Pecking Order

Every area of life has a food chain, especially business. Ten years ago the hierarchy of marketers at the top of the marketing communications food chain, and their suppliers ranged lower down, was relatively simple. Now it can be argued that the customer is at the top of the heap. The food chain itself has collapsed, re-forming into a more fluid structure to meet the demands of client businesses and their consumers.

Traditionally, advertising agencies have been the great white sharks of the food chain. With their multi-million-pound budgets, and the high public profile of their output, they were invited to sup at the boardroom table with their clients.

Ashley Grainger, business development director of DMS , says: “Historically, agencies – particularly advertising agencies – have acted as the front men, tending to have the client contact.”

This left the direct marketing agencies, and suppliers such as call handlers and database managers, lower down the chain. They liaised with less senior staff such as brand or marketing managers, or received their briefs third-hand from another agency, while the advertising agencies cornered the marketing director.

But such a hierarchical structure is not the best way to do business, says Rob Macdermott, managing director of database consultancy The Computing Group. “That structure implies a rigidity which does not reflect the way business is done in this industry,” he says. “Some relationships are ongoing, others are more transient. A particular printer may be chosen because of cost, but the next time another will be picked for technological reasons.”

Rigid hierarchies in marketing relationships can also let the customer down. A scenario develops at the point of customer contact where the front-end staff do not have the necessary information or skills to deal directly with customer queries. The marketer’s perfect wave is destroyed before it can reach the shore as the relationship with the customer fails to develop.

It is the management of this relationship with the customer that is driving the breakdown and reformation of the food chain. Those companies which deliver the keys to customer relationship management (CRM) are playing increasingly powerful roles. References to “client/supplier relationships” in the food chain are no longer appropriate.

The client managers who are now stepping up the corporate ladder to director status are less steeped in the traditional advertising methodology that makes the brand, and are more familiar with customer relationship management and its importance to business success. They are also more comfortable with newer media. Just as it is possible for a company to interface with customers in a myriad of ways, so clients are learning to develop varied ways of working with suppliers.

But if advertising agencies no longer dominate the food chain, traditional direct marketing agencies also face a threat to their status among client companies, despite their focus on accountability and results.

Mike Pearce, chairman of customer relationship management at CSM, says: “There is a definite risk that the direct marketing agency will lose its seat at the boardroom table. Management consultants are emerging as the custodians of the customer relationship, since they come up with strategies for managing that relationship, relegating direct marketing agencies to the role of creative executor.”

Shane Baylis, managing director of The Database Group, believes that some direct marketing agencies have “already been kicked out of the boardroom by management consultants”.

But all is not lost. Baylis continues: “Consultancies cannot supply expert advice in every area. Consultants are very theoretical, and tend to refer to specialists when it comes to specific advice and execution.”

Bringing consulting in-house

One solution for agencies threatened by the rise of the management consultant is to offer that same expertise in-house. Since the agencies are then also able to execute a strategy, they are perfectly poised to resist pressure from other businesses claiming to be experts in customer relationship management.

WWAV Rapp Collins adopted a slightly different tack with the launch of Zalpha in September. The company aims to bridge the gap between direct marketing and management consultancy, says Bill Portlock, Zalpha deputy managing director. “Our aim is to be the client’s strategic partner. We can work alongside above- or below-the-line agencies, operating independently from the main WWAV agency,” he says.

CSM’s Pearce argues that agencies will have to follow WWAV’s example and create a separate consultancy to retain their influence with clients. But this will only work if the consultancy division is kept at arm’s length from the direct agency operation. “The advice a consultant gives has to be objective rather than simply using the direct agency’s services,” he says. “That means employing people with a wider business background than direct marketing.”

The clear winners in the reorganisation of any hierarchy are the database consultants. Data is the key to customer relationship management and those companies which are adept not just at gathering it, but at understanding and manipulating it into pragmatic strategies rather than theoretical solutions, are poised to have higher level discussions with clients.

The database consultant’s role has not always been so exalted. But this is changing and those in the business say they have more direct access to clients, rather than dealing with them through a third party, which is usually an agency.

Clients’ data demands

Baylis says: “It has become more of a three-way relationship where we, the database consultants, are feeding into an agency and a client at the same time. We are not creative experts but we know about data. We are being pulled into discussions with clients about their data strategy, whereas five years ago we did not meet them face to face.”

For other suppliers such as call centres or print specialists, the only solution to being squeezed out of the picture is horizontal expansion to offer a wider range of disciplines. “For example,” says The Computing Group’s Macdermott, “call centres are diversifying into database consultancy and printing technology. Suppliers are adapting by offering extra services themselves or partnering up with other companies.”

This is typical of an immature market, he argues, as there tend to be few companies which can offer all the services a client needs.

The net effect of these developments in the direct marketing sector and its environs is to create a far more flexible configuration than a food chain. In some cases, the supplier which has the direct ear of the client will change from one moment to the next. If a marketer is embarking on customer relationship management, companies with the expertise to advise on collating and managing a database could find themselves at the top of the table.

If customers want online access, companies with Web expertise may be called in at senior level. Portlock says: “We have seen examples of this happening, with Website developers talking to managing directors and chief executives because they are turned on by the technology.”

Customers come aboard

All of which indicates that in one sense the food chain has not changed so significantly, despite the rise of customer relationship management and new media. Clients are still rulers of the roost – it’s their budget and they can spend it how they want, so long as profits are kept up and shareholders happy. But how clients work with suppliers to achieve their business ends has altered considerably and is likely to do so even more. The main reason for this is that clients have been joined at the top table by another group calling the shots – their customers.