It is unlikely that many in the direct marketing industry will look back fondly on 2007. As the growth of digital continued to grab the headlines, direct mail volumes fell and new business pitches dried up. And on top of that, one of DM’s most celebrated and popular agencies had a year to rival that of the England football team.
Craik Jones Watson Mitchell Voelkel, which has lost two of its biggest clients (Land Rover and Orange) and most of its senior management team in the past 12 months, last week hired Mike Welsh from Claydon Heeley to breathe new life into the agency. But some observers suggest its troubles may be indicative of a wider malaise that is enveloping the industry.
Direct mail volumes dropped to 4.65 billion last year, a fall of 7.4% on 2006, while new business pitches were down 42% in 2007, according to the AAR. Iris group chief executive Ian Millner believes the main problem with the direct marketing sector is that it is too “conservative” and “insular”.
“Their [the industry’s] own conservatism has stopped them innovating and stopped them applying the skills they have to new opportunities,” he says. “In theory, direct marketing should be leading the evolution of digital. If they could just apply some of their skills to more areas and be more entrepreneurial then direct marketing would be the key player in making integration work. But their attitude doesn’t allow that to happen.”
Millner thinks that the rate of growth in digital has been so significant that direct marketing is now seen as something that supports digital campaigns. “The best talent is no longer in direct agencies,” he adds. “The industry has lost its confidence and lost its ability to think for the future. The best DM agencies were the ones that were able to be both scientific and creative. But because of budgetary pressures the opportunities for elaborate and expensive and highly creative direct mail have now gone.”
Most observers agree that Craik Jones’ spectacular fall from grace was largely the result of an extraordinary set of circumstances. The agency was producing award-winning work for Land Rover – a client of 16 years – when the Ford-owned brand called a review as part of a global consolidation of its roster, eventually appointing WPP’s Wunderman. It then lost Orange to the same agency for similar reasons, prompting claims Sir Martin Sorrell had played a significant part in both wins.
Welsh admits 2007 was an “annus horribilis” for Craik Jones but dismisses the suggestion that direct as a sector is coming under pressure from online, describing the term “digital” as a “nonsense”.
“You don’t hear people saying they work in an offline agency,” he says. “Clients’ budgets are definitely moving from offline to online because it’s cheaper but when it moves online it’s still CRM.”
It is a point many direct agency heads are keen to make. They claim they are in a stronger position than traditional digital agencies because of the data they have available. Tequila/London chief executive Tim Bonnet predicts that “pure play” digital agencies will not survive without developing alternative “skill sets”, while chief executive of RMG Connect Tim Hipperson says: “If you come at digital with direct skills you have a strategic element that not many digital agencies have. Most are either creative or technology focused.”
More clients are turning to their retained direct agencies to handle their digital needs, according to head of direct marketing, sales promotion and integration at the AAR, Tony Spong. He believes that “organic growth” is one of the main reasons last year was so quiet from a new business pitch perspective and adds: “The pure play digital players haven’t acquired data people as quickly as DM agencies have acquired digital people. A lot of the digital guys can’t do the more complex CRM stuff so that’s where the organic growth is coming from.”
Archibald Ingall Stretton estimates that about 70% of its business is now online, while RMG Connect says that almost half of its revenues now come from digital. But AIS co-founder Jon Ingall thinks in most cases a combination of direct and digital is the right strategy: “I think there’s still a role for direct mail – in a way it becomes more important. With so much stuff going online, sending out a good mail pack grabs the attention and has more cut-through.”
Direct marketing is not declining but evolving, believes EHS Brann chief executive Matt Atkinson. He says: “The key point now is it’s quality over quantity. It’s about using the data and channels we have available in a much more intelligent way than we used to. Consumers are not saying they don’t want direct mail, they’re saying they don’t want junk mail. As an industry, we have to be more considered about what we do and so do our clients.”
Audi head of marketing Peter Duffy agrees that direct mail is evolving as a medium, saying that smaller volumes going out more often in a highly targeted way is the future: “Digital strategy is key but I can’t ever see the day when you won’t want to write to a customer because that creates the intent to go online. But I can absolutely see the day when clients stop mailing out 300,000 packs.”
Many claim there is still a problem with direct being seen as the poor relation to advertising, leading some below-the-line agencies to pretend to be something they are not in pitches. Proximity London chief executive Amanda Phillips says: “You have to be very clear as an integrated agency who you are when you’re going into a pitch. We have fallen foul sometimes of going in as a pseudo ad agency. When we go in as a direct agency or a digital agency we tend to do a lot better.”
There is no doubt that digital, whether it is a separate discipline or not, has changed the face of direct marketing. It seems the agencies that are thriving are the ones that have invested in building their digital capabilities but that direct marketing as an industry still has some way to go to take full advantage of the opportunities the internet presents.
With the advent of photography in the early 1800s, many predicted the death of painting, but instead impressionism was born and painting became an interpretation of an artist’s point of view, rather than a representation of the world. DM, and particularly direct mail, finds itself in a similar position.
As head of media propositions at Royal Mail, Fraser Chisholm says: “The internet is a significant threat to direct mail in its current form but it’s a fantastic opportunity for direct mail to reposition itself. It has to find itself space in the new environment.”