"Direct" and "promotion" are just words on the door: The work from both groups of agencies could just as likely hit the TV as the morning paper, the mailbox as the cheese display at the grocer.
Many agencies are groping for a new language, exchanging the "sales promotion" standby for "strategic marketing communication" or mothballing "direct response" to slip in "vertically integrated marketing."
With evangelical zeal, "sales promotion" agency MarketWorks has even developed a catch-all for its multiplicity of services-Convert-a-Town.
Says President Susan Cocco, to convert a town is to saturate a targeted market with in-depth media, PR, in-store promotions, field marketing and sampling.
The reason the sales promotion and direct response specialties are blurring is largely the same from agency to agency: The marketer increasingly needs a full range of expertise-and lots of it.
The "lots of it" was apparent in this eighth annual Advertising Age report surveying more than 200 specialized agencies.
Direct response agencies grew a collective 16.8% in gross income (revenue) in 1994, compared with 8.9% in 1993. Sales promotion shops advanced 8.8%, up from 7.6%. By comparison, general ad agencies grew 10.7% in 1994.
Growth seems to be oozing from agency pores, top to bottom. The largest of the traditional sales promotion shops, Gage Marketing Group, rose 21.6% in U.S. gross income, to $95.7 million (see chart on Page S-2).
One reason for that strong growth is Gage's strong database roots, which give the agency a crossover entree into direct marketing and direct response.
According to Exec VP Thomas Bell, Gage is drawing increasing business from manufacturing clients that want to optimize the mass of data generated by warranty and purchase cards.
DIMAC Direct tops the traditional direct response rankings, surging 56.4% in 1994 to a U.S. gross income to $99.3 million (see chart, Page S-4). It nudged Gage for the top spot in marketing services (see chart at right).
DIMAC, defining itself as a "vertically integrated advertising agency," bought Los Angeles-based Krupp/Taylor USA in December 1993 and Direct Marketing Group, New York, in May '94. DMG was the 18th-largest direct response shop in Ad Age's report covering '93 revenues.
DIMAC's growth also was tied to increased spending from new and old clients, some of it diverted from traditional advertising, according to the shop. "Direct is proving more accountable [than general advertising]," says President-CEO Michael T. McSweeney. "Direct marketers know in 30 days their ROI (return on investment). One-on-one communication required to know the customer can't be done through general advertising."
Agencies are not only broadening their services but keeping the tactical elements out of their self-declared identities.
Among sales promotion shops, Frankel & Co. calls itself a marketing agency, a sign it's willing to do anything for the client. Alcone Sims O'Brien feels it's important to sell a strategy, not be tied to a tactic, explains Matthew R. Alcone, chairman-CEO. That agency's tactics include, among others, direct response capabilities enhanced by parent Omnicom Group's big database.
IMPACT, a unit of True North Communications, combines promotion and direct, a blending that will continue "as long as the present short-term mentality continues," states Joe Flanagan, president-CEO.
Prime examples of where the metamorphic marketing services are heading are two IMPACT accounts that draw on its direct expertise: A metropolitan daily for which IMPACT provides print ads and TV commercials to push subscriptions, and a retail hardware chain that requires print ads and commercials to push a product-of-the-week.
"While 75% of those accounts are short-term or direct in nature, another 25% is image advertising," says Mr. Flanagan, "and we do that, too, because we're the keeper of the client's strategic direction."
All these changes in the breadth and variety of services are calling for staff changes as well.
Grey Advertising's Beaumont-Bennett is evolving into a consultancy, says George Wiedemann, chairman-CEO. The change is a result of a shift in the agency's reliance on fees tied to large production projects and the demise of agency studio work (which clients now get from outside services).
"The solutions to a given client's needs may be direct mail or sports events," says Mr. Wiedemann. "We find the strategic solutions with the client, and contract out the execution. We're looking for brains, not bodies. We've retained people who can do strategic planning."
Frankel President James Mack shares this staffing goal.
"We're after the thinkers, too," he notes. "Most importantly, we're going to research, adding people in research on strategic marketing."
The stand-alone promotion agencies, strong on in-house execution, are declining in numbers as promotion expands into marketing services.
