Exploiting the division

How is a DM agency to provide neutral advice, when it makes most of its profit from executing campaigns? By outsourcing the labour to a contractor, says David Reed

Direct mail print and production used to be central to the proposition of direct marketing (DM) agencies. In-house print buyers would source suppliers who could meet the price and timing demands of each campaign. Production managers would ensure that schedules were respected.

But times change. For one thing, DM is now about much more than just direct mail. DM agencies are equally at home creating brand experiences and brand response advertising as they are with the classic activity of cold-mailing prospects. Another issue is that the skills of print and production management are expensive to maintain in house.

So how should an agency ensure it can still manage core DM activities such as direct mail without diluting its broader offering and carrying high overheads? To solve this dilemma, Claydon Heeley Jones Mason (CHJM) has outsourced the whole of its print production to Intelligent Print Solutions (IPS).

CHJM describes itself as a direct-response communications agency. Like many agencies in the DM sector, it has sought to reposition itself as media neutral.

One of the challenges it faced in achieving this is the business model that has historically underpinned DM agencies. Profit has always been generated from the executional elements of campaigns, such as print and direct mail production. When an agency starts providing strategic advice on marketing solutions, this can be seen as creating bias.

Another challenge is whether to run an in-house production department as a profit centre or a cost centre. If the department is required to generate its own profits, this clearly runs against the goal of media neutrality. Yet bearing the fixed costs of maintaining the department is also difficult to justify, particularly when margins are under pressure.

Last year, CHJM contracted IPS to handle all of the agency’s print and production on an outsourced basis. “IPS is effectively our own print department. It has an excellent understanding of the creative requirement for new ideas and innovation,” says CHJM creative services director Pamela Conway.

The structure of the agency-supplier deal is different from a conventional print management service, as is the way it is managed and operated. In reflection of CHJM’s media neutral stance, the deal has almost no fixed element.

“We are not working on a contract to supply 5 million letterheads, for example,” says IPS director Nick Pride-Hearn. “This is direct marketing where the need can range daily from fulfilment of information requests to four-colour variable digital printing or specialist cardboard engineering.”

Divide and conquer

By avoiding a volume basis or output-specific set-up, CHJM can genuinely claim it is providing advice without any bias. At the same time, it continues to be able to draw on print and production expertise, without bearing the fixed cost of such specialists.

“We need to be on-site to work with designers and account teams as they develop their campaigns. So that’s what we do – a member of IPS staff works at the agency as much as necessary to support production output,” says Pride-Hearn.

Paradoxically, the benefits of the deal have not just been to the media neutral proposition – they have also extended into classic DM areas. “IPS has helped us secure key print-based clients, thanks to its significant print and DM expertise and reduced print costs,” says Conway.

Managing the production process and ensuring it is achieved efficiently and at the best price is at the heart of IPS’s business. Marketers are also very demanding, which means there is a strong emphasis on service.

“We work with Service Level Agreements wherever possible. The nature of the work makes it harder for clients to benchmark prices and service, so it’s vital that we set a time with our clients to review our performance and targets,” says Pride-Hearn.

Reviews are held frequently and at a senior level. Day-to-day management is supported through proprietary Web-based software. This integrates all administrative and financial functions to ensure clients have access to the information they need on the progress of a job. This same tool allows IPS staff working on-site with a client to manage campaigns exactly as if they were in their own office.

Doing what it does best

IPS’s roots are in print management, leveraging the over-capacity in the UK market to source the best deals for clients.

“Knowing and selecting exactly the right supplier for a particular task is just as important as negotiating for the best price. And if we are doing our job well, our suppliers will be happy to work with us, because they know they will be given the right sort of work, at a fair price – and they will be paid on time,” says Pride-Hearn.

IPS now has a number of similar outsourced arrangements with agencies and clients. As the requirements of each differ, so too does the range of solutions that the company is asked to provide.

A prime example of the way this new type of agency-supplier arrangement can work is a campaign created by CHJM for Guardian Newspapers in summer 2003. The idea was to distribute 8,000 paper cones of strawberries to spectators at three pre-Wimbledon tennis tournaments. The concept extended the “Fresh Thinking” strapline, which The Guardian had been using in its advertising.

IPS was able to source the strawberries, print and manufacture the cones using food-grade materials and odour-free inks, and organise daily deliveries in chilled lorries to each venue. It is a long way from the days when an agency’s print buyers argued with printers over a few additional pence per thousand on a direct mail production run. But media neutral direct-response communications are a long way from old-school DM.

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