Direct 'Mad Men' talk of transformation
Direct 'Mad Men' talk of transformation
The past 30 years have brought significant change to direct marketing agencies. Agency execs say that while the changes have been especially dramatic in the last five or six years as the Web and its analytics rewrote agencies, change began earlier.
They cite rapid changes in technology; the Food and Drug Administration's decision to allow direct to consumer drug advertising in 1997; the growth of cable TV; and the dawn of the Internet as major turning points.
Jim Kobs, who in 1978 started Kobs & Brady (today DraftFCB), noted much of the targeting for prospects back then was done manually through mailing lists. Part of the agency's job was testing and retesting alternative wordings of direct mail pitches and packages.
"The business was tactical. There was a lot of testing, but testing minutia," he says. "The focus wasn't marketing strategies."
Within four years, much of that would change.
Lester Wunderman, chairman emeritus and a founder of the agency now called Wunderman, said in the 1970s the pace of change was increasing.
"The first change was data," he says. By the latter part of the decade, more and better data was more readily available, and agencies were able to analyze that information more quickly.
From 1979 to 1989
The 1980s were the start of major change. Those changes played out against tectonic shifts in media and technology. ESPN launched in 1979. CNN launched in 1980. IBM began selling its personal computer in 1981.
The typical direct agency at the time handled mail and print and sometimes direct response TV. Credit card companies, catalog houses, telephone companies and insurance companies were common clients. Regional agencies operated independently.
Cindy Zimmerer, SVP and director of learning and education at Wunderman, said as the decade progressed, direct agencies began seeing an explosion of interest in their services.
"In the 1980s, word about the power of direct marketing started to get out," she explains. "Companies that had never thought of doing it became very interested."
In 1979, Ford Motor Co. tapped Y&R for advertising and Wunderman for direct marketing programs: one aimed at Lincoln customers and another at women. Y&R had acquired Wunderman earlier in the decade and the two agencies worked together on behalf of several clients. Wunderman Cato Johnson's client list would grow to include major brands such as General Foods. With the business came international growth. Wunderman had 11 offices in 1978, and by 1988 it had 40. In 1988, to reflect its global focus, it became Wunderman Worldwide. Cato Johnson had been merged into Wunderman.
Patty Lyon, now worldwide chief knowledge director for Ogilvy Worldwide, says Ogilvy & Mather Direct Response — OgilvyOne today — handled the American Express and AT&T accounts. Its AT&T work involved touting the advantage of 1-800 numbers to businesses.
In 1980, the agency took on TWA's loyalty program. During the same period, the agency launched a pan-European ad for American Express.
As cable television emerged, Lyon said the cable TV channels brought with them the ability to target. With that, TV spending increased.
In the late 1980s, Ogilvy & Mather Interactive began to focus on data technology. "Data is the most instrumental change I have seen," she says. "In 1988, we had spreadsheets and Lotus 123, with one or two specialty folks."
Wendy Lurrie, president of G2 Digital and Direct, also remembered how different the technology was at Grey Direct.
"From 1979 to 1989 everything was analog," she says. "Client categories were very traditional: catalog companies and direct marketers. We did not work on [direct campaigns for] consumer packaged goods." Margins at the time, she notes, were "very thin."
As the years passed, Kobs adds, he could see direct agencies becoming more prominent in clients' marketing plans.
"At first direct was in the corner," he says. "By 1989, it was more common to have Fortune 500 companies [interested in direct]."
Kobs also remembers that creative had always been always dominated by the copy person and the art director would follow that person's lead.
"That started to change in the late 1970s and the early 1980s," he says. "As the big companies came in, it evolved into a situation where copy writers no longer dominated."
By 1979, he continues, the advertising manager was in charge of strategy. A decade later, strategy and planning was usually led by the marketing manager or the marketing VP.
From 1989 to 1999
Marketers' interest drew the attention of traditional advertising agencies, which started buying up direct agencies. By 1989, most major direct agencies were owned by large advertising agencies.
