Closer European integration may be a hot potato for politicians, but for the UK’s field marketing industry it is a vital ingredient in any recipe for international success.
The maturity of the industry in this country means the first point of contact for many global brands planning pan-European activity is a UK company. So competitive is the market nowadays that clients will expect the agency either to have offices across the continent or a network of credible partners who are experts in local retail trends and labour legislation – both of which can vary greatly between territories.
The UK field marketing sector has spent much of the past five years building a presence in Europe to meet its clients’ demands. Some organisations, such as CPM International, have chosen to acquire foreign companies outright, while others have formed networks with companies in important markets such as France and Germany where the expansion of the hypermarkets is slowly changing the retail culture.
CPM International chairman Tony Stratton says the situation in the UK where the multiples dominate will soon be seen across much of Europe, further squeezing his clients’ margins. He says companies have realised they must become more efficient and are using field marketing techniques to target their products better.
As part of the Omnicom group, CPM has the financial backing to expand its European coverage through acquisition, and already has a presence in 14 countries including Germany, where it has purchased PPD. This particular acquisition gives its clients, such as American Express, Hewlett-Packard, Buena Vista Home Entertainment, BT and Duracell, access to the emerging markets of Central and Eastern Europe.
Stratton says: “The UK model is not transferable but we can use our experience. Our development in Europe in recent years means UK sales now account for less than 40 per cent of our total turnover.”
Traditionally, it has been the food and drinks sector that has used the pan-European field marketing facilities offered by businesses such as CPM, but today the range of consumer goods companies using the UK field marketing industry’s knowledge and contacts overseas is much broader, from cosmetic and toiletry brands to those in the entertainment and IT sectors.
Field Marketing Association (FMA) chairman and managing director of FDS, Alison Williams, says: “Field marketing has been undervalued in Europe in the past, but things are changing. However, a promotion that works in the UK, such as a product demonstration, may not work so well in, for example, Spain, so you need local managers on the ground who understand the culture differences and can use the experience of the UK industry to adapt services.”
FDS is one of the growing number of UK companies to use a European field marketing network. It works closely with companies in Holland, Germany and France, and an Italian company may join the network within the next few months. ©
The Dutch partner TMG is 30 years old and had a strong presence across Europe throughout the Seventies and Eighties. As the market became more competitive it decided to specialise locally. It had to transfer its business and contacts in regional markets to its partners when the network was set up in 1994, but director David Overington admits this was the most economical way to offer clients a Europe-wide service. “Setting up a network was a cheaper option than buying up companies, and the decision on who is the lead partner in any Europe-wide promotion is taken on a client-by-client basis,” he says.
Last year, FDS was the network’s lead partner in a European initiative for Hasbro Toys, where all four companies were involved in a retail audit to assess the shelf space allocated to various toy brands by leading retailers.
Many UK field marketing companies have had to raise money to fund their necessary expansion into Europe and beyond, and this has led to a number of important corporate developments.
In January 1997, for example, eight-year old FMCG went public when it joined forces with Canadian giant Mosaic. Managing director Mike Cottman says the finance raised by the flotation enabled FMCG to cement relationships with partners it had worked with for a number of years in Europe, including Walter Field Marketing, a major rival to the CPM-owned PPD in Germany. He says: “We now cover 12 countries and in all of them are linked to the number one or number two in the market. The French and German field marketing industries are growing as the hypermarkets expand, while we have funds available to look at new markets such as Poland, Hungary and the Czech Republic.”
In an interesting move two years ago FMCG relaunched the International Field Marketing Association (IFMA). The IFMA had been run by CPM as an umbrella body for its international partners since 1990 but it was disbanded by the company in 1996. FMCG resurrected the name and uses the initials to brand all the companies in the Mosaic group. Last July it held an IFMA meeting in Barcelona attended by country managers from Mosaic companies in Europe, North America and the rest of the world. “We adopted the brand to help raise our international profile with potential clients,” says Cottman.
Another UK company to announce a flotation in North America is Headcount, which went public on the New York Stock Exchange in November as part of the Healthworld Corporation which estimates that the contract sales market in the US will grow from about 300m to more than 700m by 2000.
Headcount is a subsidiary of the Milton Marketing Group in the UK, and already has an unofficial international and European network through its sister healthcare advertising and sales promotions companies. But managing director Mike Garnham says much of the 12.5m raised by the flotation will finance an ambitious acquisition programme. He says: “We will take a controlling share in businesses in a number of countries and rebrand them Headcount. Plans are already at an advanced stage to take over businesses in the US, France, Germany and Denmark.”
By the fourth quarter of this year, Headcount hopes to raise more funds through a rights issue – known in the US as splitting – to further strengthen its presence in Europe and assist global clients that include News International, Royal Mail and United Distillers.
Headcount is about to engage in Europe-wide activity for United Distillers’ Gordon’s Gin brand, which it claims has been successfully re-launched in the UK. Garnham says: “Research in the UK found that few people between the ages of 30 and 50 drink gin because they perceive it as something their parents drink. It has been made more sexy by suggesting it should be taken in long glasses and with lots of ice, for example. Sales in this country have already improved and we are now looking to Europe.”
Most field marketing companies know how difficult it can be to transfer services that work in this country into other territories, so it is essential local managers can advise the UK arm co-ordinating European activity on a brand’s behalf.
Not only do language and cultural differences create problems, but social legislation can add huge costs to a campaign. By its very nature, field marketing involves employing large numbers of people and labour costs can differ enormously. For example, while employers in the UK pay National Insurance contributions for their employees, companies operating in France must pay much higher social taxes. In Spain, strict labour laws make it almost impossible to employ people on a temporary basis for more than six months, because after that workers are employed on a long-term contract and are entitled to large compensation payments should they be made redundant.
In Italy, where labour legislation is also tight, CPM uses co-operative workers who own their organisations and sell their services to the field marketing companies.
Ellert Retail has offices in Spain and Portugal, and carries out merchandising and product testing in stores. Managing director Rob Ellert says the problems caused by tough labour laws must be solved in the context of a retail market that is still a long way behind the UK. He says: “The essential difference in the Spanish and Portuguese markets is that there are not the multiples who buy centrally. Local account managers make the decisions, which can make our job even more difficult when employing staff.”
Many of the US-based manufacturers, which prefer to treat Europe as one market, need to be made aware of these cultural differences. Specialist IT field marketing company EMS works on behalf of Hewlett- Packard, Toshiba and Microsoft which want established UK companies to co-ordinate their European activity. EMS has a presence in more than ten European countries, with a controlling interest in businesses in France and Spain and a franchise arrangement in other territories.
Chairman Richard Thompson says: “Our core services are retailer training, product demonstration and account management, but in the IT sector your services must be flexible in different markets. In the UK, for example, PC penetration is still only 20 per cent of homes, and the majority of the sales are through multiples, while in Germany penetration is 30 per cent and the market is dominated by high street independents.”
In many European countries, field marketing is still carried out by advertising agencies, sales promotion houses and market resear-chers who can rarely match the specialist knowledge and experience that the UK field marketing industry has built up since the Thirties. It is this expertise that global brands are tapping into to fulfil their European ambitions.