Johnson & Johnson's recent decision to pull £12m out of retail discounts for its babycare and skincare ranges and plough it into brand marketing was big news for the sales promotion sector. For years, brands have been under pressure to sacrifice brand-building activity in favour of BOGOF offers. What's more, as on-pack promotions have declined, so have the agencies that created them. Here at last was a brand bucking the trend.
Yet, as interesting a tactic as it is, Johnson & Johnson's decision does not seem to be the start of a fightback. True, the Institute of Practitioners in Advertising's 'Bellwether Report' for the second quarter of 2007 showed an upturn in SP budgets, but this was the first quarterly gain since 2004. And with signs that disposable incomes are falling as interest rates rise, retailers may increase the pressure for price-led promotions over brand activity. The Bellwether Report also asked whether the level of retail trade discounts, as opposed to brand expenditure, was going up or down; 53% of respondents in the FMCG sector said it was increasing, a greater proportion than in any other category.
For these reasons, many agencies have pushed out beyond the narrow confines of traditional SP in recent years, acquiring experiential marketing and digital skills to develop a more strategic service. And this year's league table suggests that some of these efforts are bearing fruit, with a number of agencies achieving significant gross-profit growth.
A simple on-pack promotion is often not enough for brands anymore. Many continue to run promotional activity that adds value, but often the only means of securing retailer support is to do this on a bigger scale than in the past, backing up the activity with online and broadcast spend to reassure the grocers that the promotion will be successful. If an SP agency can offer all those services, it has a good chance of picking up the entire campaign, rather than the on-pack work alone.
'We're being asked to come up with the initial creative platform and work it through to the executional stage. That's a massive shift from five years ago,' says Geoff Howe Marketing client services director Simon Marjoram. He also notes a growth in pan-European work, one example being his agency's umbrella activity across 12 markets on behalf of Sanford pen brands such as Berol. The 'back to school' promotion centred on a licensing deal with DreamWorks film Shrek the Third.
Yet there is still some way to go, according to Iris Group chief executive Ian Millner. 'The current lack of talent, ambition and investment in the SP industry is preventing it from reaching its full potential,' he argues. 'While the discipline gives marketers a range of techniques and principles that can influence and manage the behaviour of consumers, conventional SP agencies will only be taken seriously by clients if they can learn to apply these skills to more strategic challenges.'
This trend has come to the fore over the past year as a number of high-profile rosters were reviewed by clients, including Norwich Union, Premier Foods and BP, which were seeking to reduce the number of agencies and focus on 'added maximum value' that arises from working across channels. Millner, whose agency posted another year of strong growth, argues that by blending SP with expertise from other disciplines, agencies will see better margins, form stronger client relationships, execute more creative campaigns and achieve sustainable growth.
There is no shortage of marketing disciplines laying claim to the strategic high ground, so the challenge facing SP agencies is to show what they can do that rivals cannot. According to Catalyst managing director Sam Jordan, competition is intensifying as clients search for the best ideas from a broad spectrum of agencies; its past three pitches have been against direct marketing stalwarts, a media agency and big advertising agencies, as well as more regular competitors.
'As we expand across disciplines with less and less respect for the old order, we have to be ever-more mindful of the service we offer,' says Jordan. 'If we can match specialist agencies at their own game and retain the multi-channel "big-idea" thinking that has brought us success to date, then we will be very attractive propositions for clients.'
Despite the huge transformations in the industry, BD-NTWK client services director Jonny Clow insists the heart of SP is still about giving a tangible reward: 'As well as it being important to give people a reason and an incentive to win, it is also important to make people feel there is an element of skill involved, that they can create a strategy in order to beat the system.'
One such campaign was his agency's 'Get up and play' work for Fanta, Sprite and Dr Pepper, in which 10 Nintendo Wii games consoles could be won every day for a nine-week period. Consumers were setting their alarms for 3am in the hope that this would improve their chances of winning.
Britvic head of marketing services Marc Lawn believes SP is undergoing a renaissance, transforming into 'intelligent promotions'. What is necessary today, he feels, is a mix of the right accountability and message - increasingly using direct-to-consumer technologies such as mobile phones - married with the right brand experience. 'With disposable income dropping and food and drink costs expected to explode, retailers will have to extract value by being wiser about what they give away,' Lawn adds. 'The key challenge for SP is to link retailer and brand-owner objectives through the intelligent use of promotional activity.'
There is still life in traditional on-pack promotions - the recently implemented Gambling Act should make them easier to run - but they must now work for retailers as well as brands, with some stores requesting exclusivity. Dynamo recently developed a limited-edition squeezable tomato-shaped bottle for Heinz Tomato Ketchup that was available exclusively in Tesco.
