200 for 2000: Top 30 Direct and sp agencies - DM and SP in urge to merge talents - The direct marketing and promotional disciplines are becoming more intertwined and the traditional distinctions are blurring Our tables, reflect this coming together.

This is the first time that Marketing has compiled a table

combining direct marketing and promotional marketing (sales promotion)

agencies.

It’s an acknowledgement that the disatinctions between the two

disciplines have become increasingly blurred.

As the marketplace has changed, SP agencies have expanded into direct

marketing . In many cases, they have done this by recruiting experienced

direct marketers, or taking over DM agencies. In some instances, parent

companies have merged subsidiaries from the different disciplines, as

Omnicom did with Tequila and Payne Stracey.

Most of these multi-disciplinary agencies have been accepted into

membership of the Direct Marketing Association and there’s no doubt

they’re capable of producing high-calibre direct marketing. The problem

is knowing how much should be classified as DM.

The result is that the top 30 places in this year’s direct marketing

league in March was split almost equally between agencies 100% dependent

on direct marketing, and others for whom it was only a proportion,

perhaps 40%-60% of their activities.

Better to acknowledge that the table contains agencies from different

cultures, and with a range of skills.

What’s fascinating about all this is that below the line agencies are

going through the equivalent of the Big Bang. John Williams, whose own

agency, Perspectives, was bought by WPP at the end of September, claims

that the sector is a bit like a constantly expanding universe, prompting

questions of where it will all end.

The metaphor can be taken further. Among the swirling clouds, old worlds

are crashing together, while new ones are being formed. That’s true not

just because of the continuing flow of mergers and takeovers but because

agencies are defining new roles for themselves.

It’s now commonly agreed that the one-stop shop does no one any favours,

and probably contravenes the Trade Descriptions Act. Agencies are happy

to describe themselves as multi-specialist or multi-discipline, but not

to claim to be able to do everything well. Marketing has become too

diverse and too specialised for that.

Skill factor

A new order is being established. Direct marketing skills are the common

factor. Beyond that, some agencies have experience in design, sales

promotion, advertising, telemarketing, field marketing, database

management, new media, internal communications, live events, channel

marketing and distance learning.

A case in point is the current interest in customer relationship

management, or CRM. Many agencies are latching on to this, but a handful

of the biggest, including Carlson, Brann, Wunderman and the WWAV group,

offer integrated solutions because of their investments in areas such as

telemarketing, database management, loyalty schemes and fulfilment.

The internet, of course, is part of this and has become a focus for many

agencies, just as it has for their clients. Agencies such as KLP, IMP

and 141 Communications have built dedicated internet teams, 25-35

strong.

Kevin Twittey, group CEO at Triangle, has said that new media expertise,

planning skills and database management, are ’must have’ resources.

OgilvyOne’s chairman, Nigel Howlett, points out that internet technology

pulls together many key aspects of relationship marketing, from database

management to customer service. ’Within three years it could be almost

50% of our business,’ he adds (see panel).

The range of specialisms considered relevant to modern marketing poses a

dilemma for clients. On the one hand, they often attempt to reduce the

number of agencies they use. On the other, they need to know where to

turn to get genuinely expert assistance in some of the newer areas.

As it is, a more strategic role for below-the-line services and bigger

budgets, means that a lot of short-term, ad-hoc work has been replaced

with longer-term contracts.

Miles Hanson, managing director of The Marketing Store Worldwide, says

that clients will increasingly identify like-minded individuals and

agencies whom they trust to give the right insights into their brands

and reflect their values.

’Agencies will also become more selective about who they work with,’ he

adds. ’It makes sense to shift away from chasing every pitch and brief,

but rather form long term and deep relationships with clients that

’fit’.

’This seems a rather obvious point, but those agencies who can’t

revolutionise their offering and reinvent themselves in the face of

continually changing market conditions will not survive the next

century.’

Skill factor

Such thinking is also reflected in the debate about the role of

below-the-line agencies as strategic consultants.

A couple of months ago, for instance, WWAV put a lot of its top brains,

including the whole of its London planning department, into a new

consultancy arm called Zalpha.

’Consultancy is a means of allowing clients to tap into the intellectual

resources we have developed over the years,’ claimed chairman John

Watson at the launch. ’Zalpha is not an Andersen’s, it is not a Bain’s.

It is very focused on CRM.’

Similarly, KLP has an alliance with the brand consultant Galileo.

’Consultancy is just a posh work for good thinking,’ says chief

executive Iain Ferguson.

The agency now has a section, unconnected with campaign executions,

whose function is to think about clients’ brands, consumer attitudes,

and where the markets are heading.

The Lowe group offshoot, Interfocus, which has had a management

consultancy division for almost two years, provides a third example. It

was called in when the US fashion group Eddie Bauer encountered problems

with its UK launch.

As well as handling all communications, from advertising to the

internet, Interfocus has advised on retail strategy and the distribution

mix.

Meanwhile, the ’urge to merge’ remains an important feature of the

sector.

The year kicked off with the fusing of two Omnicom subsidiaries, Tequila

and Payne Stracey, and draws to an end with every likelihood that two

more, Clarke Hooper and Momentum, will combine from January 1, 2000.

The latest information is that there are still a few legal points to be

settled, but the agencies’ creative teams have already been merged, and

they are operating with a single new business team. ’With no conflict of

clients, and no earn-out positions to worry about, it clearly makes

sense,’ says Hooper’s chairman, Barry Clarke.

The ad agency Bates also took a major step toward rationalising its

below-the-line interests, merging 141 London, Bates Communications and

Bates Interactive in to one operation, 141 Communications.

