AD AGE DATAPLACE: MARKETING SERVICES: FULL-SERVICE TACK PAYS OFF AS SPECIALTY SHOPS POST 16% GAINS BEHIND THE ACOUNTABILITY BANNER.

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The marketing services industry is literally in the heat of change, shaped between Vulcan's hammer and anvil.

The biggest agencies are making major vulcanian moves, heaving together specialty divisions, fusing them more closely to ad units and linking them globally to create a new corporate architecture of which the mythological smithy himself would be proud.

McCann-Erickson Worldwide has formed McCann Relationship Marketing and brought in direct response patriarch Stanley Rapp (the Rapp of competitor Rapp Collins Worldwide) to fire up the new global marketing specialty business. Also within McCann's parent, Interpublic Group of Cos., DraftDirect bought promotion house D.L. Blair in April-virtually a year after DraftDirect itself was bought by Interpublic.

Ogilvy & Mather Worldwide has hewn OgilvyOne Worldwide out of former Ogilvy & Mather Direct.

BATES SWITCH

Bates Worldwide's Sales Promotion Group is recasting itself into 141 Worldwide (pronounced one-four-one), a concept suggested by the potential business available with several international clients, including B.A.T Industries.

Foote, Cone & Belding created Impact Communications Group at its Chicago headquarters, bundling the Impact sales promotion unit, FCB Direct's Chicago office, and FCB Public Relations, Chicago. PR increasingly is becoming part of the pool of specialties at marketing services companies.

"All marketing agencies are beginning to see that if they are to be competitive they must offer full marketing services," says James Mack, president of Frankel & Co., Chicago. So, in many respects, the landscape change is evolutionary.

Financial returns are of mythic proportions from both twin peaks of marketing services. Sales promotion from 135 shops rose 16.3% in U.S. revenue to $1.2 billion; U.S. direct response revenue from 142 agencies hit $1.3 billion, up 16.6%, according to this 10th Advertising Age survey.

TOP AGENCIES GAIN

Both gains topped the 13.2% increase in 1996 revenue in the U.S. for advertising agencies, according to the Ad Age Agency Report (AA, April 21).

Marketing services executives in the survey say accountability in ad spending of all kinds and the importance of retailing are driving their direct and promotion specialties.

Direct can not only tell "what your spending is doing, but allow you to talk to the 20% of the population that gives you 80% of your business," says G. Steven Dapper, chairman-CEO of Rapp Collins.

And using the customer database properly means cutting attrition. "If you can cut attrition by 5% you can be successful," says Wendy Riches, chairman of New York-headquartered OgilvyOne.

"We have a much bigger marketplace today where competition is fierce. Your best customer is somebody else's prospect. Marketing now is about using a mix of rational and emotional approaches to get a one-on-one relationship, making sure that the customer is not just satisfied but loyal, and holding on so that you 'own' that customer," she says.

Mr. Rapp, McCann Relationship Marketing's chairman-CEO, likewise links added value with customer retention "by turning unfeeling technology into a warm, personal experience that leads to becoming part of a community."

Examples of such relationships, Mr. Rapp says, are clubs for airline frequent fliers, buyers of pet food and pasta, readers of computer-game magazines and even owners of Harley-Davidson motorcycles.

McCann has found clients want full integrated service-"everything from business strategy development to creative execution, media and production management," says Pamela Larrick, managing director.

In addition, the power of the retailer continues to shape the market.

"All Frankel clients seek a big impact at retail," says Mr. Mack, identifying Frankel as a total marketing, retail brand agency-a concept that looks beyond merchandising and point of purchase of a brand to store design.

Part of this idea is converted into words by Dick Blatt, president of Point-of-Purchase Advertising Institute: "With over 70% of all buying decisions made in the store, POP . . .serves as the final three feet of a marketing campaign."

RISING PROFILE

Jeffrey McElnea, president-CEO of Einson Freeman, Paramus, N.J., sees the rising profile of POP as "the continuation of a pretty consistent growth for the past 10 years. But this is not just POP but all in-store activity."

Merchandising assignments away from the store floor helped Dugan Valva Contess, Morristown, N.J., record a 60% jump in U.S. revenue. Part of that non-floor activity: the use of broadcast as a medium for the account-specific marketing of a Kellogg Co. cereal brand hooked into a promotion at Kroger Co. stores.

Internet use in marketing services has become a big referral tool. Much of the promotion activity for direct shop Biggs-Gilmore Communications, Kalamazoo, Mich., is by computer. For instance, it markets Baja power boats by producing World Wide Web-site commercials, as well as by using magazine bingo cards and boat shows. Nearly 30% of leads come from the Internet and one-quarter of all leads trigger dealer referrals, says Lisa Pappas, Biggs-Gilmore's director of direct marketing.

INTERACTIVE PUSH

Interactive operates as a seamless part of OgilvyOne. It is a tool of direct, says OgilvyOne's Ms. Riches, noting it does not, for example, replace direct mail.

She believes, however, it may change the mail much as TV competition has caused magazines to proliferate with scaled-down niche readership, and newspapers to move from 'round-the-clock editions to broader feature coverage.

Frankel's Mr. Mack believes electronic communications will replace paper and plastic for in-store promotions. Such a tool, he says, is the agency's new Siren Technologies division and its Digital Point of Purchase system with a network of terminals that present prices, promotions and menus, etc., easily changed at a central control panel.

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