When the Institute of Sales Promotion (ISP) unveiled its new branding last month, one might have been forgiven for wondering which discipline it represented. Conspicuous by its absence was any mention of sales promotion itself. The ISP's latest strapline is 'When promoting sales is your business', and what marketing services company could claim not to fall within that remit?
It is a neat trick, and the result of no little soul-searching within the industry. The ISP's goal is to transform sales promotion from a stand-alone discipline - and an increasingly marginalised one at that - into a technique underpinning all marketing communications.
The shift is a response to years of budget cuts and pressure on margins. As a discipline, sales promotion has been dependent on the FMCG and food and drink sectors, both of which have been under pressure themselves. Furthermore, the big grocers, which tend to favour discounts over brand-led promotions, have sought to restrict in-store activity, thus limiting the industry's scope to on-pack work. Meanwhile, the rise of specialist procurement departments within client companies has virtually wiped out the mark-ups that sales promotion agencies used to enjoy on re-billable costs such as print. It has, therefore, become far harder to make money out of the discipline.
The Bellwether Report for the second quarter of 2006, issued by the Institute of Practitioners in Advertising (IPA), showed that sales promotion budgets had been revised down for the sixth successive quarter. Last year, it suffered the fastest fall in spend on the medium in the survey's history.
Agencies should not expect an upturn anytime soon, according to Intelligent Marketing managing director Tricia Weener. 'The next couple of years will continue to be tough,' she says. 'Retail clients are cutting budgets. They are being more cautious and more short-term.'
The upshot for sales promotion agencies is that they have had to adapt their offering. Integration with other disciplines is nothing new in the industry, but the need for it has never been greater. If they fail to follow this route, agencies will find themselves trapped in a diminishing market.
'I'm not sure what specialist sales promotion is any more,' admits Graham Kemp, chief executive of The Marketing Store. 'If it is putting promotions on pack, I'm not sure there is a future. I wouldn't build a business around that sort of work.'
One sign of the turbulence within the market was the closure of Publicis Groupe subsidiary Triangle. The agency, one of the biggest in the sector for many years, has been merged into direct, digital and sales promotion shop Arc Worldwide. The integrated model clearly won out over the specialist.
A further indication of the industry's rapid evolution is the approach being taken by a wave of start-ups, often headed by former executives of bigger agencies. Companies such as Space, Bullet and Intelligent Marketing have all been formed in the past few years, while only a few months ago, a group of former Logistix executives set up The Promotions Practice.
The common denominator among these firms is that they present themselves as strategy-led shops capable of integrating sales promotion into a range of media. As such, their revenues are not as dependent on in-store work or print mark-ups as some of the more traditional agencies.
Some of these start-ups have been attracting big-name accounts. Earlier this year Space handled a major promotion for Eurostar based on its tie-up with the film version of The Da Vinci Code. The activity was based online and targeted consumers in six countries.
Such agencies offer a clear point of difference from traditional sales promotion shops, according to Eurostar's head of marketing, Greg Nugent. 'They don't approach a project solely as a sales-promotion brief,' he says. 'If an agency does this, it is missing a trick.'
To date, there have been two principal areas of expansion within sales promotion: experiential and digital. This is not simply because these are two of the fastest-growing marketing disciplines. For brands that have found their in-store activity restricted by retailers, live events and internet work are clear alternatives when seeking to bring a promotion to life. Iris' recent campaign for Wonderbra, which involved a heavy online presence and the hosting of a fashion show, epitomises this shift in approach.
Of course, it is easier to talk about integration than to do it. The predominant hurdle is staff. Expansion beyond pure on-pack sales promotion activity requires employees with different expertise, but at a time when margins in the sector are being eroded, it is not always easy to find the money to hire them. Digital staff, in particular, come at a premium.
As a result of this hike in wages, agencies are still trying to work out exactly where digital should sit. Bigger shops such as Arc, whose work for Flash won gold in the digital category at this year's ISP Awards, have dedicated digital departments. But for smaller agencies, these can be costly to set up. While Bullet has built an internal digital department, Space has not; the latter has rather outsourced the technical elements of its Eurostar campaign to a specialist.
An internal digital team can be hugely beneficial. Phil Goodman, director at Bullet, points to a Jacob's Creek campaign on which his agency worked. Initially, the wine brand wanted the work to be based around a bottle-neck collar, but the agency convinced it that a dedicated website would be more effective. 'If we didn't work digitally, we wouldn't have recommended it,' says Goodman.