'If brands don't have a strategic alliance in place with retailers, it is getting harder for them to get good shelf space,' says Intelligent Marketing managing director Tricia Weener. She believes the convergence of disciplines will continue. Her agency's recent activity has included working for Tchibo on a cause-related marketing link-up with Breast Cancer Care and with Lufthansa on a dream-destination flights promotion.
As with other long-established marketing sectors, digital is an issue keeping SP agency heads awake at night. Some see it as a huge opportunity, while others worry they may get caught out, either by demanding clients or a new breed of competitor. Either way, digital capability is now a necessity.
'The whole issue for SP is tapping into digital,' says Scott Knox, managing director of agency trade body MCCA. 'A few are doing it well, but some are fudging the issue. Clients want the digital offer to be running harmoniously with the SP. They want agencies to understand the breadth of what's available.'
Despite these challenges, canny agencies have found growth opportunities. With budgets under pressure, partnership marketing - the alliance of two or more brands to promote each other - has continued to expand. This is an area SP agencies are making their own. Phil Goodman, managing director of Bullet, says it has been an area of significant growth for his agency. Bullet brokered a partnership between Nicotinell and the UK's biggest pub company, Punch Taverns, to coincide with the introduction of the ban on smoking in enclosed public places in England. Nicotinell wanted to be the most visible smoking-cessation brand at point of issue when the ban came into force on 1 July, and Punch wanted a promotion that could help its customers who wanted to use the clampdown as an incentive to stop smoking.
Bullet has also recently been appointed by Churchill Insurance to secure brand partners to endorse its 'Challenge Churchill' campaign, and won a competitive pitch through the COI to handle a partnership marketing campaign for UK Transplant to increase the number of people on the NHS Organ Donor Register. 'Partnership marketing offers inexpensive media and very significant return on investment,' says Goodman. 'When budgets are under pressure, it makes sense. If brands want awareness and exposure, why wouldn't they do it?'
In terms of the agency landscape, it has been a quiet year for consolidation. There has been nothing on the scale of last year's merger between one-time SP giant Triangle and Publicis Groupe stablemate Arc, though the decision by Media Square to merge Dynamo and Catalyst last month will create a major player, boasting clients including Sainsbury's and Unilever.
The latter merger, creating the agency WAX Communications, underlines the need for scale to ensure a broad service. 'We're bringing the agencies together to build on our complementary skills and create a platform for strong growth across all below-the-line disciplines,' says Catalyst's Jordan. 'It gives us greater scale from the off and means that we can make further investments to provide our clients with the best services in the future.'
One interesting new player in the sector is Initials Marketing, which boasts Triangle founder Kevin Twittey as its chairman and a one-time Arc regional director for EMEA, Jamie Matthews, as managing director. In its first year, Initials has secured work from an impressive array of clients, including Camelot, Cadbury, Beam Global, Food Standards Agency, Nouvelle and PepsiCo.
Another new name is Chime-owned BMT, which stands for Branded Moments of Truth. The agency, part of the VCCP group, was previously called Gasoline. It has worked for AEG on the launch of The O2, the much-improved venue formerly known as the Millennium Dome. It is a sign of the times that both agencies sell themselves as multi-discipline shops.
Haygarth director Damian Charles, whose company has been involved in promotions including 'Rock up and play', which was intended to bring the Nokia brand closer to a youth audience, warns that this trend will continue. 'There will be more consolidation and some of the new start-ups will disappear. It's getting harder and harder to make money.'
The big question is where the sector goes next. The trend is toward bigger shops capable of offering a range of services that can deliver the margins necessary to stay in business. The issue they face is whether to keep promotions at the core of their business, or become genuinely multi-discipline shops. As an industry in its own right, SP is at a crossroads.
THE SARBANES-OXLEY EFFECT
For agencies 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. These have been placed within the table but not ranked to indicate their position in the industry.
These agencies include many of the network-owned integrated below-the-line agencies; it should therefore be noted that their gross profit figures are not necessarily from sales promotion work alone. For several agencies, the latest financial data available was for the 2005 financial year. Figures for Tequila include both the London and Manchester agencies.
ESSENTIALS - ISP AWARDS
Billington Cartmell was recognised as Agency of the Year in the 2007 ISP Awards, after scooping two golds, two silvers and two bronzes across five campaigns. Elvis Communications was runner-up.
Unilever was named Promoter of the Year, picking up plaudits across six campaigns and achieving an impressive 11 nominations. One of its brands to triumph was yeast-extract spread Marmite, through a campaign developed by Iris.
