Joshua, 141. Together they sound like a Biblical reference. In fact they are two of the new names for “below the line” (non-advertising marketing) agencies in the United Kingdom. Until this year, both went by better-known international DM network titles – Grey Direct and Bates Communications, respectively. These name changes reflect a more fundamental shift in the territory major players in the DM agency world are staking out across Europe.
For just like Wall Street, merger mania has hit this sector. And along with it is coming a new agency culture that might – some decades after the idea was set forth – actually deliver integrated marketing communications. Maybe it’s a long shot, but when Draft Worldwide – a top U.S. DM agency and one of the largest in the world – swoops on sales promotion practitioner Marketing Principles, something is clearly going on.
“It’s about offering below-the- line marketing solutions,” says Chris Lovell, U.K. managing director of Draft Worldwide.
Lovell himself has been on a merger and acquisition spree since his own agency, LVB, was bought out by Draft last year (see DIRECT, March 1, 1998) to end years of below-par performance by the American network in the United Kingdom. With the addition of Marketing Principles, his quest for scale is now being realized.
Mergers have in some respects become almost inevitable and seem likely to quicken in pace as a result of two pressures. On the one hand, previously separate marketing disciplines are increasingly overlapping.
“Everybody has realized that much more below-the-line activity is coming together in marketing services groups combining sales promotion, databases and telemarketing in a holistic way,” says Peter Boggs, president and CEO of Grey Direct International. “That trend has taken off in the last 18 months.”
The second pressure has been from client-side consolidation. Regionalization drove marketing and production in businesses since the 1980s. And now the view is becoming truly global.
The picture of how international DM and sales promotion is executed has certainly changed substantially in the last five years. It used to be that the same three network names could be found over agency doors in every territory, with common standards and practices.
Now there is more diversity, and a willingness to rely on centers of excellence in one country to lead campaigns in others, rather than pushing the work between locations for local interpretation.
Only a few DM agency networks have the resources to meet client demands around the world. They are typically the ones that have had global clients for some time – OgilvyOne with American Express and IBM, Wunderman Cato Johnson with Ford and Citibank.
Grey Direct has 12 clients for which it works in more than five European countries. It has pursued a policy of growing organically, rather than by acquisition, managing to expand revenue by 30% in the last eight years. But Boggs says this is no longer enough: “We have still fallen behind. So now we are focusing on acquisition and growth.”
To help meet this new demand for scale, Grey Direct and Grey Integrated were merged in the United Kingdom and renamed Joshua. The unusual moniker is due to “idiosyncrasies in the U.K. market,” says Boggs, where agencies have been dropping the strings of founding partner names in favor of more New Age titles. Mother, St. Luke’s, One O’Clock Gun and Black Bottle are some other recent introductions.
Where previously networks tried to impose a McDonald’s-style, same-flavor-everywhere approach, local diversity is now seen as an important resource. Grey’s Swedish agency – the biggest DM operation in that country and also in the top 10 of all agencies there – is called Almen Direct.
For some of the networks, getting in on the below-the-line act is proving to be a rather bumpy ride. In recent months, Bates Communications – the DMsister agency to Bates Dorland Advertising, part of the Cordiant Communications Group – has gone merger mad. Following an internal linkup with Bates Interactive, the company acquired promotions specialist Blue Skies and the whole lot has now been bundled up as 141 Communications.
As a result, all of its senior management resigned, leaving the former managing director of the newly acquired sales promotion (SP) agency in charge. Nobody from 141 was available for comment. Working out who runs what and which skills need to be carried over post-merger is clearly a more complex task than many realize.
But of course there are advantages to marrying.
“We want to go to clients and find solutions that best meet their requirements rather than saying we will make all our money from print and filling envelopes,” says Lovell of Draft Worldwide. That means creating a new, unified culture out of the coming together of DM and SP. Lovell thinks this is a natural evolution.
“Sales promotions have become more creative, thinking businesses, rather than just doing product activity,” he says. “It is a natural development, rather than this fuzzy line that has been increasingly blurred between the two over the last 10 years. Clients want to have more accountable marketing.”
Similar thinking has been bringing together other agencies in the United Kingdom. Tequila, an Omnicom-owned SP specialist that works closely with Blau Marketing in a number of international markets, merged with local DM agency Payne Stracey earlier this year. But this is intended to be much more than a realignment in search of cost savings.
“Having tried to drop the term `below the line’ for a while, it is becoming more relevant,” says Ben Stephens, managing director of Tequila Payne Stracey. “We all thought clients were looking for specialists, and now they want something broader.” Responding to that requirement means having a sufficient depth of resource in each of the specific skill areas, as well as the ability to coordinate across all of them.
“There is a need for critical mass,” Stephens says. “There is no point building mini-bits in each country, for example by having a little data company in Spain.” That means leveraging agency resources in one country across other territories.
Tequila Payne Stracey already does this with its work on Nissan, which is driven out of the Netherlands, and for British Telecom, where London is the lead agency. Stephens describes the approach as “having streams as much as teams.”
Lovell says that despite the coming together of disciplines, their individual strengths still need to be recognized. “You need the right people for good tactical work as well as for if you’ve been given a year’s strategic work that’s based on DM principles with sales promotion elements,” he says.
Draft Worldwide is looking to match its U.K. and U.S. multidiscipline offer through acquisitions in Europe.
“In France we have just acquired one of the largest SP agencies, and we have a good DM position there, too,” Lovell says. “In Italy we are looking to do the same. We want to develop sales promotion in Germany, although that’s a difficult proposition because of the legislation” limiting promotional gifts and discounts to a small percentage of the value of the product being bought.
In parallel with shifts on the agency side, clients also have been reorganizing their management. While some sectors, such as FMCG (“fast-moving consumer goods,” such as packaged goods), still retain traditional product, brand and marketing manager roles, clients are relying more and more on a central marketing manager to cover everything. That role may even be regional or global in scope.
This represents a major opportunity for agency networks, since if they are hired it means pushing work into multiple territories, rather than just one. But it also means more hand-holding because “modern marketing managers are not well versed in marketing techniques,” says Lovell.
Not every network has managed to leverage the diversity trend into a truly international offering. While Omnicom has substantial market share in most European markets – in the United Kingdom it owns well over 25% of all DM agencies by sales revenue – skeptics wonder if it has a credible network.
Still, evolving into below-the- line, rather than specialist DM or SP, agencies would appear to be the way forward into the millennium.
Stephens certainly believes his agency, Tequila Payne Stracey, has to go that way. “It drives a different client relationship because you should dig deeper into the client’s organization,” he says. “We may end up with a shorter client list, but we will be more embedded in their business, as opposed to just talking to one department. We are having to become more business-sensitive. As a businessman, that is more fulfilling.”
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