"We call ourselves a promotion marketing agency but what we have is a vertically integrated production marketing facility," says Len Daykin, senior VP of Don Jagoda Associates, a sales promotion shop that grew 33% in 1994 U.S. gross income.
Known for its emphasis on execution, Jagoda attaches the back-end (the production plant) to the front-end planning, creative side. "We don't just spin ideas out of whole cloth," says Mr. Daykin.
"We've been integrating sales promotion and direct response in telemarketing," says Peter Mills, chairman-CEO of Ross Roy Communications, No. 8 on the combined marketing services list.
But, he says, direct and promotion are not right for everything. Promotion, for example, is still the name of the game in product areas like spirits and tobacco, where on-premise advertising is crucial.
A test of linking direct and promotion brought the U.S. Postal Service to FCB Direct, New York, and two Chicago sales promotion agencies, Frankel and Lee Hill Inc.
Taking aim at present perceptions of the nation's postal system, the program announced in May will advance a new vision for the USPS, from delivery to retail to motivating employees.
"The relationship of advertising, direct [response] and promotion are blurred in interactive marketing," says Lou Schultz, president of C-E Communications (formerly Lintas Marketing Communications).
"If you have a database it's direct response, and to keep the customer engaged you offer sales promotion. But the proof of the process is brand equity-that's what all [services] should be building," Mr. Schultz says.
C-E integrates sales promotion and direct response in about 60% of its programs, he notes, and uses them separately in 40%.
"There is no question that direct is now looked upon as a mainstream marketing tool," states Raymond S. Rizzo, chairman-CEO, Clarion Marketing & Communications, No. 12 on the combined marketing services ranking. "But I can't say there will be a watering down of advertising to make it more like direct. I look for a mix of marketing tools."
Ross Roy uses the term "relationship equity" for the lasting arrangements between brands and their customers.
"In the case of client Chrysler, for example, it wants to be your car company so that you will keep buying the automotive products you need from it," says Mr. Mills.
Because of the sales stimulus from target marketing, marketers are rejecting the old saw that direct isn't cost efficient for package goods.
"There's not a major player in package goods that doesn't have some kind of initiative going in direct response," says Mr. Bell.
Practicing "relationship marketing," IMPACT uses a strong blend of promotion and direct response in programs for package goods clients such as Kraft Foods, Coca-Cola and NutraSweet Co.
Humming in the background of IMPACT's relationship marketing, Wunderman Cato Johnson's "action marketing" and Columbian Advertising's "customer management" is new technology centered around the computer and database development.
"Knowing things on a real-time basis and being able to measure and demonstrate the results of advertising make up the character of our type of marketing," says Mitchell Kurz, worldwide CEO of Wunderman Cato Johnson, "and that's a change from the days when Viscount Leverhulme [Richard Hesketh Lever] said, `Half the money I spend on advertising is wasted, and the trouble is I don't know which half'."
Using computer technology, marketing services agencies focus on customers to retain customers and maximize sales. They focus on individual markets and zoom in on individual buyers. They build databases on individual tastes, preferences and possible interests.
Columbian uses its customer-management approach to concentrate on spending marketing dollars on long-term customers, tabbing the good, so-so and light users. Rapp Collins' Infoworks unit offers a similar program.
Marketers can now dial in on the right customers for each product, notes Barry Blau, chairman of Barry Blau & Partners, because they can "select customers more precisely, enrich the data, then have a dialog with the audience, getting 40% to 50% response."
"There are no national marketing programs anymore," says Lee Flaherty of Flair Communications. "Today the business is really local, account specific-co-marketing in nature.
"We need to think globally, act locally," says Mr. Flaherty. "For example, say that only 33% of all people in the U.S. drink alcoholic beverages; just 3% drink scotch. So you don't even put up [point-of-purchase displays]. You need a database to go after scotch drinkers one-on-one."
Databases are giving marketing services agencies more proprietary data on places, consumer habits and a better understanding of emotional patterns and needs.
But Mr. Kurz cautions: "The more you can measure, deliver, demonstrate, the more clients want. It's like an opiate. We'll all want more.
"And the only constraints are not in the marketplace but in possible regulation, to guard privacy."