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Howard Draft joined Kobs & Brady in 1978 at age 23 and ended up owning the agency before he was 40. Its Chicago headquarters have recently moved into new offices east of Michigan Ave. In the main lobby is an espresso bar. Beverages are $1 each, and money earned goes to a long-standing pro bono client that combats childhood AIDS. Mr. Draft was interviewed in his office by John McDonough.

Ad Age: In your career what has been the major breakthrough you've seen in direct marketing?

Mr. Draft: I'd say three. The real keys to direct growth have been working women, the mass use of credit cards and the opportunities provided by multi-media today. The whole purpose of direct marketing is targeting. There are now hundreds of magazines out there plus cable TV. Many more options. That along with credit cards and 800 numbers to make the purchase an easy process have probably been the biggest breakthrough factors.

Think how far we've come in changing the kinds of sellers who use direct marketing. The world of direct today is the Fortune 500 companies. We're using TV and print to acquire a first-time customer, then using direct mail against a database at the back end [to hold the customer].

Ad Age: You've said that you build brands. Isn't that the ad agency's job?

Mr. Draft: Not exclusively. When we work with clients like Sprint, British Airways or Philip Morris, we have to respect the brand.

The worst thing that can happen is for an agency to create great brand-building advertising over time, then have direct marketing that is not consistent and true to that brand. And what we've done is hire a lot of people from general advertising, not just creatives but account service and research people, too. Jackie Silver is our research director, and she came from Ted Bates and Needham.

The more accurate we are in developing research and applying it to a brand, the more effective our advertising is. Obviously, we make brand building a top priority.

Ad Age: Isn't the object of direct marketing to make the sale?

Mr. Draft: The object of marketing is to build a relationship with the consumer. That starts with getting the consumer to raise his hand and invite you in to deliver some sort of advertising message. Once the hands are raised, we capture the names and remarket to them and build a long-term relationship. And who's better suited to build that relationship that a direct marketing agency?

Traditional advertising is growing single digit these days while direct and promotion are growing double digit. I have major clients who spend more on direct than general advertising. Eventually they are going to come together. I'm producing :30 and :60 TV spots that have to be true to Fortune 500 brands. I can't be effective if I regard direct marketing [as an inbred speciality] and dismiss the experience of general agency talent. You've got to bring the two together.

Ad Age: Do your creatives come from general agencies?

Mr. Draft: I would say most of them. Certainly the senior people. Lee Hill came out of Burnett. We've been applying a lot of general agency people to the work we've been doing. You can not hire and develop enough people in direct marketing and promotional advertising just by growing them on your own.

We have to move people over from general to direct marketing, which is great, because remember, 20 years ago I wanted to be in general [advertising] but couldn't get in. Now I've got people in general who want to get into direct. The paradigm has shifted, and I think that's a fabulous aspect of our industry today.

Ad Age: What is your ownership structure?

Mr. Draft: We're 100% owned by IPG [Interpublic Group]. I'm just a hired gun; I'm a very large stockholder at IPG now.

Ad Age: And your senior management?

Mr. Draft: They are [stockholders] too. When we sold the agency, there were 32 stockholders within Draft. I could have kept a lot more [of the stock] for myself, but I felt there had been a number of people who had made this company great.

Ad Age: You bought yourself from Saatchi for $27.2 million. Six months later, what was the price to IPG?

Mr. Draft: There were 1.8 million shares plus, so if you calculate the 1.8 million shares after they've been split two-for-one, it's over $100 million. It was a good return on investment. And IPG has seen the company double in a year and a half.

Ad Age: Let's talk about ethical issues in direct marketing. What is the biggest problem in that area?

Mr. Draft: Privacy. Especially in Germany it's a major issue: How

much information we can hold on the consumer and how we can use it? With the kinds of clients we work with, this is not a problem. They would never do anything to push that envelope too far, and this agency has its own in-house law department to make sure we don't. But for the industry, privacy needs to be addressed.

Ad Age: What have been the biggest overall failures-and biggest successes-in the direct marketing industry in the last decade or so?

Mr. Draft: The biggest failure is that direct marketing hasn't really pushed the consumer to opt out of mailing lists. I think there is still too much mail going to people who aren't interested in it. The Direct Marketing Association has this thing where you can opt off a list. But consumers are not well-enough educated in how to do it.

Think about how many catalogs you get that you have no interest in. The industry hasn't done a good enough job telling people how to get off the lists.

I don't want to mail a catalog to someone who doesn't want it. It's costing me money to reach someone who wants to be left alone. It's not costing the customer anything-it's costing the marketer.

I want as educated a consumer as I can get. And I'd like to see the industry do more advertising to educate that consumer.

Ad Age: And on the plus side?

Mr. Draft: The biggest breakthrough for direct marketing in the last decade is the media options that exist for us. I can target so completely on cable TV. Let's say I have a financial service or a mutual fund. We can go on CNN Moneyline, on CNBC. The media options that exist are like the old days of direct mail lists; 20 years ago, you'd get a list broker in and you'd see the 100 or so list options on how to reach a target audience.

Today, I can go to hundreds of types of magazines, TV stations and programming, and I can target in mass media the way I used to be able to in mail. And because of that, I can acquire a customer much more efficiently on the front end and use the data base on the back end to remarket to him.

Ad Age: You've also acquired a number of sub-specialties.

Mr. Draft: Yes. They're elements that go along with the total picture. D.L. Blair specializes in sweepstakes, for example, which they do for Coca-Cola, Philip Morris and other major brands. We leave them alone and let them work totally independently.

Adler Boschetto Peebles & Partners is a full-service agency, and MCA does promotion and point of purchase. Lee Hill Inc. is a large sales promotion/general agency that has been fully integrated into Draft Worldwide. All of our work provides efficient ways to develop names for a data base that we can market back to.

Ad Age: Where do you want Draft Worldwide to be in the next few years?

Mr. Draft: We'll be a top two brand on a global basis working with the world's best companies in integrated direct marketing promotion and targeted advertising.

Ad Age: But aren't you doing that already?

Mr. Draft: Not quite. But with Interpublic as a partner, we now have the wherewithal for the first time to build a really world-class company. They've positioned us as the fourth network within IPG and are giving us the resources to build this company.

Ad Age: Would you ever acquire a general agency?

Mr. Draft: We have already acquired agencies with general capabilities. We're always looking for new opportunities and good people, but we're not specifically targeting a general agency. If I could rationalize, I would. But I'm not. We're part of IPG now.

Ad Age: How much longer can your growth continue?

Mr. Draft: We're going to have a great year in 1998. And by 2000, we'll have 550 [people] in Chicago alone, vs. 400 now. On a worldwide basis, I want to get this agency to $1.8 billion by the end of 1998.

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