The direct marketing sector struggles with image problems. Its 'junk mail' tag, in particular, has proved difficult to shake off, despite significant improvements in targeting and more responsible attitudes being adopted by the majority of brands and agencies that use direct mail.
Other reputation issues persist just as obdurately. Despite sterling efforts by bodies such as the Direct Marketing Association (DMA) to improve the sector's environmental performance, the public perception is that the medium still lacks 'green' credentials. Occasional high-profile media coverage of database leaks and the loss of personal and financial information have also triggered concerns relating to data protection.
Nonetheless, despite the numerous challenges, the industry also faces a number of opportunities, particularly in the digital space. Boundaries between agency types have never been as blurred as they are today, and with their expertise in targeting customer segments and generating direct response, direct shops are well-placed to connect with the digital-savvy consumer across a variety of platforms.
Some direct luminaries suggest that by virtue of their agency's skills in engaging with consumers and delivering return on investment across multiple platforms, they are well-equipped to take on a strategic lead agency role, overturning the hegemony that has long rested with ad agencies. It is a compelling and controversial argument, but not everyone is convinced.
'Convention dictates that your advertising agency is your lead agency and that your direct, sponsorship, promotional and digital agencies play important but supporting roles,' says Peter Gandolfi, head of brand strategy at Nationwide. 'The theory goes that the ad agency sets the direction by creating positive predisposition for the brand, and the other agencies leverage that predisposition or consideration into response and sales-generating marketing activity.'
Gandolfi likens this to an outdated, inefficient feudal system, in which the ad agencies are the barons and the other agencies are either knights or peasants. However, he does not believe that there should be a 'revolution' in which direct agencies take power to become the lead agencies or the most important advisers.
'I don't have a lead agency and I don't want or need one,' says Gandolfi. 'It is my role to lead a team of hand-picked agencies that are the best of their breed, which work closely together to build my brand and my business. Each has a specific role, but we share a common goal - doing a great job for Nationwide. It is about the collective effort of everything we do. Nothing is more or less important than anything else as far as the consumer is concerned, and no one agency is more important than any other as far as I am concerned.'
Colin Woodcock, head of brand at Prudential, shares some of Gandolfi's views, but says he would consider having a direct business as his lead agency. He adds that the decision would, of course, hinge on factors such as campaign aims, budget and brand issues.
'If there is a clear brand proposition, branding framework and product/service propositions that are appealing, profitable and available direct, then why not?' he says. 'That said, the need to integrate communication across different audiences and media means that the make-up of my virtual agency team is almost certainly more important than who leads it.'
Historically, direct agencies' ways of working have focused on account handling and campaign delivery. These abilities remain absolutely essential, but a growing number of agencies with their roots in direct marketing have sought to broaden their offer into digital channels, while repositioning to offer more strategic and integrated services.
While the new media boom has spawned a wave of pure-play digital agencies, many longer-established direct shops have developed digital expertise, and claim their broader marketing knowledge can help brands fully exploit customer communication across these burgeoning direct channels. 'Clients want creativity and intelligence from agencies,' says DMA Agencies Council chairman Chris Arnold. 'They look to whoever can provide them.' In his view, ad agencies have 'failed appallingly' to offer marketers integration as they gravitate toward building campaigns around TV ads. This has helped direct agencies attract top creative and planning talent, as the ambitious are keen to learn about integration.
Jon Ingall, managing partner of Archibald Ingall Stretton, says the biggest problem for agencies is competing 'for the limited pool of talent'. He also believes that some direct agencies struggle to come up with the 'big idea' that can provide brands with valuable differentiation and cut-through. Nevertheless, with the best brains in the agency world keen to gain experience in digital and direct marketing, he adds that the standing of direct agencies is improving rapidly, with growing numbers of advertisers open to having an agency with a direct background as their lead.
'Above-the-line agencies have always taken the lead from a branding perspective, and that is unlikely to change for companies that have big global brands to manage,' says TILT managing director Ben Allan. 'However, we may see direct marketing taking the lead on less established brands, which are more dependent on direct marketing than above-the-line activity. This will become more common as below-the-line media continues to develop.
Direct agencies are perfectly placed to lead the integrated approach across digital and traditional direct mail because their expertise and knowledge is relevant to digital, in which measurement, targeting and analysis are core skills. While tracking relating online advertising to website traffic is fairly advanced, brands are struggling to pin down what exactly in their offline is driving their online traffic.'
