The direct hits

Which DM agencies have fared well? Have any bombed out of the market altogether? David Reed reveals all in this year’s Direct Marketing Agencies Reputation Survey and reports on the effects of agency consolidation and a slowing economy

Are genuinely integrated below-the-line marketing agencies finally starting to emerge in the UK? The question arises from this year’s Direct Marketing Agencies Reputation Survey. Out of the top 20 direct marketing (DM) agencies as rated by clients, ten appeared in the Sales Promotion Agencies Reputation Survey’s top 20.

This substantial cross-over appears to reflect a growing trend in the way clients use agencies. Instead of a roster of specialists, more clients are using one below-the-line agency and one advertising agency. Clients realise they can reduce costs by not duplicating overheads – a crucial factor in a slow economy.

When asked what other services their DM agency provides, clients named a considerable variety. Top of the list was interactive communications, which 46 per cent sourced from their DM agency. This was followed by strategic consultancy (46 per cent), sales promotion (42 per cent), database management (38 per cent), PR (35 per cent), customer loyalty programmes (32 per cent) and event marketing (28 per cent).

Reviewing rosters

“To streamline operations and keep costs down, clients are looking to reduce agency rosters. There is economic sense in doing that, but there are difficulties in trying to get more out of one supplier,” says Jim Surguy, managing director of Results Business Consulting, a management consultancy specialising in advising marketing services providers.

Delivering this complex blend of services is a challenge for agencies, which have historically concentrated on pure DM. Mergers have tended to be viewed as the solution – IMP absorbed DMB&B Direct, Tequila acquired Payne Stracey. Another response, also driven by the soft market, is to consolidate several agencies under an umbrella brand.

Barraclough Hall Woolston Gray (BHWG), which this year tops the survey for the first time, is now operating under the Proximity group banner. This also brings sales promotion agency Clarke Hooper and interactive agency Traffic into the same fold. While the alignment is no doubt a response to the current business climate, the agency is trying to make it meaningful.

“It has taken a lot of energy and focus to get the integration to work. Much of that is down to management and understanding our roles. One of the things we have seen as a result of consolidation is that the electronic media side has become about fulfilling interactions through direct marketing,” says BHWG Proximity chairman and executive creative director Chris Barraclough.

Despite the effort involved, the creation of the Proximity group has helped to rejuvenate BHWG. For one thing, Barraclough is more active in the creative department than before. He estimates that 70 per cent of his time is now spent in writing ads. “We had a big shake-up of the department at the end of 2000. I have moved back to lead the creative department with our three creative directors,” he says.

With 17 awards already bagged this year, even before the main industry event of the DMA/Royal Mail Awards in December, the benefits of this change are obvious. Little wonder, then, that BHWG should have claimed the top spot for creativity.

One industry observer who asked not to be named notes that creativity is the Achilles’ heel of DM agencies. “It is all very well being skilled in different channels, but you have got to have something bright to convey the message. Many agencies are good technically, but in terms of creative work there is a lot they could learn from above the line,” he says.

Benefits of consolidation

Another benefit of consolidation is the ability to strengthen resources across the board. For this survey, scores are awarded for eight separate criteria. Achieving excellence in all of these is a tall order for any agency.

Significantly, this year was the first time clients gave higher marks to criteria other than creative ability. Asked to score the importance of different factors, quality of account handling gained a mean score of 3.67 out of a highest possible ranking of 4.0. Creative ability was scored 3.57 and measuring effectiveness 3.53.

Agencies would do well to notice this shift towards service and accountability. It indicates that investing in people and processes across the board is just as important as attracting big-hitting creative talents. The current shake-out should result in genuinely talented staff in all departments retaining their jobs, while the time-servers get weeded out.

Ehs:realtime has just come through a difficult year after completing its merger of digital and direct marketing resources. As managing director Louise Wall says: “People were shocked when we did it. The dot-com bubble had burst and we were the first to market. We believe the market will bounce back and saw the importance of managing digital and direct data together.”

Ehs:realtime saw the biggest improvement in its ranking among clients, jumping ten places to number seven. The biggest increases in its scores were for account handling, evaluation techniques and full service. These are not often areas that agencies see as important to develop.

As Wall notes: “We have always had a reputation as a creative agency, but our client services and planning get overlooked.

“We have got one of the best planning departments covering digital, account, media and data all working together in one team. That is unusual. That has meant a huge investment in planning over the past few years which is now paying off.”

Reputations are difficult to manage and usually lag six months behind the reality. The three most important factors in choosing an agency – according to clients – are examples of the agency’s work, word of mouth and previous experience.

This year’s survey highlights the real winners and losers in the fight for recognition. Alongside BHWG, laurels must go to Triangle and Joshua – both performed strongly in this and the sales promotion agencies survey.

Pure isn’t always best

Skybridge, the result of a merger between Motivforce and Purchasepoint, leapt into the top ten at number four. That is a notable result for an agency specialising in “integrating business improvement, events and communications solutions,” but which does not have a strong DM track record.

Pure direct marketing agencies did not do well this year. While Carlson Marketing Group achieved a dramatically improved rating, there were weaker results for WWAV (suffering perhaps from churn among its senior management), while the only other agency in the top 20 following a classic DM model is JDA.

The biggest losers were last year’s number one agency McCann-Erickson Manchester (now McCann Relationship Marketing), dropping to number 12, and FCA!, last year’s number two, which no longer exists. It is also worth noting that the top 20 is dominated by network-owned agencies, but that the international groups are either absent, for example Wunderman, or known by a UK-only title, such as Joshua.

Another notable development is the dominance of large, London-based agencies (apart from the long-established Bradford-based agency JDA). Small or regional operations find it hard to break through, even though they are often more dynamic or interesting in their approach.

Only one non-London agency had been heard of by more than ten per cent of clients – Hamilton Wright – while agencies with new, interesting propositions such as Millennium Direct or TDA barely register. The only solace is that just three per cent of clients had heard of Wunderman’s disastrous rebranding as Impiric.

Black Cat is in the unusual position of having a strong reputation for direct marketing and an even stronger one for sales promotion, despite its bias towards the former. “Black Cat is more of a DM agency than anything else and the highest proportion of its work is direct marketing,” says joint managing director Stephen Callendar.

He admits that ten years ago, Black Cat’s activities were evenly balanced between the two. But he believes part of the perception is due to growing integration of below-the-line activities.

Recognition of talent

“We start working for clients in one discipline, which could be DM, sales promotion or interactive. They soon appreciate we can do a lot more and we move on to other areas of the business, so we become their below-the-line agency,” says Callendar.

This growth in demand for an integrated proposition should be good news for those agencies that have got it right. Taking a bigger slice of a client’s overall marketing budget will make for greater stability. But it is likely to be offset by another trend on the client side: the move away from having a retained agency. Just one-third of clients said this was the relationship they had, while 42 per cent appoint by project and 33 per cent on an ad hoc basis.

That means pitching for every bit of business – an expensive process for agencies and one that detracts from client relationships. Some agencies mentioned a declining willingness to compete for each bit of business. If clients come to rely on a broader offering from agencies, but show less loyalty to them, then relationships will become strained over the coming year.

Methodology

Market Management 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 reviewing and selecting a direct marketing agency, and had to be working at one of the UK’s top 100 spenders on advertising, as measured by MMS.

Copies of the full survey are available at £95, incl postage and packaging, from Emma Bathie on 020 7970 6301

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