Direct marketing has a good reputation. That might seem an unusual claim, but it is especially relevant when considering the results of this year’s Marketing Week Direct Marketing Agency Reputations Survey. Nobody can now deny that direct distribution and communication channels are leading business development strategies.
What is unusual is that it is the discipline of direct marketing which is often being embraced, not necessarily its practitioners. This is perhaps most evident in the split between the top tier of agencies which are rated by Register-MEAL Top 100 advertisers and the rest of the bunch. The top six or seven DM agencies suggest that reputations are consolidating around bigger shops, or certainly those which are aligned with above-the-line networks.
Unlike previous years, the tables have been compiled on the basis of unprompted mentions by clients of agencies they have either worked with or heard of. The Top 30 is based on the scores for agencies placed in the top three by those clients across all eight criteria on which they were asked to rate shops – creative ability, evaluation techniques, account handling, senior management, full-service capability, strategic planning, multidiscipline expertise and relevant sector experience.
(Last year, when interviewees were questioned on agencies used or heard of, they were prompted with a list of over 40 agencies.)
It is evident that the agencies which would claim to be the most dynamic in direct marketing and which make the most noise about their successes may not yet have got their message across to clients. The grouping of three agencies ranked 23rd epitomises this point.
BHWG has been one of the fastest-growing agencies in the industry, but only one in ten clients put it in their top three. Likewise Rapier Stead & Bowden, which surprised the entire marketing community with its massive Cable & Wireless win this year, was only rated highly by one-tenth of the sample.
Perhaps reputations are simply lagging behind current activity. Yet 24 per cent of the sample surveyed had heard of or used BHWG – only two per cent fewer than IMP. Conversely, only 17 per cent had knowledge of Smith Bundy Carlson, yet it was ranked third overall, while just 14 per cent knew of fourth-placed Lowe Direct.
One reason for this disparity between apparent success and peer group approval may be explained by the fact that direct marketing is often invisible. “There is a growing trend among agencies for those doing particularly well not to talk much about that success,” says Martin Bartle, spokesman for the Direct Marketing Association.
Smith Bundy Carlson is a prime example. By turnover, it would not make the top ten, yet clients rate it third best agency in the UK. “We have had a very successful year – our income is up 25 per cent,” says Jeremy Shaw, managing director of Smith Bundy Carlson and general manager of Carlson. “That has come from extra work we have been given by existing clients.”
This is one of the key differences between above- and below-the-line agencies and their growth. Big account wins are unusual, significant increases in budget from existing clients are not. Some of the client budgets now being directed through direct marketing agencies are sizeable, but they do not get reported because they are not subject to pitches.
Roy Boss, managing director of Brann, believes that size is increasingly a key factor in how clients choose their agency. “If a client is working on a large scale, they want to have an agency which can handle that scale, particularly because direct marketing can involve complex projects,” he says.
This score proves beyond doubt that DM is playing a bigger role in advertisers’ thinking, and that DM agencies are consequently playing a bigger role in clients’ lives. According to 57 per cent of the sample, their DM agency had played a growing role in the marketing of their products or services over the previous 12 months. During the next 12 months, 64 per cent said this role would increase. And they will be backed by increased budget according to 58 per cent.
Yet this growth is bringing its own problems. “Increasingly, members are reporting how difficult it is to recruit not only well-trained staff, but any staff of the calibre they require,” says the DMA’s Bartle. “How long can growth continue if the industry doesn’t pay attention to training and development?”
It is a problem of which WWAV Rapp Collins is only too aware. One of the two largest agencies in the industry, its consistent results in every category on which clients were asked to judge agencies show that it is possible to build the right skills across every area.
Chairman of the agency John Watson believes recruitment and staff retention can actually be improved by growth, because it offers employees new challenges. “As the industry expands and new clients enter, there are new things to do, new techniques to use. We have done a lot of work now in direct response television, with over 120 commercials made. So a creative with a couple of years’ experience can start work on press and mail, then some years down the line end up doing good DRTV,” he adds.
In most statements made about the adoption of DM, accountability is given as the prime reason. It is somewhat contradictory, then, that in this survey, 82 per cent of respondents said creative ability was very important when assessing an agency – the highest for any factor. Measuring effectiveness was rated very important by 80 per cent, while 62 per cent said quality of account handling was very important.
Rather depressingly, when asked about the importance of improved training and development programmes, 39 per cent said these were fairly important and 35 per cent said not very important. This does imply clients have not yet recognised the potential skills gap opening up which might compromise those creative, effectiveness and account handling skills they otherwise prize.