However, some client marketers are happy to outsource digital work, as long as their agency has the expertise to define the strategy. Alex Pickering, marketing manager of Andrex, used a website as part of a promotion that involved selling toy guide-dogs to help The Guide Dogs for the Blind Association. 'I wouldn't say I expect online capability, but I do want a clear strategy,' he says. 'Online is not just a bolt-on; agencies have to understand how online can complement the promotion.'
Digital is not the only area in which agencies are facing recruitment headaches. Due to a cutback in hirings during the recession, there is a real shortage of experienced staff across the direct disciplines. This has led to a marked increase in freelance rates, encouraging permanent staff to demand higher pay.
Rising staff costs are hurting the industry's profitability badly, says Jim Surguy, managing director of consultancy Results Business Consulting. 'Profit on income in promotional agencies is down to just below 10% - even traditional ad agencies are making more than 10%,' he explains. 'There is a skills gap at critical levels, and this shortage is driving up salaries.'
Nick Rankin, managing director of BD-NTWK, adds that there is a real scramble to sign the best talent, which is doing the agencies no favours. 'Agencies have to get together to calm things down, otherwise some of them will not be around in a few years,' he says.
Scott Knox, managing director of the Marketing Communications Consultants Association, agrees that these issues could make or break an agency. He argues that the shops doing well in the market are those that allow their staff to find out about new disciplines and techniques, then exploit them in campaigns. He adds that taking the time to retrain staff to avoid costly recruitments can reap dividends.
'All the people at an agency need to be up to date with what is happening in the market and what is emerging,' he says. 'They shouldn't be afraid that they don't know something, and should have the chance to find it out.'
Investing in emerging disciplines is not the only path to growth. Partnership marketing - the alliance of two brands in a promotion - is one area of the discipline that is expanding.The most obvious appeal of this type of activity is that costs can be shared - a weighty draw for budget-wary marketers. Moreover, as Eurostar's Nugent points out, two businesses working together are likely to achieve greater results than if each did its own thing.
Several agencies have reported a rise in partnership marketing activity over the past couple of years. Intelligent Marketing, for example, worked on a tie-up involving Tussauds Group and Woolworths, while Geoff Howe Marketing has worked on partnership activity involving Nintendo.
The government is one advocate of this approach, and has used tie-ups with interested parties to extend its 5 A Day and road-safety campaigns. Earlier this year, the COI set up its first dedicated partnership marketing roster, which it filled almost exclusively with sales promotion agencies, including start-ups such as Bullet. 'Agencies with a sales-promotion background had the skills we were looking for,' says Daphne de Souza, head of sponsorship at the COI. 'They can identify the right kind of partners.'
However, partnerships can be tricky. Simon Marjoram, director of Geoff Howe, argues that it is hard work managing clients' expectations. 'Trying to get two companies to march to the same tune at the same time can be difficult,' he says. 'It can be a two- to three-year conversation. No agency fee could ever represent the amount of time that goes into that sort of deal.' And, as Marjoram points out, there is no eventual guarantee that, having set up a deal, an agency will be appointed to handle its implementation.
Intelligent Marketing's Weener also believes agencies need to tread carefully with partnerships. She argues that both parties must agree the rough parameters of the deal at the start, otherwise an imbalance of power can develop. 'If one partner seems to have greater power and starts to use it, it can generate resentment. Both sides often try it on a bit, but if you have something agreed early on, you are in a less precarious position.'
On the whole, however, the growth of partnership marketing is a positive for the sales promotion sector. It is a sign that, for well-positioned agencies, the tough market for classic sales promotion does not have to mean a fast track to bankruptcy.
Whether the ISP's attempts to make sales promotion relevant to agencies of all disciplines will pay off remains to be seen, but the sector is evolving. While the days of focusing on on-pack promotions, supported in-store, may be numbered, the techniques behind them remain a crucial part of the marketing mix. There is no shortage of promotions out there; the difference is that they are delivered on a bigger scale across multiple channels, and it is up to agencies to find the right models to keep pace.
