This is the first time that Marketing has compiled a table
combining direct marketing and promotional marketing (sales promotion)
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.
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
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
’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
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
Meanwhile, the ’urge to merge’ remains an important feature of the
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
This was announced after the page proofs for the October sales promotion
league table had been passed for press, necessitating some late
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
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
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
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
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
’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
’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.’