The agency was hired to drive frequency of purchase by encouraging consumers to use Squeezy Marmite more often at breakfast. It also needed to build awareness of the product by encouraging interaction and generating word of mouth among the key target market: mothers of young children.
Iris created an on-pack promotion across 1m packs offering a free 'Marmart' kit in return for two tokens from the packs. The kits were intended to make breakfast more fun by giving consumers the tools to create their own works of art on their toast. The kit included a lunchbox in the shape of a Squeezy Marmite pack, a spreader, toast stencils and an art mat.
There was one token on each promotional pack. To receive a kit, consumers sent off their two tokens with a payment to cover postage.
The campaign also had an online element. Consumers were encouraged to create their own 'Marmart' and submit it for display online at www.marmite.co.uk/marmart. This gave participants the chance to share their work with other Marmite fans.
A word-of-mouth programme targeted mums of five- to 11-year-olds - key purchasers of the brand. One thousand 'key Marmart mums' received a free kit, including a tell-a-friend incentive. 'Key Marmart mums' were identified as people likely to spread the word - they included mothers who were part of a social network, belonged to after-school clubs or worked in offices. A further 70,000 spreaders with incentive leaflets were handed to mums when they picked their children up from nursery.
The use of phrases including 'absolutely squeezy peasy freebie' on materials such as leaflets helped create a new positioning for an iconic brand, adding more fuel for debate around its memorable love/hate advertising.
TOP 10 AGENCIES 2000-2007
1. Triangle* 96
2. SMP 95
3. Billington Cartmell 56
4. Claydon Heeley 48
5. Arc* 45
6. Blue Chip 44
7. Dialogue 43
8. Elvis 38
9= Swordfish 28
9= The Marketing Store 28
Source: ISP (grand prix 6pts, gold 3pts, silver 2pts, bronze 1pt)
*Triangle and Arc merged in 2006, which would give a combined total of
TOP SALES PROMOTION AGENCIES
Rank Agency Gross profit Gross profit Chnge Staff
2006(pounds) 2005(pounds) (%)
Proximity London* 29,017,000 23,337,000 24 245
Tequila* n/a 22,657,221 n/a 259
1 Iris 17,810,000 12,816,000 39 421
2 The Marketing Store 14,960,055 13,249,308 13 181
3 Carlson Marketing UK 13,871,320 16,845,924 -18 226
Arc Worldwide* n/a 13,382,000 n/a 135
Joshua G2* n/a 13,369,000 n/a 206
Momentum Activating Demand* n/a 12,735,000 n/a 182
4 Geoff Howe Marketing
Communications 12,656,000 11,824,000 7 120
5 Billington Cartmell 11,352,000 8,271,675 37 105
6 Haygarth 10,535,445 10,125,353 4 154
7 BD-NTWK 8,978,708 6,870,533 31 173
8 Chemistry Communications 8,450,000 5,596,000 51 110
Euro RSCG KLP* n/a 7,474,000 n/a 71
9 Exposure Promotions 6,863,231 6,505,776 5 76
10 TRO 6,705,000 6,657,000 1 139
Dialogue Marketing* n/a 6,613,000 n/a 71
11 Elvis 5,466,166 n/a n/a 75
12 Dynamo** 5,300,000 n/a n/a 65
13 WDMP 4,857,520 3,220,410 51 64
14 JJ Group 4,286,444 4,020,110 7 80
Logistix* 3,531,000 4,160,000 -15 49
15 KLM 3,141,153 2,849,322 10 69
16 Beechwood 2,829,936 3,504,100 -19 37
17 SMP 2,650,000 2,500,000 6 45
18 23red 2,412,963 2,416,968 0 45
19 Ainsworth & Parkinson 2,378,336 2,385,241 0 44
20 Golley Slater 2,282,117 1,293,223 76 52
21 Cubo Brand Communications 2,205,365 1,242,528 77 24
22 The Big Kick 2,205,000 1,190,000 85 16
23 Steam UK 2,126,197 1,818,395 17 21
24 Liquid Communications 1,850,000 1,330,000 39 17
25 Intelligent Marketing
& Communications 1,849,012 1,559,840 19 34
26 Catalyst** 1,816,693 1,783,089 2 48
27 Branded Moments of Truth
(formerly Gasoline) 1,648,572 1,399,888 18 20
28 HRG 1,499,297 1,032,227 45 25
29 Space 1,241,978 565,972 119 18
30 Why Not! 1,006,334 894,517 13 13
31 Toucan 810,923 601,573 35 12
32 Bullet 782,331 299,658 161 14
33 Initials 700,000 n/a n/a 10
34 Cognito Integrated
Marketing 487,500 357,000 37 12
Founded 1991. Subsidiary Omnicom Group. Chief executive Amanda
Phillips. Clients include TV Licensing, Royal Mail,
InterContinental Hotels. Member ISP, MCCA, DMA, IPA.
