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Will you need an ad agency if the superhighway will permit you to talk directly to customers? (chart) AGENCIES DON'T MAKE THE GRADE SURVEY SAYS SHOPS AREN'T UP TO SNUFF ON THEIR CLIENTS' NEW-MEDIA NEEDS

By Published on .

Ad agencies, take note. Your clients don't think you're equipped to handle interactive marketing.

An exclusive Advertising Age survey of 260 senior executives from a broad range of companies found that in general, ad agencies aren't cutting the mustard when it comes to new media.

Among CEOs, 28.8% said their agencies weren't prepared for the information superhighway and 27.3% said they weren't sure if their agencies could handle their company's interactive needs.

For marketing directors, 28.2% said their agencies were ill-equipped and 31.8% responded that they didn't know where their agencies stood, nearly mirroring the response of chief information officers.

And agencies that don't get up to speed soon will get left behind. Nearly half of the CEOs contacted said they wouldn't even need an agency if they could talk directly to customers through interactive media.

The survey was conducted last spring by Northern Illinois University for Advertising Age and sister publication Business Marketing.

It was mailed to CEOs, chief information officers and senior-level marketing personnel at a cross-section of industries, including healthcare, insurance, banking, retailing, publishing, electronics, telecommunications, broadcasting and automotive.

USA Chicago, a consultancy, also was a sponsor. The survey has a margin of error of 10 percentage points.

Whether or not their agencies are ready, top executives are certain interactivity will affect their business.

Sixty-eight percent of CEOs said there is a demand for it among their customers. And more than 70% said it will change the way they market their goods and services.

"American business, the study has shown, believes that the information superhighway is here now and they're intending to make use of it," said Pat Yanahan, president of USA Chicago.

As for agencies, respondents said know-how and technology are the main problems.

Of the executives surveyed, 47% of CEOs, 32.9% of marketing executives and 37.1% of chief information officers said their ad agencies lack sufficient knowledge to meet superhighway marketing needs. And 33.3% of CEOs, 43.5% of marketing executives and 37.1% of chief information officers felt technology was another issue.

Survey respondents said they are increasing ad spending on new media, while spending on traditional media is frequently flat or down.

For example, 39.4% of CEOs said spending on CD-ROM catalogs had increased and 51.5% said spending on online newsletters was up. Among marketing executives, 47.1% said CD-ROM catalog spending was growing, and 55.3% pointed to online newsletters.

This means that the types of traditional advertising on which agencies earn their bread and butter-TV, print, radio-could get upstaged by new-media options. Clients want new media, and they feel their agencies can't deliver on many fronts.

Of course, the dollars allocated to interactive media are undoubtably less than the millions spent on network TV, for example. But the growing interest among business leaders is significant.

"The growth in online services and use of the Internet has prompted publishers as well as advertising and marketing agencies to rethink the way that information is currently delivered," Mr. Yanahan said.

"Forward-thinking companies will be there to communicate with customers as they move onto the information superhighway in increasing numbers."

One area that appears especially poised for growth is direct sales and database marketing: 47% of CEOs and 54.1% of marketing executives said direct marketing spending is up.

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