The new age of direct marketing agencies

They are leaders in sectors ranging from traditional DM and digital to emerging channels. They remain steeped in the science of data while offering greater contributions to a company’s overall brand strategy. They struggle both to reorganize their own internal organizations to reflect the number and complexity of emerging channels as well as to educate their clients about today’s turbo-charged marketing space. They enjoy newfound respect and access to the C-suite.?

This is the world of today’s direct agencies, as we proudly introduce DMNews‘ first Agency Business Report. In a series?of online-exclusive profiles, you’ll read about 70 of the top direct and digital agencies, including their capabilities, service standards and corporate identities. Click here to access all of these profiles.

It has been nearly a half-century since Lester Wunderman famously coined the term “direct marketing” in 1961 — which Wunderman CEO Daniel Morel points out was later said by Lester to be better put as “personal advertising.” But today’s DM agency leadership acknowledges that the past 10 years have truly brought a vast shift to the industry, due to the rise of digital; changes in consumer behavior; the emergence of many more marketing channels; and the need for agencies to reorganize the traditional way they do business. ?

“A lot of things have changed,” observes Epsilon CEO Bryan Kennedy, who started at the agency 13 years ago. “There’s no question that the complexity of the solutions and the amount of coordination for well-executed integrated channels has just become more complex as channels have really proliferated.” ?

Direct agencies used to have a much more straightforward role, as direct mail served as the primary one-to-one channel for most marketers. Just a decade ago, Kennedy points out, Epsilon managed databases for clients that focused on driving direct mail and only centered on names and addresses. Now, however, data have become more abundant and more detailed, and tools to analyze it have become far more complex.?

“To take advantage of the rich data available and to truly understand customer behavior and segmentation, agencies really have to be more nimble and have a much different toolset than existed 10 years ago,” he says. ?

For agency Draftfcb, that data complexity, as well as increased efforts to integrate campaigns across channels, means the company has had to break down walls of separatism between various disciplines, says CEO?Laurence Boschetto. But, he also admits that hasn’t been easy.?

“Anytime you have anyone going into uncharted waters, it’s very challenging because there are different audiences you have to impact,” he explains. “So, there are a number of different areas that need to be developed internally within our own organization, in terms of psychology and training as to why we’re doing what we’re doing to benefit our client’s business.”?

He adds that educating clients about these new efforts is also challenging. “Taking large organizations and helping them see a new solution requires pretty considerable heavy lifting, [which means shifting] how they think, work and budget,” he says. ?

At the same time, today’s clients expect their agencies to wring more out of less – they want increased accountability and measurement to get the most from shrinking company advertising budgets.?

“[Clients are] not satisfied with click-through rates,” says Bob Lord, who was named CEO of Razorfish last month. “They want to know if the product sold, and whether it helped their brand impression. The line is blurring between direct marketing and brand. Companies see both as synonymous.”?

But this tight-fisted client attitude actually bodes well for the direct and digital world these days, he adds, because DM can boast measurability that traditional advertising cannot — so more marketers are turning towards DM agencies and cutting back on traditional spend.?

“While marketing budgets are contracting, I suggest we’re staying flat,” Lord explains. “With our targeting abilities we can be more effective in getting the consumer at the right time.” ?

And, agency leaders emphasize that while many things have changed in the DM world, one thing remains solidly the same: the value of data.?

“It’s pretty amazing that it was not that long ago where everyone involved in an Internet company thought they had created and invented DM,” says Kennedy. “In fact, [direct marketing] is a discipline that’s rooted in data and collecting and analyzing and processing that data over a period of time. That has not changed.”?

Wunderman CEO Morel notes that it’s obvious that direct agencies are not looked at as the “old envelope stuffers of yore.” Instead, DM is “becoming sexy, man,” he laughs. “Even my daughter thinks her dad is cool.” ?

Direct marketers, he says, spent a long time feeling rather invisible in the ad world. “We were very much under the radar screen, we weren’t the visible part,” he says. “We were the guys working the data and the numbers, the stuff being done at retail and with production.” But now, Morel says, mail production accounts for less than 10% of what Wunderman produces. ?

