Great and the good

This year’s SPCA/Marketing Week SP Reputations Survey has some interesting findings: budgets are being squeezed and agencies are downsizing. But it’s not all bad news, as the smaller agencies are making their presence felt in the market.

Reputations are like soufflés – you can never be sure they are going to rise. But for six of the top seven agencies in this year’s survey, there is a degree of certainty about how they are viewed by clients. KLP Euro RSCG, Carlson Marketing Group, Tequila London, IMP Group, Triangle and The Marketing Store Worldwide have all spent the past four years in the top ten.

They have traded places with each other a few times. IMP has been on and off the top spot twice, for instance, while this is the first time that KLP has held it. But the consistency with which these agencies manage to score highly among users of promotional agencies, is a testimony to their skills and quality.

The agency with the most to celebrate, however, has to be Black Cat Agency. Four years ago, the then-independent agency was rated joint 16th, only making the top ten in 1999. It has since doubled its reputation score to take second place; remarkable when you consider the size and longevity of its rivals.

“I don’t know why Black Cat has done so well. When it got to number five last year we talked about it here and we didn’t understand it,” admits Black Cat joint managing director Stephen Callender.

Some explanations can be found in the survey results. At 12 per cent, Black Cat had the second-highest number of clients who had worked with and rated the agency highly in the survey. Callender says: “We do tend to get re-appointed by clients as they move around. We have one client who has appointed us five times over ten years. We do have a very good word-of-mouth reputation.”

This is most demonstrable in the fact that more clients in the survey had heard of Black Cat than any other agency, at 35 per cent. This was a significant result when compared with scores achieved by other agencies. Triangle had been heard of by 30 per cent, as might be expected of the SPCA/Marketing Week Best Promotional Agency of the Year. But apart from Tequila, which 33 per cent had heard of, all other leading agencies were known to under a quarter of the survey sample.

In business terms, 2001 has been an important year for Black Cat. After years of independence, it finally sold out to J Walter Thompson (JWT) in February. “JWT is a great match in terms of philosophy, values and way of working. It is not trying to hard-sell Black Cat to its clients, but the partnership will give Black Cat access to a new client base,” says Callender.

Just luck?

One result of the acquisition was Black Cat’s appointment by NTL to its customer acquisition and development account. This sizeable piece of business is leveraging Black Cat’s direct marketing skills as well as using its promotional expertise.

Callender says that the challenge has been to manage growth, having expanded from three to over 100 staff in the past decade. “We have had to change the way we work, but we have still managed to retain our friendliness and family feel. But there is always the danger that once you get on a pedestal, you will get knocked off,” he says.

For most promotional agencies, the major concern this year has been less their reputations than their bottom lines. Like nearly all marketing services, sales promotion has suffered from the same softening of client demand and investment. Downsizing has taken place, although at less of a rate than many direct marketing agencies have experienced.

SPCA chairman Matthew Hooper says that across the industry there have been concerns. “Like most agencies, our members have been hit by the downturn and the cautious attitude of clients. The decimation of the technology sector, dot-coms and telecommunications naturally triggers major concerns across a lot of other sectors,” he says.

Most SPCA agencies reported reduced client budgets. Much of the discretionary spending that is usually released in the second half of the year has simply not been used. But Hooper does not believe there will a long-term problem: “Brand building may not be a priority for clients, but building sales is. Agencies with the ability to produce activity in that area will benefit.”

There are positive signs from this year’s survey that promotional marketing agencies are relatively secure. When asked about their role in the marketing of products and services, 58 per cent of clients said it was growing, while 28 per cent said it had remained the same. Only 14 per cent said it was decreasing.

Favourable outlook

Looking ahead to the next 12 months, 54 per cent said this role would continue to grow, while 37 per cent said it would stay the same. That implies that existing budgets are relatively secure, although there is also evidence that agency incomes are likely to remain static – 49 per cent of clients said their budget allocation would stay the same for the next year, while 38 per cent expect it to increase.

A number of factors are helping promotional marketing agencies to weather the economic storm such as involvement in buoyant sectors. “It’s interesting to see that retail spending continues to grow. That is keeping the wolf from the door for m

any agencies,” says Hooper.

In a downturn, many consumers switch more spending to packaged goods and grocery products, as they cut back on eating out and leisure activities. Those brands and the stores that sell them are traditionally major clients for sales promotions.

The SPCA has actually seen its membership grow over the past year, but many of the new members are smaller, independent agencies. A rough estimate by Hooper suggests that while agency numbers have increased, the number of individuals represented by the SPCA has remained static. In other words, most agencies are slimming.

Some of the major agencies have seen their reputations dwindle. It is notable that the mean scores for the top five agencies this year are well down on 2000. Last year’s fifth-placed agency had a higher score than this year’s top-placed agency, for instance. Triangle and Marketing Store have both seen their scores halved in the past three years.

Other agencies have shown strong growth in their status. One of these is Joshua, which last year entered the top 30 for the first time and has moved into the top ten this year. This is an impressive performance for an agency trying to pull off the trick of offering a genuinely integrated communications proposition.

Joshua board director Michael Miley says of the agency’s reputation: “It starts from the premise that Joshua is a strategic communications agency which is solutions-driven. It allows you to deliver a stronger vision than other agencies, because you have a holistic view.”

The agency has benefited from some important client engagements. Consignia has appointed it as its below-the-line agency, for instance. It has also been offering a full service marketing proposition to Handbag.com.

There is clear evidence from clients that they do want a broader range of services from their promotional marketing agencies. Point-of-purchase marketing is used by 71 per cent of clients, with 69 per cent asking for direct marketing, 68 per cent promotional advertising, 50 per cent strategic consultancy and 47 per cent each interactive communications and event marketing.

But when assessing an agency, one factor still dominates – creativity. Creative execution was cited as being very important by 85 per cent of clients with 83 per cent saying creative concepts are very important. This compares with 73 per cent saying quality of account handling is very important, but only 33 per cent attribute the same importance to full service capabilities and 29 per cent to expertise across more than one discipline.

The most notable new entrant into the top 30 this year was Draft Worldwide, which achieved joint 11th alongside Saatchi & Saatchi, having not been placed at all last year. Draft Worldwide business development director Graeme Atha believes that the ability to access everything from direct marketing and event marketing to research and planning from a single agency is something which clients do value. The scores that Draft achieved this year appear to confirm this.

With the continued pressure on agency revenues, it seems likely that more integration – both planned and forced by recession – will typify the sector. Agencies that have embraced this as a central proposition may see the benefit in next year’s survey.

Methodology: Market Management Services interviewed a sample of 301 respondents chosen from Marketing Week’s circulation list. To be eligible for inclusion in the survey, respondents had to be marketers with responsibility for selecting or reviewing a sales promotions agency – working within one of the UK’s top 500 spender’s on advertising, as measured by MMS. Copies of the survey are available at &£95, including postage and packaging, from Emma Bathie on 020 7970 6301

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