TOP SALES PROMOTION AGENCIES
Rank Agency Gross profit Gross profit Chng Staff
2005(pounds) 2004(pounds) (%)
Tequila* n/a 26,035,414 n/a 335
Proximity London* 23,337,000 21,362,000 9 209
Joshua* 13,369,000 14,510,000 -8 199
1 The Marketing Store 13,249,000 14,967,069 -11 183
2 Iris 12,816,000 8,830,106 45 202
Momentum Activating Demand* 12,735,000 n/a n/a 185
3 Geoff Howe Marketing 11,824,000 10,911,000 8 115
Arc Worldwide*1 n/a 11,589,000 n/a 121
4 Haygarth 10,125,353 9,096,643 11 144
5 Billington Cartmell 8,271,675 6,020,216 37 84
Dialogue Marketing* n/a 8,075,000 n/a 89
6 Euro RSCG Skybridge 7,871,000 8,025,000 -2 95
Euro RSCG KLP* 7,474,000 7,788,000 -4 89
7 Dynamo 7,000,000 9,520,000 -26 85
Logistix* n/a 6,226,000 n/a 91
8 TRO 5,900,000 6,650,000 -11 104
9 Chemistry Communications 5,596,000 6,373,000 -12 115
10 BD-NTWK 5,400,000 5,600,000 -4 132
11 Elvis 3,749,008 n/a n/a 52
12 Exposure Promotions 3,632,849 2,681,077 35 113
13 WDMP 3,220,410 1,731,242 86 42
14 SMP 2,500,000 2,350,000 6 40
15 Ainsworth & Parkinson 2,385,241 2,291,837 4 50
16 The JJ Group 1,900,000 1,900,000 0 83
17 Catalyst 1,783,089 1,635,568 9 25
18 23red 1,692,000 370,000 357 35
19 Dialogue DLKW 1,655,000 642,000 158 55
20 Intelligent Marketing & 1,570,000 1,120,000 40 31
21 Gasoline 1,400,000 1,500,000 -7 19
22 Liquid Communications 1,330,000 1,140,000 17 18
23 Brahm 1,058,351 1,002,154 6 155
24 KHWS 918,047 845,419 9 12
25 Why Not! 894,517 n/a n/a 10
26 Toucan 601,573 449,834 34 12
27 Space 561,000 374,000 50 10
28 Pistol 425,699 n/a n/a 6
29 Cognito Integrated Marketing 357,000 233,000 53 9
30 Bullet 299,658 180,225 66 13
31 Elevator Promotional Marketing 291,479 270,471 8 5
(formerly GCAS SP)
Founded 1992. Subsidiary Omnicom. Chief executive Tim Bonnet. No
clients disclosed. Member MCCA. www.tequila-uk.com
Founded 1991. Subsidiary Omnicom. Managing director Amanda
Phillips. No clients disclosed. Member ISP, MCCA, DMA.
Founded 1998. Subsidiary WPP. Managing director Nick Spindler. No
clients disclosed. Member ISP, MCCA, DMA. www.joshua-agency.co.uk
1 The Marketing Store
Founded 1986. Subsidiary Havi Group. Chairman Graham Kemp. Clients
include McDonald's, Cereal Partners, Asda. Member ISP, MCCA, DMA.
Founded 1999. Privately owned. Joint chief executives Ian Millner,
Stewart Shanley. Clients include Sony Ericsson, Shell
International, Coca-Cola. Member ISP, MCCA, DMA. www.irisnation.com
Momentum Activating Demand*
Founded 1999. Subsidiary Interpublic. Chief executive John
Armstrong. No clients disclosed. Member ISP. www.momentumww.com
3 Geoff Howe Marketing
Founded 1978. Privately owned. Chairman Geoff Howe. Clients include
Hill's Pet Nutrition, Honda, Samsung. Member ISP, DMA.
Founded 1968. Subsidiary Publicis Groupe. Managing director Mike
Spicer. No clients disclosed. Member ISP, MCCA, DMA. www.arcww.com
Founded 1984. Privately owned. Chief executive Stephen Morris.
Clients include Nokia, PepsiCo, Gillette. Member ISP, DMA.
5 Billington Cartmell
Founded 1990. Privately owned. Managing partners Ian Billington,
Paul Cartmell. Clients include Unilever, GlaxoSmithKline,
LloydsTSB. Member ISP, MCCA. www.bcl.co.uk
Founded 1995. Subsidiary WPP. Chief executive Christopher Maccoll.
No clients disclosed. Member ISP. www.dialmkg.com
6 Euro RSCG Skybridge
Founded 2000. Subsidiary Havas. Chief executive John Hackney.
