Agencies are by definition optimists. Consider the business model: they carry a high fixed overhead in staff and property costs. Large parts of their revenue are derived from ad-hoc projects. Any new or additional business has to be pitched for at additional cost to the agency.
In uncertain economic times, it is no surprise that agencies come under pressure. The downturn in advertising expenditure predates the historical events of a year ago, which means that most agencies had already taken the necessary steps to reduce their liabilities.
At the same time, they have been evolving their service proposition, spreading beyond promotional marketing to direct and digital marketing. These developments appear to have paid off in terms of client confidence in the sector, and in terms of agency reputations.
Ups and downs
Slightly more than half (51 per cent) of the 300 clients surveyed for this year’s Marketing Week Promotional Marketing Agencies Reputations survey reported that their agency has played a growing part in the marketing of products or services during the past 12 months. Only 14 per cent reported a declining involvement.
Looking ahead to the next 12 months, 35 per cent expect more involvement and only 12 per cent less. This appears to be matched by budget increases – 37 per cent say they will increase spending on promotional marketing, while just 13 per cent expect a decrease during the next 12 months.
Marketing Communications Consultants Association (MCCA) chairman Matthew Hooper says: “The agencies I have spoken to say there are signs of clients beginning to recognise that they can only cut marketing expenditure for so long before it begins to have a negative impact. So they have begun to increase budgets again.”
He believes that the flexibility and accountability of promotional marketing, which is increasingly combined with direct marketing in integrated campaigns, has helped to see the sector through. Certainly clients reported a demand for more services than just traditional sales promotion campaigns.
Promotional advertising is supplied to 82 per cent of clients by their agencies, with direct marketing and point of purchase supplied by 66 per cent. Other services being provided include strategic consultancy (46 per cent), customer relationship management (CRM) and public relations (PR) (43 per cent each), digital communications and events marketing (42 per cent each)
and customer loyalty programmes (41 per cent).
Reputations in this sector will clearly be affected by an agency’s ability to deliver across multiple disciplines. Asked to rate features that are important when assessing a promotional agency, full-service capabilities were scored at 3.2 and expertise across more than one discipline at 3.1 out of a possible four.
Despite this, more traditional capabilities retain their importance. Conceptual creative ability was rated 3.8 and creative execution 3.7, while the quality of account handling scored 3.8. There have also been increases in the scores given to strategic planning (3.2) and evaluation techniques (3.3), but international links are only rated 1.9.
The agencies that make up the “premiership” in this year’s survey – the top seven achieving average scores of more than 20 points – have all managed to pull off a difficult balancing act. While retaining their core promotional marketing skills, they have added broader marketing abilities. Creative edge has been maintained at the same time as planning abilities being increased.
“I hope our position is the result of awareness of our ability to deliver an integrated solution. There is a trend among clients to want this sort of facility,” says Phil Bourne, chief executive of KLP Euro RSCG. His agency has achieved the unique feat of retaining the number one position for two years consecutively.
KLP Euro RSCG was scored highest for the second year consecutively on strategic planning ability, expertise across more than one discipline and international links, while this year it also took the highest score for evaluation techniques. Its creative abilities received the second-highest score for any agency.
Bourne says of the agency’s status that, “it has been a very deliberate process of trying to reflect the changes we have seen going on in the market. We have been changing our products accordingly.” This has seen high-profile recruitment, such as the arrival of Mark Fiddes in a strategic direct marketing role and continued investment in interactive skills, where the agency now has a dedicated team of 25.
Bourne says: “The biggest factor this year has been the bringing together of KLP Euro RSCG and Euro RSCG Direct. That is a function of an acquisition made three and a half years ago, which this year has been actively brought together. We now have the same creative department and share the planning function. We are 90 per cent integrated.”
If one thing is most likely to affect an agency’s reputation in the current environment, it is the level of genuine cross-discipline integration it can demonstrate. The concept has been around for years, but few agencies have really stepped up to the mark. Budget squeezes and broader marketing objectives seem finally to be making it a reality.
Tequila London chief executive Paul Biggins says: “If we are honest, the industry has been talking about integration for ten or 15 years. Our position is now media neutral. We have specialist skills in a number of different disciplines – events, direct marketing, sales promotion, sponsorship, and digital. A typical scenario for us is to have clients working across most of those.”
Since being made chief executive of the London agency at the start of this year, Biggins has been working to strengthen this cross-discipline proposition. “I have upweighted the agency a lot in terms of its customer insight team of strategic and data planners. It now has a new person heading that and six new members of staff,” he says.
Reaching the top
Tequila London has moved into the top three after several years of steady progress up the rankings. It is rated joint first on account handling, second for full service and international links, and third for creativity, evaluation techniques and strategic planning ability. Surprisingly, its rating for expertise in more than one discipline has declined slightly, but this may simply reflect the profile of respondents in the survey.
“This year Tequila has won a lot of creative awards and has managed to reinforce its creative reputation,” says Biggins. The agency was the most awarded at the MCCA awards event and also picked up a Precision Marketing Response award, an Echo and a Cannes Lions Direct.
Another agency on the move is Joshua. Having reached the top ten last year from 15th place, it has now climbed to sixth position. Its best score for specific features was on expertise across more than one discipline, where it is ranked equal second, and equal third for full service.
Joshua London chief executive Peter Thompson says: “This has been a strong year for Joshua. In today’s market, there is a strong focus from clients on ensuring their marketing contributes towards return on investment. They are searching for promotional marketing strategies that they believe will convert passive consumers into sales.”
He identifies a critical area of the agency’s ability as connecting point of sale promotional activity with pre-purchase marketing. “In many cases, the purchasing decision is made a long way from advertising communications, that is, in the retail environment. Promotional marketing has to exploit those things to get a purchase,” he says.
Point of purchase work carried out by Joshua for the Post Office has been working particularly well. “Doing sales promotions in that environment is very demanding. We have worked very closely with Publicis and developed the brand thinking between us,” says Thompson. The agency has also transformed the Zurich “flying pigs” concept into a successful retail campaign.
Thompson makes the point that, “the interpretation of creativity is changing. It has come a long way from just a theme and an idea on pack. It is now all-embracing and about searching for ways to communicate with consumers.” That includes promotions running via WAP phones or online, such as a campaign for one Mars brand that Joshua is running worldwide.
Being able to cope with multi-disciplinary, media-neutral briefs that demand fresh creative thinking with real business benefits is no easy task. The agencies that are clearly leading the promotional marketing sector have all invested time, money and resources in developing their skills and processes.
The most notable finding in this year’s survey comes from cross-tabulation of two different questions, however. Respondents were asked to name agencies that they had heard of and also those they had used over the past five years. Comparing the two results shows the extent to which awareness of an agency converts into real business or reveals where hype is just hollow.
For the leading agencies, their reputation is between two and three times higher than the level of usage, reflecting good word of mouth. Tequila London had been heard of by 34 per cent and used by 10.67 per cent, for instance, while Black Cat scored 31.7 per cent for awareness and ten per cent on usage, and Triangle’s scores were 29 per cent and 10.33 per cent respectively.
But the fourth highest scoring agency for awareness – Saatchi & Saatchi with 27.3 per cent – had only been used by four per cent of clients. Equally, Perspectives had been heard of by 12.33 per cent but only used by 1.33 per cent. A reputation is only valuable if you can take it to the bank, it seems.
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 spenders on advertising, as measured by MMS. Copies of the survey are available at £95, including postage and packaging, from Karen Findlay on 0207 970 6301