M&A tones up its local performance

Outdoor’s continuing attempt to take a bigger slice of the advertising cake took another step forward this month – but there was a human cost.

Mills & Allen has axed its direct sales operation, making 41 people redundant out of a total salesforce of about 75.

Direct sales, or local sales, involves selling small numbers of inferior posters to local advertisers, often on long-term contracts of up to three years.

It is a means of selling panels tucked away in poor positions which cannot be included in national poster packages aimed at blue chip clients. It can be a regular stream of revenue, if local advertisers pay by direct debit over a long period of time. Small businessmen are also less likely to know about competitive advertising rates, and may buy at a premium.

But there is a huge administrative burden in relation to the size of the deals. Direct sales staff must find new business, oversee the artwork, as well as chase bad debts. There are tales of direct sales executives “stealing” better quality panels from packages, thus downgrading the flagship packages.

M&A chief executive David Pugh says: “Direct sales were taking up 55 per cent of costs, but bringing in only seven per cent of the revenue.”

He argues that it was also inflexible – direct sales staff were only able to offer local advertisers a few boards and could not handle the progression to bigger regional, or even national, campaigns. For example, a car manufacturer like Vauxhall might run a national poster campaign for a new model, while at the other end of the scale the odd board would be used by a local garage. However, in between there were few regional campaigns sold to big Vauxhall dealers. They would be likely to use press instead.

Under the new system, called regional sales, Pugh wants staff to sell outdoor as a medium, with the skills to sell it over regional TV, press and radio. The scheme will be run by former head of direct sales David Glendinning, who will report to Kevin Shute, former director of national sales and now the new UK sales controller for both national and regional.

Rival contractors question why M&A took so long to rationalise. “I don’t why know it didn’t do this earlier,” says one.

Pugh admits: “It’s probably right. But organisations develop a momentum of their own.”

Some executives within M&A say they have been pushing for this restructure for two years. There was, perhaps, a certain amount of internal rivalry between the regional and national sales departments. One insider even argues that Havas-owned M&A hung onto its old ways because of the French culture of direct poster sales, which suits France’s more disparate geography.

The arrival of Lawson Muncaster from Eurosport as the new sales director in March was certainly a catalyst for change. There is also the argument that as more of the inferior boards were sold on long-term contracts of up to three years, there was no need for such a big sales team.

Pugh says: “Of course, Havas wants us to save money. It wants to improve the profitability of M&A. But this is not cost-cutting. We are using our resources more intelligently to create more profit.”

He reveals that M&A, the only contractor to employ its own bill-posting force, rather than sub-contracting, is planning to put this in a new operating company from January 1. The operation will be partly owned by sister company Sky Sites, the airport poster contractor. By bringing in other shareholders, the average posting price comes down. Eventually Pugh wants to sub-contract this service out to other poster companies.

Events at M&A show how important it is to get the best of both worlds between local and national sales. Rival Maiden Outdoor sells direct only on a reactive basis. It is putting more resources into the six-sheet market, following its purchase of six-sheet contractor Adlight, but it is also testing two methods of selling direct. At More O’Ferrall, the bus shelter poster contractor, there is slightly more emphasis on direct sales to fill the older, four-sheet boards in out-of-the-way bus shelters with local advertising.

TDI, the US-owned bus and London Underground contractor, makes the highest proportion of revenue from direct sales – 15m out of a turnover of 80m. Yet the emphasis is still on the big regional clients.

Andy Moug, regional sales director, says the objectives of his staff are to target a small number of big regional advertisers in each territory, “service them to death”, and then pick up smaller deals at the edges.

Regional advertising looks likely to be the next battleground for outdoor in the coming three-to-five years. Pugh argues that although outdoor takes five per cent of the national advertising cake, among advertisers in only one or two TV regions it manages just one per cent.

However, the outdoor industry faces stiff competition. Media owners such as EMAP are pulling in regional youth advertising across the North with their new radio stations; cinema advertising has shed its image as the medium for the local tandoori restaurant; and regional press advertising is enjoying a renaissance.