Hot shop springs from Arkansas

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Three hours northwest of Little Rock, and deep within the shadow of the world's largest retailer lies one of marketing's hottest shops.

Amid the steepest advertising downturn since the Great Depression, little known Thompson Murray has flourished, increasing headcount more than sixfold to 115 in the past three years. In 2002 alone, the agency staff has grown 64%.

That growth springs from a strategic position between two giant clients. Twenty miles to the north is Wal-Mart Stores' non-grandiose global headquarters in a former Bentonville, Ark., warehouse. Three miles to the south is Procter & Gamble Co.'s 200-employee Wal-Mart team in a modest Fayetteville office park.

In between lies Thompson Murray, housed in a new building built to look like an old converted warehouse, befitting a boomtown built on thrift. More than 300 Wal-Mart vendors, up from 125 just five years ago, have moved teams of 10 or more people into the corridor between Bentonville and Fayetteville as they cozy up to the world's biggest retail buyer.

In this Anytown USA, Thompson Murray has thrived as a multidisciplinary agency focusing on treating the retail environment as media. Chairman-CEO Andy Murray describes its business as the science of "turning shoppers into buyers."

He points to research last year by the Point of Purchase Advertising Institute finding 70% of consumer purchase decisions are made in store. That fact is not lost on Thompson Murray client P&G, whose Chairman-CEO A.G. Lafley is fond of talking about how Wal-Mart's 100 million weekly shopping visits easily exceeds the reach of any TV program.

Mr. Murray saw this as an opportunity, since he believes that conventional ad and promotion agencies aren't set up with the range of capabilities needed to do retail marketing. So he's built one that encompasses shopper research, package and display design, promotion, PR, brand identity, retail quality, compliance auditing and creative development for a full range of in-store and out-of-store advertising.

opportunity knocks

Mr. Murray, a nine-year information technology veteran from P&G, left his job on the company's dedicated Wal-Mart team in 1997 to form BrandWorks, a consulting firm he started from his kitchen. Although he merged with local ad agency Thompson Earnhardt & Associates in 1999, the rest of the shop's growth has come organically. The closest thing to an acquisition was hiring 11 employees earlier this year from Blackwood Martin, a local agency that closed after losing its Masterfoods USA account.

"A lot of times people try to move into this in-store space from other business models, and it can be challenging," Mr. Murray said. "They're very focused on one discipline."

Thompson Murray research shows marketers have 2.5 seconds of a shopper's attention in-store rather than the relative luxury of a 30-second TV spot. So he uses eye-tracking research to discover what consumers see in that 2.5 seconds. He tries to combine package designers who can create a pleasing look with ad copywriters who can create a message that stops shoppers in their tracks.

Catering broadly to the biggest vendors in Wal-Mart territory has made Mr. Murray very busy. Besides P&G, he currently works for General Mills, Coca-Cola Co. and J.M. Smucker Co., and has handled Nestle Foods, General Electric Co. and Energizer in the past. The shop is compensated both by fees and commissions, and does not disclose revenue. (Based on an estimated average of $130,000 for per-employee revenue published by the Association of Promotion Marketing Agencies Worldwide, its current annual revenue would be $15 million.)

Thompson Murray broke ground last summer on a 21,000-square-foot addition to a 15,000-square-foot space opened less than a year earlier. The new building includes an in-store retail lab that will include mock supercenter, club store and dollar store sections where concepts can be tested with consumers in realistic settings.

attracting talent

Mr. Murray had the building designed to resemble a converted Chicago warehouse, combining lofts and exposed brick with notes of rustic Arkansas. He's walked a tightrope, he admits, between creating a space appealing enough to attract talent from places like Chicago and Dallas without looking so expensive it rankles that cost-conscious client from Bentonville.

Exactly what projects the agency is working on, Mr. Murray won't say. He was reluctant even to discuss the agency until he could talk it over with Wal-Mart and P&G. Such is the secrecy surrounding Vendorville that several marketers in the town have unlisted phone numbers and some building owners won't disclose their tenants.

While Mr. Murray won't reveal the project details, there are some clues as to the kind of work it's doing. For example, P&G's Wal-Mart team has won for two years running the company's internal award for what Mr. Lafley calls "the first moment of truth," when consumers make their decisions at the store shelf.

This year, the team won for creating Speaking of Women's Health, an independent organization sponsored by P&G, Wal-Mart and a handful of regional sponsors whose work includes a weekly program on the Lifetime cable network. In a taped presentation to analysts last week, Jim Stengel, P&G global marketing officer, said the Speaking of Women's Health program had yielded $5 in increased sales for every dollar invested.

P&G won't disclose precisely its results with Wal-Mart, but filings with the U.S. Securities and Exchange Commission show the company did 17% of its $40 billion in fiscal 2002 global sales with the retail giant, up from 15% a year ago. Growth at Wal-Mart accounted for most of P&G's $1 billion global sales increase last year, and P&G's Wal-Mart business of around $6.6 billion is up 10% to 23%-depending on rounding errors-but not far from Wal-Mart's 14% growth to $217 billion in sales last year.

"Over the past three to five years, we've been putting significant new focus on the first moment of truth based on the importance of it," said Dina Howell, global marketing director of P&G's 10-country Wal-Mart team based in Fayetteville. "Thompson Murray grew and added capabilities as we realized we needed those capabilities. That's one of the things that sets them apart."

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