“[Our] business is in an exciting time,” he explains. “It is 60% digital when, in fact, two years ago it was less than 20% digital. For Microsoft, for example, [our work is] all digital — we don’t produce a single piece of paper for them. With Ford it’s [becoming] exactly the same.” ?

In addition, DM agencies are becoming more “front row” for the client, he continues. “We’ve escalated the discussion we have from the guy in charge of buying of print production to the guys talking strategy,” Morel says. “[We’re discussing] ‘What should I do with my brand on the new medium called the Web,’ because the business is immediately transactional. We are the ones doing all of this stuff – but now it’s on steroids.”?

Lord agrees that DM agencies are now able to connect with the C-suite in ways they never had before. “We’re having conversations not just with the brand manager, but also with the CMO and potentially the CIO,” he says. “And [the conversations are] about how to fundamentally change how we get to the consumer in a different way than ever before. For example, we just recently did a brand product launch exclusively online and had phenomenal success. Two or three years ago, the brand manager wouldn’t ever have considered it. But now, the budget must be put into a place where they knew it will be effective and drive results.”?

But while agency CEOs are pleased at the relatively newfound focus on accountability, there are still concerns about the DM agency industry that keep them up at night. ?

“I think on a macro level, our industry has been very reticent to change and needs to change at a more accelerated rate,” says Boschetto. “The industry is still compartmentalized, he insists, and those barriers need to break down further.”?

The larger question for agencies is, he says, “How do you let the accountability and all the scientific and direct side coexist with the branding and advertising side and have the best impact?”?

Another concern, he adds, is that clients may say they want new thinking, but it remains to be seen whether they are really ready to respond to it. “Are they really prepared to respond to those kinds of new solutions?” he wonders. “Because they [categorize and compartmentalize] as well.”?

For Lord, it is the confounding issue of measurement that still hangs over the digital industry that concerns him. “It’s somewhat frustrating to me that I sit on a lot of individual boards and we still rabble around the concept of measurement — what’s the measurement of engagement,” he says. “The world is changing so quickly that the issue is evolving. It’s not about messaging anymore — it’s about whether someone really engages with your brand. It’s very powerful vs. a TV spot, but the industry hasn’t figured that out in terms of measurement.”?

He also adds that traditional research is “not up to snuff now.” It’s too slow, he explains, at a time that consumer buying behavior has drastically changed. “Consumer buying behavior is now so influenced by their social graph and influence sphere, that research is too slow to react,” he says.?

As for new online measurement tools, he points out that the industry has not accepted them as valid. “The research industry has to say these tools are valid and effective put into context,” he says. “I’m not saying traditional tools will go away, but when is it appropriate to use these new tools? Our measurement systems have to include this influence sphere.”?

But for these same CEOs, the excitement about being part of DM has not dimmed. “I believe this is the best place to be in the entire value chain of marketing spend,” Kennedy insists. “At the same time as you’re seeing shrinkage [of budgets], we’re also seeing budgets concentrate on the kinds of marketing programs and strategies we support – whether those be pure multichannel direct marketing strategies or loyalty programs, which are a big part of our business.” ?

Draftfcb’s Boschetto says that while he came from the above-the-line advertising space, he has learned about good business from direct.?

“I’ve learned about cause and effect relationships, about databases and insights into consumer behavior, about developing marketing programs built on that premise and seeing what the results are and fine-tuning the program in real time,” he explains. “So, when I look at both, I imagine a world where the best of marketing and the best of business coexist in an open space. That’s the excitement for me – venturing into new technologies, asking, ‘What learnings do we take from yesterday to reinvent our tomorrow?'” ?

As for the future of the DM and digital agency, Razorfish’s Lord believes those specific attributions will soon break down.?

“You’re going to call [them] agencies in general,” he says. “I do believe there is this space between the traditional agencies and traditional consultancies. Where you’re bringing business context and great ideas together – that’s the new agency of the future, where you are a trusted adviser helping them to transform their business through innovative direct marketing. And it’s a pretty cool space.”?

Boschetto agrees, pointing out that agencies need to deal with their disciplines as people deal with their lives — in totality.?

“It’s not about direct, brand-building, promotions, retail or digital, it’s about all of it,” he says. “So, as we reinvent ourselves with a whole new thinking about the engagement process, we have to understand that totality of the industry and how to optimize results using every channel and touchpoint.” 

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