Founded 1992. Subsidiary Omnicom Group. Chief executives Tim Bonnet
(London), Fergus McCallum (Manchester). Clients include Canon,
Carbon Trust, Gala. Member ISP, MCCA, DMA. www.tequila-uk.com
Founded 1999. Managing director Sam Noble. Clients include Sony
Ericsson, Unilever, Coca-Cola. Member MCCA, DMA, IPA.
2 The Marketing Store
Founded 1986. Subsidiary Havi Group. Chairman David Bender. Clients
include McDonald's, Cereal Partners, Shell. Member ISP, MCCA, DMA,
3 Carlson Marketing UK
Founded 1960. Subsidiary Carlson Companies. Chief executive
Jonathan Harman. Clients include Arla Foods, BT, Nestle. Member
ISP, MCCA, DMA, IPA. www.carlsonmarketing.co.uk
Founded 1968. Subsidiary Publicis Groupe. Chairman Andrew Edwards.
Clients include Procter & Gamble, Coca-Cola Enterprises, HBOS.
Member ISP, MCCA, DMA, IPA. www.arcshowcase.co.uk
Founded 1978. Subsidiary WPP. Managing director Nick Spindler.
Clients include Masterfoods, Post Office, Nestle. Member ISP, MCCA,
Momentum Activating Demand*
Founded 1999. Subsidiary Interpublic. Chief executive John
Armstrong. Clients include Nestle, Cereal Partners Worldwide,
Bacardi. Member ISP, MCCA, DMA, IPA. www.momentumww.com
4 Geoff Howe Marketing Communications
Founded 1978. Privately owned. Chief executive Steve Connors.
Clients include Hills Pet Nutrition, Honda, Associated British
Foods. Member ISP, DMA. www.geoffhowe.com
5 Billington Cartmell
Founded 1990. Privately owned. Managing partners Ian Billington,
Paul Cartmell. Clients include Unilever, GlaxoSmithKline, Lloyds
TSB. Member ISP, MCCA. www.bcl.co.uk
Founded 1984. Privately owned. Managing director Sophie Daranyi.
Clients include Nokia, PepsiCo, BAA. Member ISP, DMA.
Founded 1990. Privately owned. Chief executive Ghill Donald.
Clients include Coca-Cola, Orange, Nintendo. Member MCCA, IPA.
8 Chemistry Communications
Founded 2000. Publicly quoted. Chief executive Joe Garton. Clients
include SCA, Premier Foods, Diageo. Member ISP, MCCA, DMA.
Euro RSCG KLP*
Founded 1974. Subsidiary Havas. Chief executive Phil Bourne. No
clients disclosed. Member MCCA, DMA. www.klp.co.uk
9 Exposure Promotions
Founded 1993. Privately owned. Managing director Mark Stringer.
Clients include Virgin Trains, Unilever, Diageo. Member ISP.
Founded 1982. Privately owned. Managing director Keith O'Loughlin.
Clients include General Motors, T-Mobile, BMW. www.tro-group.co.uk
Founded 1995. Subsidiary WPP. Managing director Peter Lidgey. No
clients disclosed. Member ISP. www.dialmkg.com
Founded 2003. Subsidiary Cossette Communications. Managing director
Mike Cullis. Clients include Mitchells & Butlers, Pizza Hut,
Cadbury Trebor Bassett. Member ISP, MCCA, DMA.
Founded 1990. Subsidiary Media Square. Managing director Roger
Marriott. Clients include Sainsbury's, Anheuser-Busch, Coca-Cola.
Member ISP, MCCA, DMA. www.dynamo.net.uk
Founded 2002. Privately owned. Managing director Craig Wheeler.
Clients include Carphone Warehouse, Thomson Holidays, Boehringer
Ingelheim. Member MCCA, DMA. www.wdmp.co.uk
14 JJ Group
Founded 1989. Privately owned. Managing director Robert Beck.
Clients include British Gas Business, Aston Martin, Whitbread.
Member ISP, DMA, IPA. www.thejjgroup.com
Founded 1989. Subsidiary EMAK Worldwide. Chief executive Peter
Boutros. Clients include Kellogg, Coca-Cola Enterprises, Nestle.
