Introduction: Riding it Out

Every industry is entitled to a bad year once in a while. In 2001, just about every industry had one.

Net revenues among the members of the PROMO 100 declined 4.1 percent to $2.59 billion last year. It was the first time since the magazine began conducting its annual rankings in 1993 that year-to-year revenues declined. In all, 52 of the 100 agencies that made the list, which traditionally has been a hot sheet on the best-performing shops, posted a drop in revenues for the year.

That so many qualifying agencies experienced a downturn in business proves how difficult a year it was. The fact that so many struggling companies were willing to report their fiscal woes (slumping agencies historically have shied away from our list) is an even greater testament to that fact.

And there’s no denying that it was the toughest year the marketing world has seen in a long time. Spending on advertising dropped 4.1 percent, according to Universal McCann, New York City. Spending on traditional promotion tactics dipped 3.7 percent, according to PROMO’S Annual Report of the U.S. Promotion Industry.

Yet companies did not stop marketing last year. In fact, during the worst economic climate in a decade, when they were cutting back on allocations almost everywhere else, corporate marketers devoted more money to one of the most costly, most complicated — and, in large part, most unproven — tactics in the plan: mobile marketing. Spending on marketing tours and events, which various sources have estimated to be anywhere between $12 billion and $20 billion, increased by 40 percent in 2001, according to an Intellitrends survey.

That was a very interesting development, one that suggests the marketing industry may have reached a crossroads. There is a very strong possibility that, hidden within the economic crisis of 2001, lost amidst the desperate debate over cost savings and profit reforecasting, was a fundamental shift in marketing — one whose inevitable arrival was hastened by the financial crisis.

Few vs. Many

PROMO apparently picked the perfect year to de-emphasize agency net revenues and growth in its ranking system (see box on page 47 for a full explanation). But the budget cuts undertaken by so many marketers did not affect all agencies equally, and more than a few shops had very strong years.

Event and mobile marketing companies benefited the most. Revenues among the list’s pure-play (or nearly so) event shops rose 17.9 percent in 2001, with eight of them posting growth. The success was led by GMR Marketing, our Agency of the Year (see page 42).

An ability to assist with events and tours (if not actually handle them) seems to have aided other agencies as well. A principal at one small shop confided that the lone mobile tour it managed last year “saved us.”

Big vs. Small

In general, larger agencies had a tougher go of it than smaller shops. Revenues fell at seven of the 10 largest agencies on the list; only one of the other three posted significant organic growth. Also impeding growth was a significant slowdown in aquisition activity during the year.

Several prominent PROMO 100 alumni ran into financial troubles that had nothing to do with the recession:

• Simon Marketing (No. 30 in 2001) collapsed under the weight of the McDonald’s gamepiece scandal. A billion-dollar powerhouse in 1999, Simon’s stock was delisted by NASDAQ in May after the company’s net assets dropped below $4 million; ceo Allan Brown’s March departure all but signaled a full demise for the shop.

• Aspen Marketing (No. 9 last year) is struggling to stay afloat amidst reports of executive misconduct and fiscal instability. Patrick O’Reilly has replaced Tom Breslin as ceo of the agency network; the New York City office has been shuttered and at least one of its divisions, Schmidt-Cannon, is pursuing a buyout, according to sources. Despite reports to the contrary, O’Reilly contends Aspen is “healthier than we’ve been in 18 months.”

• The wheels fell off Big Fat, Inc. (2001’s No. 100), which made a huge industry splash last year. The company lost several prominent accounts and reportedly was seeking additional financing.

Integrated vs. Specialist

Agencies with a wide range of skill sets also seemed to fare better last year. Full-service shops such as 141 Communicator, Momentum North America, Zipatoni Co., and Ryan Partnership all posted growth.

And that brings us back to the industry shift of which we spoke earlier which, in a word, is the much-ballyhooed “integration” of activity. Not of the “Let’s get all of our disciplines working together for a unified message” variety. And not of the “Let’s make sure we hit the target at multiple touchpoints” variety.