But as one observer puts it: “As long as an agency is giving the results the client wants, they are not worried. If they no longer get those results, they simply move to another agency.” If that sounds as if clients may themselves lack skills, this could be the truth. Although they want effective direct marketing, only 41 per cent said evaluation techniques were very important in assessing their agency.
This is even further reinforced by the influences on how an agency is chosen. Ninety per cent of the sample mentioned samples of an agency’s work, while 83 per cent said word of mouth – these were the two strongest influences. “Word of mouth is terribly important,” Tony Watson, joint managing partner of Lowe Direct, accepts.
“The client community is quite small and mobile. If you have a relationship and do good work, that helps. It is very interesting when we get invited to meet a new client and ask why they chose us – nine out of ten say it was because they spoke to somebody who recommended us,” he claims.
This does raise the interesting issue of the degree to which reputation works on the “transferable vote” principle. Lowe Direct was placed fourth overall by clients – a striking performance for an agency which did not exist 18 months ago. Of course, the rump of the agency is made up of ex-GGT Direct Advertising staff, which helps to give it credibility.
Yet GGT Direct has not suffered any negative effects, since it is ranked fifth, only just behind Lowe. It is hard to imagine an above-the-line agency being able to survive such a mass haemorrhage. Shaw at Smith Bundy believes this reflects the more complex nature of DM, which is less dependent on a single, brilliant individual.
“We always try to present ourselves as an agency, not a collection of individuals, even though we have had strong personalities,” he says. Indeed the agency’s founder, George Smith, and more recently its managing director, Wanda Goldwag (now marketing director of Air Miles), have shown that below the line can produce its own big characters.
But if any long-term trend can be read from this survey, it might be that consolidation is the way forward. Brann surprised many in the industry when it was bought for 44m-plus by the US marketing services group Snyder Communications. WWAV was bought by Omnicom last year, while Smith Bundy sold to Carlson this year.
The presence of five advertising agencies in the top ten must reflect the growing weight of direct marketing – and the fact that above-the-line practitioners are overtaking the historical below-the-line specialists. That Saatchi & Saatchi is rated more highly than a well-established specialist like Wunderman Cato Johnson is highly suggestive.
Judging by the nature of the relationship clients want to have with their agency, direct marketing is here to stay. Nearly two-thirds of the sample (64 per cent), said they now retained a DM specialist as their agency of record, compared with 25 per cent employing on a project-by-project basis and 15 per cent ad hoc.
This presents both a tremendous opportunity and a great challenge to the industry. If they can sustain standards and match the scale clients are demanding, there is a big future ahead for agencies. But confidence in agencies is sometimes thin, based only on how good the last campaign was.
Bartle believes this gives an even stronger reason for commitment to professionalism and raising standards. “The most tangible thing you can do as an agency to show that commitment to professional development is to join the DMA,” he claims. Given that 86 per cent of clients say they expect their agency to have membership of the DMA (and 72 per cent expect them to be members of the Institute of Direct Marketing), he may well have a point.
Copies of the full survey are available for 95, including postage and packaging, from Theresa Harvey on 0171-439 4222.
Brann is the top ranked agency across all criteria, followed by WWAV Rapp Collins and Smith Bundy Carlson.
The role of the agency is growing – 64 per cent of those surveyed said their direct marketing agency would be playing an increasing role in their activities during the next 12 months.
Surprisingly, creative ability and not accountability is paramount – 82 per cent of the survey said creativity was very important when assessing an agency.
Word of mouth and sample work are the two strongest influences when choosing an agency.
The vast majority of clients – 86 per cent – expect the agency to be a member of the Direct Marketing Association
The Response Show
More than 1,000 senior marketers are expected to attend The Response Show, which is being held at the Business Design Centre in London from October 21 – 23.
The event will feature a series of exhibits, seminars and showcases, targeting senior marketers who implement response-driven marketing campaigns. More than 100 suppliers of products and services to the response marketing industry will be exhibiting at the show. These include: Sitel, CCN and the Mail Marketing Group.
The show represents a convergence of above- and below-the-line activity, focusing on the planning, implementation and fulfilment of response-generating marketing. There will also be a series of seminars based on case studies from major brands including Abbey National, UPS and Frankfurt Airport.
Subjects that will be discussed at the seminars include: cross selling; can smartcards deliver loyalty; interactive marketing on the Internet; and customer promiscuity.
There are two main features of the show. The Interactive Marketing Theatre, sponsored by the British Interactive Multimedia Association, will comprise a series of interactive seminars designed to demystify the Internet as a tool for generating and handling response within a marketing strategy. The Precision Marketing Agency Showcase will involve 14 direct marketing agencies which will deliver case studies illustrating the elements of targeted response strategies.
The show is being organised by Centaur Exhibitions in conjunction with Marketing Week, Precision Marketing and New Media Age.