Both companies say they are eager to strengthen their below-the-line marketing capabilities in mainland China, because such services are increasingly important to help marketers target promotions, combat the rising cost of TV air time or reach rural consumers.
“The country is reaching a saturation point when it comes to traditional advertising; there’s so much clutter that companies are looking for ways to reach consumers more directly now,” said marketing consultant David Wolf, CEO of Wolf Group Asia in Beijing.
Earlier this week, Omnicom finalized a deal to buy a majority stake in Unisono Fieldmarketing International, a Shanghai-based company with 2,000 employees that provides field marketing and merchandising services. Unisono already helps multinationals like Gillette, Visa and PepsiCo and local clients develop their brands at hypermarkets, supermarkets, department stores, convenience stores, pharmacies and drugstores in 25 cities.
Add scale, capability
The deal “adds substantial scale and reach to meet the increasing needs of our clients in China’s rapidly growing consumer goods and services market,” said Michael Birkin, Omnicom’s Tokyo-based chairman-CEO, Asia/Pacific. “They are all looking for the full range of marketing services now, from traditional advertising all the way to the point of sale. Unisono gives us the best possible capability for brand activation.”
WPP’s JWT, meanwhile, acquired Always Promotion Network, one of China’s largest promotional networks, earlier this month. Led by Cai Hua, a local entrepreneur, the agency specializes in road shows, in-store sampling, promotional initiatives and door-to-door surveys.
The acquisition “is very important to our long-term ability to offer integrated communications,” said Tom Doctoroff, the agency’s Shanghai-based area director, Northeast Asia & CEO, China. Always will significantly increase JWT's scale on the mainland, he said.
Integrated marketing is not new to China, but below-the-line services have been a tough discipline for foreign-run ad agencies to penetrate. Unlike tech-oriented mobile, Internet and viral e-mail campaigns, marketing on the ground in China requires deep understanding of the country's geography as well as its diverse cultures and hundreds of dialects.
It also means dealing with monumental staff training and turnover issues on a scale of thousands, not the hundreds that agency execs are more accustomed to, although the approach works well in China in part because of low labor costs.
Direct marketing workers earn $1-1.20 per hour in big cities like Beijing and Shanghai, and about 75 cents in tier two and tier three cities. At the high end, attractive women hired by alcohol marketers to promote liquor beverages in karaoke bars and clubs earn $40-65 a night.
Smaller cities "completely different"
Marketers dependent on below-the-line services range from Procter & Gamble to Volkswagen, all seeking experienced help with everything from database management to road shows.
“A lot of agencies here claim they can do on-the-ground executions in big cities like Beijing and Shanghai,” said Patti Sun, Shanghai-based VP, China for Euro RSCG’s direct marketing arm, 4D. (The letters stand for “digital, data, direct, drive.”)
“But when you go down another 50 or 100 cities, which is crucial in China for large marketers now, you need the know-how to change the implementation strategy, because these markets are completely different from the big cities,” she said.
The Havas-owned agency became one of China’s pioneers in integrated marketing by acquiring a local company called Field Force, now called 4D, in 1999. Today, the division has 400 full-time staff and can deploy up to 30,000 part-time staffers in 42 cities.
They are mainly young Chinese studying a relevant subject--beauty school students for P&G's SK-II promotions, medical students for OTC marketers and MBA students for Intel--sourced through a sophisticated in-house database.
The students end up working for marketers like P&G, setting up in-store promotions and samplings for its hair care brands in eastern China or helping Diageo engage consumers with its Johnnie Walker brand with thematic events.
TV "too expensive"
China Merchant Bank, for example, is the country’s largest credit card issuer with 4 million of the 15 million credit cards in circulation. Its customers are also the highest users of credit cards compared to rival banks, with average spending of $150 a month and an average of $75 per transaction.
Even so, the bank spends less than $4 million annually on advertising in China, and almost none of it goes into television. Instead, the bank maintains a direct marketing sales force of 1,500 full-time people, and hopes to have 3,000 on the ground by the end of this year.
“TV is too expensive. It’s better to invest in direct marketing, like telemarketing, direct mail promotions and canvassing door-to-door in residential areas, office buildings and shopping malls in upscale areas, where we are most likely to find new customers,” said Freeman Peng, VP of the bank’s credit card center in Shanghai.
“Advertising has become too expensive for a large swath of the industry and a lot of medium-sized companies have found they can’t afford to run ads on CCTV, so they start to wonder what else they can do,” said Mr. Wolf. For large agency networks, meanwhile, “it’s a lot easier to buy an existing company from someone they know can make rain and run a business than it is to build a below-the-line agency from the ground up.”