Clients include Jaguar Cars, HSBC, Canon Europe. Member ISP, DMA.
Euro RSCG KLP*
Founded 1974. Subsidiary Havas. Chief executive Phil Bourne. No
clients disclosed. Member MCCA, DMA. www.klp.co.uk
Founded 1990. Subsidiary Media Square. Chief executive Roger
Marriott. No clients disclosed. Member ISP, MCCA. www.dynamo.net.uk
Founded 1989. Subsidiary EMAK Worldwide. Chief executive Peter
Boutros. Clients include Kellogg, Burger King, Capri Sun. Member
ISP, MCCA. www.logistix.co.uk
Founded 1982. Privately owned. Chairman Rob Allen. Clients include
BMW, General Motors, T-Mobile. www.tro-group.co.uk
9 Chemistry Communications
Founded 2000. Privately owned. Chief executive Joe Garton. Clients
include Unilever, Manor Bakeries, Transport for London. Member ISP,
MCCA, DMA. www.chemistrygroup.co.uk
Founded 1990. Privately owned. Managing director Nick Rankin.
Clients include Coca-Cola, Orange, eBay. Member ISP, MCCA.
Founded 2003. Subsidiary Cossette Communication Group. Joint chief
executives Mark Leversedge, Martin Semmens. Clients include
Cadbury, Pizza Hut, Mitchells & Butlers. Member ISP, MCCA, DMA.
12 Exposure Promotions
Founded 1993. Privately owned. Managing director Raoul Shah.
Clients include 3, Red Bull, West Coast Trains. Member ISP.
Founded 2002. Privately owned. Chairman Gavin Wheeler. Clients
include Betfair, Habitat, Carphone Warehouse. Member MCCA, DMA.
Founded 1983. Privately owned. Joint managing directors Chris
Simpson, Simon Mahoney. Clients include Kimberly-Clark, Microsoft,
SanDisk. Member ISP, DMA. www.smp.uk.com
15 Ainsworth & Parkinson
Founded 1990. Privately owned. Chairman Tony Ainsworth. Clients
include Vimto, Seven Seas, Kumala. Member ISP. www.thinkap.com
16 The JJ Group
Founded 1989. Privately owned. Chairman James Goddard. Clients
include Volvo, British Gas Business, Whitbread. Member ISP, DMA.
Founded 2000. Subsidiary Media Square. Managing director Sam
Jordan. Clients include Muller Dairies, United Biscuits, Heineken.
Member ISP, MCCA. www.catalystagency.co.uk
Founded 2000. Privately owned. Chairman/chief executive Jane
Asscher. Clients include Bacardi-Martini, COI, AG Barr. Member ISP,
19 Dialogue DLKW
Founded 2002. Subsidiary Creston. Chief executive Paul Biggins.
Clients include Halifax, AA, Burger King. Member ISP, DMA.
20 Intelligent Marketing & Communications
Founded 2003. Privately owned. Managing director Tricia Weener.
Clients include Diageo, Tchibo, HSBC. Member ISP, DMA.
Founded 2002. Subsidiary Chime Communications. Joint managing
directors Mark Joy, Simon Melville. Clients include Expotel, Yell,
Muller. Member ISP. www.gasoline.uk.com
22 Liquid Communications
Founded 1999. Privately owned. Managing partners Olly Raeburn, Andy
Annett. Clients include Unilever, Danone, Scandinavian Airlines.
Member DMA. www.liquidcommunications.co.uk
Founded 1983. Privately owned. Joint managing directors John
Morgan, Julie Hawson. Clients include Kellogg's Foodservice, McCain
Foods, Warburtons. Member ISP, DMA. www.brahm.com
Founded 1993. Privately owned. Managing director Andrew Watts.
Clients include ExxonMobil, Sony, La Poste. Member ISP, DMA.
25 Why Not!
Founded 2003. Privately owned. Chief executive Andy Agar. Clients
include Telegraph Group, Woolworths, Universal Pictures. Member
Founded 1991. Privately owned. Managing director Gary Rapps.
Clients include G Costa, London East Connexions Partnership, Bell.
Founded 2003. Privately owned. Managing partner David Atkinson.
Clients include Eurostar, Beiersdorf, South West Tourism. Member
ISP, MCCA. www.agencyspace.co.uk
Founded 1997. Privately owned. Chairman Sean Parkin. Clients
include Pizza Express, Bonne Maman, One Stop.
