have got an Army that is very diverse. It is 30 percent African American; it is about 8 percent Hispanic. We know we have an under representation of Hispanics, and that is potentially a growing market for us that we need to do better going forward. And so we are going to focus part of our efforts on that. But we also believe that the Army needs to represent the diversity of our nation from every region, every background, all groups, men as well as women. And so we want good, healthy general market advertising that communicates that this is a place where they are welcome, where their talents will be put to good use, and that they are going to walk away better citizens, better individuals with a chance to succeed in life at anything they do, because of this experience they have had to be a soldier in the United States Army. Thank you very much.
Meyer: One more question -- that gentleman back there --
Q: This is a question for Ms. Hudson -- I am not sure if you can answer this or not, but you know talking about what Mr. Caldera mentioned, that critical period after high school and you are looking for a job. For Hispanic Americans, whether they are in an urban area or out in rural areas of New Mexico, do you find the need for expansion in your experience has been to go toward television, Radio or the Internet in terms of trying to reach a more bilingual audience? Where are people trying to concentrate now?
Hudson: Actually that's a great question. And I'll try to answer it in three sentences or less. But I would love to talk to you more at length on that. The advent of a lot of new media is coming out -- magazines reaching the bilingual Hispanic youth are beginning to come out on the different coasts -- there is one here in New York for -- (inaudible) -- kids, there is one in LA, et cetera. TV -- you are seeing now Spanish coming into English-language media; English going into Spanish-language media. You are seeing a fantastic evolution, and it's going to be really exciting to see what we (net?) out with. Thank you.
Meyer: We do have some subject matter experts and Army senior leaders that have been involved in this process, and some other people involved in the contract that we can follow on with any technical questions you may have. We appreciate your all's support, and thank you all for coming.
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