This integration is of the “Let’s figure out how best to communicate our message and reach our customers” variety. It’s discipline-neutral and media-blind marketing, and it’s focused not so much on costs as it is on returns. In this scenario, you’re allowed to spend a buck if you promise to make at least a few back sometime.

Event marketing covers all this territory and more. To get a proper return on events, you need every resource in the arsenal — consumer and trade promotion, p.r. advertising — working together. And that’s what everyone’s been talking about doing for so long.

The road is finally open.

How We Did It

To qualify for the PROMO 100, agencies are required to submit either copies of their corporate tax returns or a letter from an outside auditor certifying their gross billings and net revenues (gross billings minus charges passed through to clients, such as premiums or printing fees) for years 1999, 2000, and 2001. In some cases, letters from the chief financial officer of an agency’s parent company are accepted.

This year, we also required agencies to submit three campaigns they considered to best reflect the quality of service and level of success they provide to clients. PROMO’S editors judged each campaign to assign them numerical scores that were added to give each agency a quality score.

PROMO then ranked each qualified agency three times: once according to its 2001 net revenues, once according to its net revenue growth for 1999-2001, and once according to its quality score. This process provided three separate numbers for ranking purposes.

Those three ranks were then added together to produce an agency’s final score; the lower the total, the higher the agency’s rank. The 100 qualifying agencies were selected based on these numbers.

In determining the top 25, PROMO’S editors considered such additional information as recent account wins and losses, industry awards, management stability, average length of service with clients, and breadth of services to determine the final positions. Several agencies were moved out of or into the Top 25 based on PROMO’S assessmment of those criteria.

Reasonable Revenue Range

The Association of Promotion Marketing Agencies Worldwide (APMA) estimates the average net revenue per employee for promotion agencies to be $130,000. Due to the varying nature of business at different types of agencies, APMA determined that a per-employee level 25 percent above or below that benchmark could be considered a reasonable range for a promotion agency.

Productivity outside that range should be looked upon as either questionably high or inefficiently low, APMA suggests. For the sake of comparison, the PROMO 100 list includes per-employee revenue figures for each agency, although the information does not have any impact on the rankings.

The MIAs

The following is a list of agencies from the 2001 PROMO 100 not represented in this year’s ranking. Reasons for their absence are noted where available.

Aspen Marketing Group (see story)
Big Fat, Inc. (see story)
Creative Alliance (acquired by Frankel)
Cyrk-Simon Worldwide (see story)
Equity Communications (entered but did not qualify)
Ervin Marketing & Communications (entered but did not qualify)
Flair Communications
L.A. Office (changed strategic focus)
Mitchell & Co. (status unknown)
Robinson & Maites
U.S. Marketing & Promotions
Vertical Mix Marketing (acquired by GEM Group)

Consolidators

A list of the largest promotion agency networks. Acquisitions listed in parentheses. PROMO 100 agencies are in italics.

ASPEN MARKETING GROUP

(B-12, Creative Source International, M3 Marketing, Norris Sales Co., Luna Bacardi, Schmidt-Cannon, Creative Marketing, JG Promotions, Hanig & Co., Phoneworks, Corporate Trademarks, Premium Source Merchandising)

HAWKEYE COMMUNICATIONS

Marketing Continuum, Cohesion Marketing, Interactive Media Solutions, Creative Communications of America, The Convergency, FFwd Precision Marketing, Triplefin, Mosaic Marketing, DPS Creative

INTERPUBLIC GROUP OF COS.