Graham Green, a senior figure from the sales promotion world, was

brought in as chairman and recruited direct marketing expert Jeremy Shaw

from Carlson as managing director.

The most recent deal to be completed, however, was WPP’s acquisition of

Perspectives.

This was announced after the page proofs for the October sales promotion

league table had been passed for press, necessitating some late

tweaks.

Perspectives falls just outside the Top 30 of the combined direct

marketing and promotional marketing table but, as an agency whose growth

has consistently outpaced the industry average, it might be expected to

break through into the upper echelon soon.

The publicly quoted Canadian group, Mosaic, this summer snapped up

Stretch The Horizon, another fast-growing multi-discipline shop, best

known for its direct marketing expertise. Its brand name is being

retained in the UK and, indeed, there are plans to expand it.

However, in group terms, it is part of a new set-up, Mosaic Group

Marketing Services, alongside sister agency ZGC, and some other

specialist businesses, including distance learning.

The ZGC name is being rolled out internationally, often through offices

shared with Mosaic’s field-marketing subsidiaries.

It’s an interesting example of how the multinational communications

groups are starting to leverage their investments across a range of

marketing disciplines.

Top 25 Direct marketing & promotional agencies

                                   Gross Profit       %            Gross

Rnk Agency                         1998    1997  change  Total    profit

                                    (pounds m)           staff  per head

1   WWAV Rapp Collins             21.70   20.40     6.37    305   71,148

2   Tequila Payne Stracey         16.51   13.25    24.57    210   78,624

3   OgilvyOne Worldwide London    16.45   13.72    19.88    245   67,151

4   Barraclough Hall

    Woolston Gray                 15.17   14.54     4.29    204   74,348

5   Joshua                        13.75   13.60     1.13    215   63,977

6   Evans Hunt Scott              13.56   13.42     1.05    204   66,495

7   Mosaic Group Marketing

    Services                      13.56     n/a        -    160   84,750

8   Holmes & Marchant Group       13.12   12.74     2.98    233   56,309

9   IMP                           12.25   11.72     4.55    170   72,065

10  Claydon Heeley                11.28    6.81    65.64    147   76,714

11  KLP Euro RSCG                 11.24   10.92      2.9    189   59,471

12  The Marketing Store

    Worldwide                     10.50    8.84     18.8    196   53,587

13  McCann-Erickson Manchester     9.38    7.80    20.23    119   78,807

14  Interfocus Network             9.22    8.78     5.06    130   70,921

15  141 Communications             8.90    4.51    97.14     83   107,24

16  Triangle                       8.20    6.84    19.94    176   46,608

17  Clarke Hooper Consulting       6.75    4.50     49.9     88   76,739

18  Lowe Direct                    6.30    3.60       75     97   64,948

19  The Haygarth Group             6.19    4.71    31.46     96   64,458

20  Dynamo Marketing               6.09    3.10    96.36     95   64,158

21  GGT Direct Advertising         5.84    3.81    51.65    110   53,091

22  Alcone Marketing Group         5.67     n/a        -     38  149,237

23  Marketing Drive                5.41    5.41    -0.13     62   87,210

24  Momentum Integrated

    Communications                 5.40       4       35     71   76,056

25  Rapier                         5.35    5.80    -7.76     72   74,306

Top 5 Hybrid agencies

                                   Gross Profit       %            Gross

Rnk Agency                         1998    1997  change  Total    profit

                                    (pounds m)           staff  per head

1   Brann                         40.52   30.94   30.98   1019    39,766

2   Wunderman Cato Johnson UK     28.30   24.47   15.66    520    54,423

3   Carlson                       24.75   20.67   19.78    450    55,009

4   Colleagues                      9.0     7.7   16.88    110    81,818

5   Advertising Research

    Marketing (ARM)                 5.5    4.74    8.73     24   214,792

METHODOLOGY

This new listing was compiled by running together this year’s direct

marketing and sales promotion league tables. Ranking is by gross profit

(turnover less cost of sales), a measure, which both sectors accept is

more meaningful than turnover, and one that they use themselves to

assess progress.

A complicating factor is that a few of the multi-discipline agencies

submitted 1998 figures for the DM table in March, but exercised their

right to submit more up-to-date figures for the SP tables in

October.

For greater consistency, we have used the older figures.

We’ve found it necessary to continue to separate out what we term

’hybrid agencies’. These are all major players in direct marketing. What

distinguishes them is that they also have substantial activities not

normally found in DM agencies, which boosts their income and distorts

comparisons. Brann, for instance, has printing, telemarketing and

lettershop. Wunderman has a large unit dedicated to Ford’s database work

and Carlson a division devoted to administering loyalty schemes.

DIRECT LOOKS FOR NEW MEDIA TALENT

Finding talented people with experience of the internet and other media

is currently one of the greatest problems facing agencies.

OgilvyOne’s UK chairman, Nigel Howlett, says that the company could have

100 people working in this sector by the end of the year, up from only

ten a year ago. It means an unrelenting search for suitable

candidates.

’The internet was on the periphery, but we can now see it taking its

place at the core, and displacing other activities,’ he says.

’Interactivity makes the whole direct discipline more effective,

converging applications such as database management, telephony and

customer service.

’As a result, growth has been phenomenal - seven-fold in a year. For

OgilvyOne globally, it now accounts for almost pounds 100m in revenue

and is going like a train. It is hugely exciting.

’The biggest issue is identifying and recruiting the right people. We’re

battling to get the resource curve ahead of the revenue curve. This is

the opposite of the agency world’s normal approach to investment, but

necessary because the whole thing is growing so fast.’

This article was first published on Marketing