29 Cognito Integrated Marketing
Founded 2002. Privately owned. Managing director Karl Heasman.
Clients include Nivea, IDT Financial Services. Member ISP, DMA.
Founded 2003. Privately owned. Chairman Stuart Gulliver. Clients
include Pernod-Ricard, BAA, Virgin Holidays.
31 Elevator Promotional Marketing (formerly GCAS SP)
Founded 1994. Privately owned. Managing director Sara Callanan.
Clients include InBev Ireland, Kerry Foods, Stena Line. Member ISP.
THE SARBANES-OXLEY EFFECT
For firms affected by the US Sarbanes-Oxley Act, which restricts the financial information companies can disclose, we have used Companies House data provided by Willott Kingston Smith. This includes many of the network-owned integrated below-the-line agencies; it should therefore be noted that their gross profit is not solely from sales promotion. In some cases the latest available data was for the 2004 financial year. No up-to-date information could be found for Draft FCB. Arc Worldwide merged with The Triangle Group this year, and combined figures have not been posted.
TOP 5 FOR GROWTH - BIG AGENCIES
Agency Gross profit Gross profit Change
2005 (pounds) 2004 (pounds) (%)
1 Iris 12,816,000 8,830,106 45
2 Billington Cartmell 8,271,675 6,020,216 37
3 Haygarth 10,125,353 9,096,643 11
4 Proximity London* 23,337,000 21,362,000 9
5 Geoff Howe Marketing 11,824,000 10,911,000 8
*Companies House data for Sarbanes-Oxley-affected agency
TOP 5 FOR GROWTH - SMALL AGENCIES
Agency Gross profit Gross profit Change
2005 (pounds) 2004 (pounds) (%)
1 23red 1,692,000 370,000 357
2 Dialogue DLKW 1,655,00 642,00 158
3 WDMP 3,220,410 1,731,242 86
4 Bullet 299,658 180,225 66
5 Cognito Integrated 357,000 233,000 53
ESSENTIALS - ISP AWARDS Every year the Institute of Sales Promotion (ISP) holds its Promotional Marketing Awards to recognise campaigns that demonstrate the creativity and effectiveness of the discipline. In 2006, prizes were awarded for campaigns across 12 client categories, as well as for various promotional techniques and communications channels.
The ISP scores each agency according to the awards it has won, and updates the total over time to keep track of the most successful shops. Since the turn of the millennium, SMP has proved the most consistent performer, with 92 points. However, the merger of Arc Worldwide and Triangle has produced an agency with a combined total of 104 points.
One of this year's winning campaigns was Coca-Cola's 'Win a Player' (pictured), which took gold in the beverages category. The activity, created by BD-NTWK, was launched to leverage the brand's three-year sponsorship of the Football League.
The campaign, which took the form of a free prize draw, was designed to appeal to football fans by giving them a real chance to contribute to their team's success. It offered the opportunity to 'win a player' for their side as well as money for themselves. First prize was £250,000 for the club and £10,000 for the winner, with runner-up prizes of £50,000 and £1000 respectively. Entrants could also win pairs of match tickets in hourly draws that took place every day throughout the promotional period.
The campaign was activated through several channels. The draw was promoted on 210m packs of Coke and backed by a point-of-sale and TV campaign. Fans could enter via text or online, and the website expanded the experience by offering football content, news and games, as well as a consumer poll.
The draw attracted more than 1m entries, and the winner was announced live on Sky Sports just before the Championship play-off final. The activity was so successful that it has been conducted again this year, this time receiving more than 2m entries.
ISP AWARDS TOP AGENCIES 2000-2006
1 SMP 92
2 Triangle* 77
3 Claydon Heeley 48
4 Saatchi & Saatchi Group 42
5 Euro RSCG KLP 40
6 Blue Chip 39
Source: ISP (Grand Prix 6pts, platinum 5pts, gold 3pts, silver 2pts,
The Impact Awards 2007, in association with Promotion & Incentives and Marketing magazines, will recognise the work of the UK's most effective agencies working in promotional and motivational marketing.
A panel of 12 leading client marketers will judge the first Impact Awards, with details of the nominees and winners sent to more than 100,000 marketing professionals.
Any work launched or current during the period of January to December 2006 will be eligible to enter the Awards. The winners will be announced in April 2007.
For more information, visit www.impactawards.co.uk.