DraftWorldwide (Group III Promotions, KBA, Sloan Group, Miller/Huber, Columbian Advertising), D.L. Blair, Momentum (Diamond Group, Waylon Co.), Adair-Greene, Botsford Group, Future Brand (Marketing Corp. of America), Zipatoni Co., Campbell Mithun, Campbell-Ewald, Marketing Drive Worldwide (Market Growth Resources, Impact Communications, Wells Marketing, The Properties Group, McCracken Brooks, Maier Marketing), Imada Wong (49%), Jack Morton Worldwide

Cordiant Communications
141 Communicator

Davidson Marketing, International Sports Marketing, Fantastic Sports, Fitch plc, Primo Angeli. Sports Pro Hawaii, 141 Worldwide

GEM GROUP (CSS STELLAR)

Vertical Mix Marketing, Lang & Associates, Corporate Marketing Associates

HAVAS ADVERTISING

Arnold Brand Promotions, Brann Worldwide, Euro RSCG Impact

OMNICOM GROUP

Alcone Marketing, GMR Marketing, Tracy Locke Partnership, Integer Group, The Promotion Network, Beyond DDB, U.S. Marketing & Promotions, InterOne Marketing, Davie-Brown Entertainment, CPM, MarketStar Corp., TIC TOC, Integrated Merchandising Systems, Pathways Marketing Consultants, Millsport, The Marketing Arm, Live, Motorsports Decisions Group, AWE

PUBLICIS SA

Frankel (Creative Alliance), Gramercy Group, Publicis Dialog, Burrell Communications (49%)

WPP GROUP

Clarion Marketing and Communications (through Bcom3 aquisition), Einson Freeman, Wunderman

ALLOY, INC.

360 Youth, Target Marketing & Promotions

Others of Note

Not every top agency enters the PROMO 100. The following is a list of noteworthy shops that are not part of the rankings but have been covered in the magazine during the year.

Arnold Brand Promotions, Boston

The fact that Arnold Worldwide’s below-the-line staffers work right alongside their advertising compatriots shows in the integrated work produced for clients Volkswagen and Monster.com, among others.

Bochanis Rogan Zoom, Wilton, CT

After brief stints elsewhere, former b. little & Co. principals Jordan Bochanis and Lee Rogan reunited with Louisiana design shop Zoom late last year and quickly scored work from Snapple Beverage Group, Pennzoil-Quaker State, and Fresh Express.

Campbell-Ewald, Warren, MI

This integrated shop (with about $100 million in marketing services revenues) worked on Chevrolet’s Olympics activation and produces customer magazines for Pier 1 and Farmers Insurance.

CircleOne, Norwalk, CT

A trio of Marketing Drive execs left the shop in early 2001, and the Duracell account soon followed. Since the doors opened, the still-tiny agency (15 employees) has won business from other Gillette brands (Mach3 and Oral-B) along with Toyota, New World Pasta, Campbell Soup, and others.

GoodStuff Marketing, Manchester, NH

These field marketing specialists have a client list that boasts Pepsi-Cola, Masterfoods, Sony, and AT&T. It gave wheels to Dunkin’ Donuts PRO Awards-winning Bring a Bagel to Work Days in 2000.

Imada Wong, Los Angeles

This ethnic marketer adds Asian flavor to DaimlerChrysler’s Jeep 101 event schedule and Oriental holidays to AT&T’s marketing calendar. Net revenue nearly doubled to $5.3 million in 2001 for the shop, which is minority owned by Interpublic.

Norm Marshall & Associates, Sun Valley, CA

The decades-old entertainment marketing specialist keeps producing hits, most recently Baskin-Robbins’ wildly successful tie-in with Shrek.

PowerPact LLC, Richmond, VA

The former nucleus of Chancellor Marketing Group (see the June 2001 PROMO for the complicated story) re-merged last spring. Work for General Mills’ Yoplait and Aventis Pharmaceuticals won industry awards last fall.

Thompson-Murray, Springdale, AR

This three-year-old agency works with Wal-Mart and Procter & Gamble. Need we say anything more?

UniWorld Group, New York City

This specialist shop helps such blue-chippers as Burger King and Kraft Foods better target African-Americans. WPP owns a piece of the $26 million agency.