The Internet and electronic mail became possible first with CompuServe and later with the 1994 release of an early version of Netscape. These only were hints of what was to come later in the decade.
Rapp chairman and CEO Robert G. Horvath, says his agency, then known as Rapp Collins Worldwide, still did mostly direct mail in the 1990s. Seventy-five to to 85% of the agency's business was mail, 20% was TV, and it also did a lot of data work.
Howard Draft, executive chairman of DraftFCB, says the successful DRTV campaigns in the late 1980s piqued clients' interests and increased spending on direct channels.
Where Kobs & Draft had been dealing with $5 million to $10 million accounts, the TV spending brought some $50 million to $100 million. Bigger accounts also increased agencies' ability to analyze data about customers and prospects.
"We were bringing is such mass audiences, we started to play around with quantitative media [analysis]," Draft said.
Other agencies added big accounts. O&M Direct added IBM in 1994.
Agencies were further helped along in the middle of the decade by the FDA's move to allow drug advertising. Kobs & Draft won Rogaine, and a number of direct and general agencies won drug businesses.
"The rise of DTC [direct-to-consumer] advertising was huge," says Lurrie. Not only did it bring clients, she explains, but the pharmaceutical companies had a lot of data needs that, in turn, transformed their direct agencies. In addition, technology advances were providing agencies quicker access to rich data than they had in the 1980s.
"Getting data was slow and expensive and you couldn't do anything too small [back then]," says Lurrie. "You could get it in TV, but everything else was much slower," she said, noting that started to change in the 1990s.
From 1999 to 2009
The Internet hit direct agencies in two waves. First was the original dot-com bubble from 1998 to 2001 and the growth in e-mail marketing. From 2004 on, social networking, search marketing and mobile began to emerge. The online universe dramatically altered agencies, changing titles, overall strategy, and the client's channel mix.
"You had to hire more hybrid talent," says Marcy Samet, managing director of Princeton, NJ-based MRM. "People who understood the brands, but also who understood the more complicated, strong data and analytics needed."
The good news for direct agencies was that the new kind of data the Internet provided required tracking and analysis, and the direct agencies were perfectly positioned. But even for these data experts, there was far more data available than ever before.
Direct agencies struggled with exactly how to reorganize themselves. Some — like Rapp — that had formed interactive units in the late 1990s, disbanded them and integrated their people and functions into client teams in the main agency. Draft first expanded, then merged with ad agency FCB. Others like Samet's MRM added talent and became mostly digital agencies. There were also stories of what happened along the way.
"By 2000 the bubble was enormous," says Lurrie. "The client would call on a Monday, want a meeting on Tuesday, award the account on Wednesday and want work by Friday. Budgets were big, but every agency had horror stories. "
Lurrie said by 2002 or 2003, the technology behind analytics had become faster and cheaper and it became a "core capability" for agencies, as well as perhaps a necessary one.
The ready availability of data from Internet interactions drew new clients as did the Internet's small cost compared to other advertising vehicles.
"Clients are looking for ways to do more for less," Horvath says. "TV is expensive. There are a lot of dollars involved in direct mail." He said the Web cuts the media costs.
OgilvyOne's Lyon adds that traditionally the first condition for targeting was possessing customer brand profile data from transactions. The Internet changed that.
"Now all clients have data on people they do business with. It's led to increased importance of direct," she says.
Agency executives agreed the data and ability to track response online gave direct agencies a leg up. Companies could now more efficiently target prospective consumers. In addition, the new mediums boosted creativity. At some clients, the result was a changed relationship with direct agencies.
"We were always the second class citizen to the general agency," Draft says. Direct agencies' access to the data changed that.
"Over time, the clients began to want to listen to us first," he says.
Lester Wunderman cites how data has enabled targeting.
"The science of data has really built our business," he explains. "We can now do a better job of saying 'Hey you' instead of saying 'Dear Mrs. Smith.' Mass media was a new idea [once], but it has lost its relevance."