Marketing Services

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While marketers have always used marketing services to achieve measured sales results, their use has turned almost obsessive.

"We need to move product this quarter . . . this six months! That's what Wall Street investors want. And that's what we give them, whether it's sales of auto parts or sweet rolls," says CEO Ronald G. Askew of Integer Group, a Lakewood, Colo., sales promotion agency.

The rush to short-term revenue has been good to marketing services agencies.

The 216 U.S. agencies monitored in this 13th annual Advertising Age Marketing Services report generated U.S. gross income (revenue) of $5 billion in 1999, up 17.2% from the previous year.

Sales promotion, often considered the side of marketing services more inclined to instant gratification, rose 20.1% to $2.39 billion in gross income, the second highest annual jump in more than a dozen years.

Direct marketing gross income increased 15.6% to $2.49 billion, continuing its annual double-digit growth that began in the 1990s. These agencies aggregated $122 million in gross income in areas other than marketing services.

For the first time in recent years, both promotion and direct agencies trailed traditional ad agencies in percentage growth in U.S. gross income.

Ad agencies racked up a 22.2% gain in U.S. gross income in '99, fueled by a vitamin shot of mergers and acquisitions and interactive marketing (AA, April 24). In worldwide gross income these traditional agencies advanced 21%, compared with 21.3% growth for promotion and 17.5% uptick for direct marketing among marketing services agencies.

The bottom-line trajectory of the marketing scene has fostered new marketing services models -- targeted, loyalty, relationship and alliance marketing, the Internet with its instant response, and field and event marketing. The latter, a form of promotion often mixed with direct, is reporting heavy revenue gains. One of its top practitioners, U.S. Marketing & Promotions, Torrance, Calif., measured '99 growth of 113.2% in gross income.

NOT AN AFTERTHOUGHT

"Event marketing is no longer an afterthought, but an integrated component of a company's strategy," says Gary M. Reynolds, CEO of GMR Marketing, New Berlin, Wis., which grew 34.8% in gross income. Event marketing can be entertainment, sports or lifestyle events, wrapped around fairs, festivals, races, trade shows, cookouts, malls, etc.

"Events are an efficient way to touch customers directly," says Dan McConnell, VP at Beyond DDB, Seattle."They have come for entertainment and are more receptive to the promotional message. There is much less bias by the customer."

Direct and promotion agencies are capitalizing on interactive's large window of opportunity, but executives' perspective on its value varies.

"We believe e-mail is more effective in reaching the customer, but we don't have data on the behavioral nature of the Internet audience. We can't identify the demographics yet," says John Kuendig, president of Ryan Direct.

Stan Rapp, chairman-CEO of MRM Worldwide, New York, calls the Internet "a rocket booster in marketing" that allowed his agency to touch the customer it courted in 1997, when it combined direct mail, telephone, direct ads and databases and evolved into customer relationship marketing.

Kathleen Biro, president of Digitas, Boston, says the agency's '99 gross income climbed 53.3%, with more than 75% of that gain coming from Internet-related business and new client growth. The agency is the former Bronnercom.

Given the growth in Internet marketing, it might seem the mailbox is fading into a monitor. "Mail is still alive and well even where it's tied through the Internet," says Roberta Weinstein, managing partner, BEN Marketing Group, Stamford, Conn.

Statistics are on the side of direct mail, at least in the short-term. Direct mail is expected to be a $50 billion business in 2003, when Internet marketing hits $5.3 billion, says Mr. Rapp.

A migration from direct mail to Internet is a more long-term projection. Cost will make that a fait accompli, says Lawrence Kimmel, president of Grey Direct, New York. He says 115 million addresses in the U.S. receive mail but only 8 million get e-mail. "Yet an e-mail is more targeted and costs just 3 to 12 cents each compared to print plus mailing at 21 to 23 cents each."

BOUNDARIES BLURRING

The survey shows marketing services' boundaries keep blurring as direct and promotion morph and evolve. "We don't sell ourselves as a promotional agency anymore. We do image advertising, in-store, outdoor, media. We think like a brand, act like a retailer!" says CFO Jeremy Pagden of Integer Group.

Minneapolis-based Carlson Marketing Group, No. 1 in marketing services revenue, takes a broad view of the business. "We go to solutions-based answers for the client," says Jeff Manley, exec VP. "We don't categorize [these answers] as distinctly sales promotion or direct marketing."

"All disciplines are available under one roof, after all," says Mike Kust, VP-marketing.

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