Member ISP, MCCA. www.logistix.co.uk
Founded 1986. Subsidiary KLM Group. Chairman Jon Derry. Clients
include Diageo, BSkyB, Npower. Member MCCA, DMA. www.klm.co.uk
Founded 1999. Privately owned. Managing director John Wood. Clients
include Pernod Ricard, Alliance & Leicester, Associated British
Foods. Member IPA. www.beechwood.com
Founded 1983. Privately owned. Joint managing directors Chris
Simpson, Simon Mahoney. Clients include Microsoft, Kimberly-Clark,
Sandisk. Member ISP, DMA. www.smp.uk.com
Founded 2000. Privately owned. Managing director Jane Asscher.
Clients include Bacardi-Martini. Member ISP, DMA, IPA.
19 Ainsworth & Parkinson
Founded 1990. Privately owned. Managing director Tim Parkinson.
Clients include DAF Trucks, Constellation, Seven Seas. Member ISP.
20 Golley Slater
Founded 1957. Privately owned. Chairman Andrew Tillard. Clients
include Mitsubishi, Oli, School Food Trust. Member ISP, MCCA, DMA,
21 Cubo Brand Communications
Founded 1995. Subsidiary Cagney plc. Joint managing directors Kerry
Simpson, Chris Walmsley. Clients include Anheuser-Busch Adventure
Parks, London Metropolitan University, Caribbean Airlines. Member
22 The Big Kick
Founded 1999. Privately owned. Managing director Barbara Holgate.
Clients include Birds Eye, PepsiCo, Unilever. Member ISP, MCCA.
23 Steam UK
Founded 2000. Privately owned. Creative director Nick Spink.
Clients include Scottish & Newcastle, Foster's Group EMEA,
Ladbrokes. Member ISP. www.steam-uk.com
24 Liquid Communications
Founded 1999. Privately owned. Joint managing partners Olly
Raeburn, Andy Annett. Clients include Scandinavian Airlines,
Unilever, Mitchells & Butlers. Member MCCA, DMA.
25 Intelligent Marketing & Communications
Founded 2003. Privately owned. Managing director Tricia Weener.
Clients include HSBC, Diageo, Tchibo. Member ISP, MCCA, DMA.
Founded 2001. Privately owned. Managing director Sam Jordan.
Clients include United Biscuits, National Australia Group, Johnson
& Johnson. Member ISP, MCCA. www.catalystagency.co.uk
27 Branded Moments of Truth (formerly Gasoline)
Founded 2002. Subsidiary Chime Communications. Managing director
Mark Joy. Clients include SABMiller, Muller, Anschutz Entertainment
Group. Member ISP. www.bmt.uk.com
Founded 1990. Privately owned. Managing director Stuart Becker.
Clients include Cow & Gate, ConAgra Foods, Marston's. Member ISP.
Founded 2003. Privately owned. Managing partner Guy Hepplewhite.
Clients include Eurostar, Beiersdorf, South West England. Member
ISP, MCCA. www.agencyspace.co.uk
30 Why Not!
Founded 2003. Privately owned. Managing director Nick Whitehurst.
Clients include Telegraph Media Group, Greene King. Member ISP.
Founded 1991. Privately owned. Managing director Gary Rapps.
Clients include Hain Celestial, Bell Micro, Ocean Spray.
Founded 2003. Privately owned. Managing director Phil Goodman.
Clients include Pernod Ricard, COI, Churchill Insurance.
Founded 2006. Privately owned. Managing director Jamie Matthews.
Clients include Camelot, Greene King, Cadbury. Member MCCA.
34 Cognito Integrated Marketing
Founded 2002. Privately owned. Managing partners Bob Brenchley,
Karl Heasman. Clients include Nivea, SCA Europe, IDT Financial
Services. Member ISP, DMA. www.cognitomarketing.com
*Companies House data provided by Willott Kingston Smith for agencies
affected by the Sarbanes-Oxley Act
TOP FIVE FOR GROWTH - BIG AGENCIES
Agency Gross profit Gross profit Change
2006(pounds) 2005(pounds) (%)
1 Chemistry Communications 8,450,000 5,596,000 51
2 WDMP 4,857,520 3,220,410 51
3 Iris 17,810,000 12,816,000 39
4 Billington Cartmell 11,352,000 8,271,675 37
5 BD-NTWK 8,978,708 6,870,533 31
TOP FIVE FOR GROWTH - SMALL AGENCIES
Agency Gross profit Gross profit Change
2006(pounds) 2005(pounds) (%)
1 Bullet 782,331 299,658 161
2 Space 1,241,978 565,972 119
3 The Big Kick 2,205,000 1,190,000 85
4 Cubo Brand Comms 2,205,365 1,242,528 77
5 Golley Slater 2,282,117 1,293,223 76