Tony Spong, head of direct marketing, sales promotion and integration at agency selection group AAR, thinks that many direct agencies banking on more regular lead roles may be disappointed. The conservative ways in which many advertisers' businesses are structured, he says, make it hard to overturn the status quo. It will take a 'bold and innovative client' to introduce a fresh perspective, and such clients are likely to be challenger brands.
Sales promotion and direct marketing have traditionally been viewed as lesser disciplines by advertising agencies because they are more tactical, often involve meeting the consumer at the coalface, and can never be as 'widescreen' as the 30-second commercial. However, the feeling in some quarters of the direct sector is that as the medium has become more strategic and is increasingly involved in above-the-line support, so the budget and omnipotence that has traditionally been handed to ad agencies by clients has been eroded.
'Clients can now look to traditional direct marketing and sales promotion agencies for faster thinking, quicker delivery and more empathy in many channels, including digital, outdoor and press advertising, email marketing and radio,' says David Atkinson, managing partner of Space.
Nonetheless, some of the aforementioned image problems may still derail some direct agency aspirations. Genuine direct marketing agencies do not engage in pumping out 'junk mail', but the label sticks because of lazy thinking among some advertisers and lesser agencies, which is often compounded by lazy journalism.
'The perception of direct marketing is not changing fast enough at boardroom level, even if the change is happening within marketing teams,' says Ian Bates, creative director at Entire. 'Unless the business' major route to market is direct - as it is in the home-shopping sector, for example - brand and advertising agencies still seem to get priority access to the top table,' he says. 'This is particularly short-sighted in what are expected to be tough economic times, when activity geared toward highly-measurable direct response and brand engagement should come to the fore.'
CASE STUDY - HYUNDAI
Hyundai has run a CRM programme for more than seven years. Its objectives are straightforward: to capitalise on awareness activity, to manage prospects through to purchase and to use ongoing brand experiences to retain more owners when they come to consider their next car purchase.
At the heart of the programme is a deep insight into the Hyundai customer, underpinned by a clear understanding of how the automotive customer journey has evolved with the advent of digital media.
Critical to the activity's success is that direct work is no longer thought of simply as 'offline mail packs' but rather as a series of key touchpoints within the customer's overall journey.
Carlson Marketing Worldwide takes the lead in managing all Hyundai's direct consumer communications so that the brand website, offline packs, email communications and data strategies constantly evolve to maximise response and cost efficiency.
Additionally, specific knowledge gained about individual Hyundai consumers and owners is used in the development of above-the-line and media plans.
'We are essentially channel-neutral and get business results for brands,' says John Hiney, managing director of Carlson UK. 'We have business planners, as well as brand and promotional planners.
'Agencies have to learn to be more grown-up, because there is so much overlap with digital. I have sat at a roundtable meeting where seven agencies gave a different view about what digital should mean for the client. Ad agencies are still in a strong position to lead because they have brand custodianship, but where the issue is about retaining customers, agencies with direct skills are well-equipped to take the reins.'
CASE STUDY - RSPCA
The RSPCA is the UK's leading animal welfare charity and a highly successful fundraiser.
It uses DRTV as a dependable, volume source of regular donors. Like other charities, the RSPCA has recorded a decline in telephone response to DRTV over the past few years, as donors react to its commercials by visiting its website instead.
Total volumes of response are increasing, but conversion rates across the two channels differ considerably. While conversion rates on the phone are above 70% - due to call centres' managed, human interaction - conversion rates online are 3% or below, as donors are easily distracted in the online environment.
Data-led media agency Mike Colling & Company took a lead role in devising a strategy to deliver a net increase in new donors. Viewers of the RSPCA's DRTV ads were prompted to respond using their mobiles, by sending an SMS message to a premium-rate text number. The creative, 'I'm an animal, help me out', drew on imagery made familiar by reality TV shows associated with mobile response.
Responders were informed that they would be charged £3 for their text, which would go to the RSPCA as an immediate donation. A thank-you reply was sent, asking for them to opt into or out of further communication.
Response rates for phone calls alone rose by nearly 200%. The conversion rate for those who agreed to be called back was equal to those donors who call in response to a DRTV commercial. Return on investment was further supported by the cash income from the premium-rate text.
'When you use cold telemarketing and cold mail it is difficult to initiate a dialogue,' says MC&C managing director Mike Colling. 'It's better to initiate this through public media such as TV or press, and then try to channel people onto the phone, which delivers much greater conversion rates than online.'