Five years ago, Heinz stunned the marketing world by slashing its product advertising budget and moving into direct marketing. At the time, the decision was considered bizarre, unjustifiable, even dangerous. So much has changed since then that these days it would scarcely cause a ripple.
But last year, Heinz carried out another change which, although not on the same scale as its original decision, could have important ramifications within the direct marketing industry. The company switched the contract for producing its Heinz At Home magazine away from WWAV Rapp Collins and into publishing agency Premier Magazines. (In fact, Redwood Publishing was given the business, but after Redwood released information of the win to the business press without permission from the client, Heinz gave the account to Premier).
“Why go from a DM agency to a contract publisher as lead agency? It is about how they talk to customers once they have established a database,” explains Craig Waller, managing director of Premier.
Across the publishing agency sector, such changes are seen as part of an important trend. The purposes for which a customer magazine may be produced have become more complex. Understanding who the magazine should go to is now as important as the ability to create such titles. That is bringing about major changes within publishing agencies themselves.
“There used to be a dispute in companies about whether the magazine was part of corporate communications and PR or part of mar- keting. Now there is no doubt that it is owned by marketing and has taken its place alongside other media options,” says Waller.
Putting more emphasis on the first word – customer – than on the second – magazine – does have a number of key impacts on what is produced. It is too simple to assume that magazine defines a single proposition, when in fact it is a portmanteau description.
“We do lots of magazines which affect behaviour in different ways,” says Neil O’Brien, publishing director at The Publishing Team. “There is a broad range of objectives. If you want to increase sales – a couple of the titles we produce have very definite targets in terms of boosting sales from each magazine. With others, it is about making people feel the organisation views and treats them warmly.”
This can lead to a considerable diversity of approaches, even within a single client’s portfolio. Barclaycard, for example, is testing a series of magazines through The Publishing Team which reflects different customer segments. A totally different approach has been adopted by Midland Electricity, which inserts a magazine into billing statements that informs customers about the company’s services and products.
For the agencies concerned, one area which this diversity has put more emphasis on is measurement. “On every single magazine, we will have some sort of measurement device to prove to us and the client what the magazine has done,” says O’Brien. These may be hard measures – for one insurance client, magazines have led to sufficient new policies being written to cover the cost of production.
This underscores another major shift in the nature of contract publishing. Until recently, the business model assumed by most clients in considering a magazine was that of a print title. There was a belief that costs could be met from advertising revenues derived from third parties.
Almost single handedly, British Airways’ High Life magazine has created the impression that this is what contract titles are about. It remains the most successful in-flight title, attracting millions of pounds in ad spend every year.
But it is exceptional, not only because of its role within BA but also because in-flight magazines differ significantly from customer magazines.
“Their primary purpose is to inform and entertain customers who happen to be in one place for a length of time, so they are receptive. They can also underline the branding and positioning of the company,” says Waller. In the build-up to BA’s global rebranding, High Life was used to condition travellers towards the new global and people-based branding that was about to be introduced.
Segmenting customers is increasingly resulting in segmented customer magazines. This often results in the ending of a “one size fits all” approach in favour of tightly targeted publications. Royal Mail undertook a review of its magazines when it changed direct marketing agency. Following on from a move to Brann for loyalty marketing activities, it also switched both contract publisher and its brief.
“Before, it had one magazine for all. As its database has improved, it knew it could target different groups. The response level for one magazine trying to address all users of mail was weak, because Royal Mail was not able to do any targeting. It had to segment,” says Kim Conchie, group chief executive of Brass Tacks Publishing and chairman of the Association of Publishing Agencies.
Brass Tacks now produces four titles for Royal Mail, which cover different levels of responsibility. At the top end, Mailbrief is sent to chief executives and managing directors in the UK’s top 5,000 companies. “It is a strategic piece of customer communication in terms of changes of policy, the monopoly and so on. Royal Mail is perceived by top business people as expert in mail,” says Conchie.
Mailplan is also a strategic title, but for those people responsible for the use of mail for business purposes, such as direct marketers. Mail news goes to decision-makers on purchases of mail and franking machines, who range from managing directors of small and medium-sized enterprises to secretaries and PAs in charge of mailing in larger companies. Finally, Mailroom is aimed at mailroom managers in big organisations.
While Royal Mail has a need to build loyalty and brand image, it also has business goals for its titles. “The effect of the titles is amazing. They can do 3m of incremental business from each issue,” claims Conchie.
To some agencies, such developments are the outcome of the organic growth of the contract publishing sector. They also reflect a growing maturity among clients in how they use their magazines. As a result, some agencies have begun to recast themselves in an entirely new image.
“Some clients are entering relationship marketing on the basis of creative magazines or newsletters to specific customers. That is the second or third step of segmenting the database,” says Graham Lake, managing director of TPD. As might seem to befit a company which specialises in working for hi-tech clients, his agency is probably at the cutting edge of the change in contract publishing. TDP now describes itself as a customer communications agency, rather than a publishing agency. This aligns it with a more developed tranche of clients.
“Unless you have taken the first step of producing a communications vehicle, you cannot move on to segmenting. We’ve coined the phrase, second-generation publishing. The first generation was mass marketing. Over 50 per cent of our clients are now in the second generation of segmenting messages towards smaller groups,” he says.
If this has a familiar ring to it, it is because the technique already exists in the form of direct marketing. Understanding how to allow data to drive a brief and a communications process is affecting the type of people being employed by publishing agencies. It is also making DM agencies feel rather uneasy.
“Assuming it is to be part of a relationship building strategy, the key is customer focus. As a matter of course, you should view the role of a magazine from the customer’s point of view. Furthermore, you should normally use a magazine in the more developed phases of a relationship marketing campaign, not give it to everybody,” says Tony Wightman, managing director of direct marketing agency TSM.
He says that becoming data-driven is a concomitant of becoming customer-focused. And alongside that, magazine production will move into the hands of agencies which understand the customer.
“The skills involved are those which are appropriate to an agency whose job it is to guard the brand personality and proposition. If we are responsible for developing a relationship building campaign for one of our client’s brands, then we should develop the brief for a magazine,” says Wightman.
Within publishing agencies, there are mixed views about this trend. Waller agrees that, “there is huge potential for convergence between DM and publishing agencies”. The Heinz example provides a model for how that might work. At TPD, Lake says the relationship might not be an easy one, however: “There are areas where we are in conflict with direct marketing.”
But clear distinctions remain between the two disciplines. According to Lake, direct marketing is usually about a single sales proposition, which is a sales task, while magazines build relationships and loyalty, which is a marketing task.
Certainly, putting together a 16- or even 116-page publication requires very different skills to those involved in putting together a four-page mailshot.
The overlap, in terms of customer data and segmentation, is currently an area under dispute. At the moment, the benefits to clients are of better targeted and hence more effective customer magazines. In the long term, the benefits might be more for publishing agencies.
Lake says: “In the next five years, customer communications agencies and their variant will play a bigger strategic role than they have to date. At the moment, advertising agencies play the key strategic role. But communications agencies like ours are catching up fast.”