Specialists Thrive in Fast-Growing Events Segment

Missed Opportunity? Ad Agencies Have Stayed Out of This Hard-to-Quantify Market, Leaving Spoils to Promo Shops

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Events may be among the fastest-growing segments of the marketing world, but live marketing has trouble getting much respect from the ad industry.
Patrick Quinn, president-CEO at PQ Media
Patrick Quinn, president-CEO at PQ Media

That may be in part because it's hard to pin down how big the events market is. It's so vast and complex that no single branch of the marketing services world has fully stepped up to own the event-marketing business.

Though most ad agencies bill themselves as offering event marketing -- and a handful actually do so without contracting it out -- promotion shops likely handle most of the business in an industry with estimated growth rates of anywhere from the low single digits to the mid-teens.

Crunching the numbers
Estimates on event-related spending can vary widely, and many experts debate how profitable such marketing efforts can be. Media private-equity firm Veronis Suhler Stevenson covers event marketing in its annual "Communications Industry Forecast," based on data from PQ Media, a provider of alternative-media econometrics. PQ pegged the event-marketing segment at $32.2 billion in 2006, up 15.4% from a year earlier, and projects it will grow another 16% to $37.4 billion in 2007.

Those PQ numbers include only consumer events in which the sponsoring brand receives top billing and owns the event; the figures exclude event sponsorships in which another entity owns the activity and marketers pay to slap their names on the concerts or sporting events. Those activities added another $13.4 billion in 2006, a 10.6% increase from '05 (see chart).

"Event marketing and sponsorship is growing at twice the rate of the overall advertising and marketing sector," says Patrick Quinn, president-CEO at PQ Media.

Complicating factors
The number also excludes a much larger and slower-growing business-to-business trade-show market, which is the primary reason the PQ-Veronis number is lower than some other industry benchmarks, such as Promo's. The magazine pegged the market at $171 billion in 2005, up 3% from the previous year, based on George P. Johnson Co.'s annual survey.

One problem in quantifying the market is that event marketing tends to overlap with -- or bleed into -- other marketing areas, including sponsorships and retail promotion. Take a typical Nascar sponsor such as Procter & Gamble Co.'s Tide. The whole budget might be classified as a sponsorship outlay, but it involves heavy event marketing around individual Nascar races and mobile tours involving retail stores around the country.

By any measure, event marketing is huge. Even by the relatively conservative estimate of Veronis, it's equivalent to more than two-thirds of the spending on broadcast TV.

"For companies like Mars, [event marketing is] the second- biggest expenditure after in-store trade marketing," says Sunil Garga, global president-consumer and business insights at Information Resources Inc. "They're actually spending more on events than they are on TV."

And that's why a growing range of agencies are ramping up interest.

Focus on customer interaction
Aegis Group media shop Carat in 2004 formed Cincinnati-based Carat Brand Experience, in large part because the agency realized that the growing popularity of communications channel planning -- a discipline it helped create -- was leading big marketers such as P&G to spend more on events.

"There's more of a focus on trying to understand: Where and when does the customer want to interact [with the brand]?" says Dale Tesmond, managing director of Carat Brand Experience. "They're finding out it often happens to be in fairs, festivals or in the middle of the aisle."

The biggest players in the live-marketing business tend to be promotion shops that specialize in it, such as Interpublic Group of Cos.' Jack Morton Worldwide, New York, or Omnicom Group's GMR Marketing, New Berlin, Wis.

Specialization in event marketing
The Advertising Research Foundation, which is conducting a wide-ranging study of event-marketing return on investment it expects to complete by this summer, is finding most of the major brands involved rely on either specialty promotion shops or in-house units to do the work.

"There seems to be a need for specialization," says Don DiForio, senior VP-research at the ARF. "The logistics of some of these things can be crazy."
Brad Wirz, senior VP-experimental marketing at Euro RSCG 4D Impact, Chicago
Brad Wirz, senior VP-experimental marketing at Euro RSCG 4D Impact, Chicago

Unilever has made event marketing a key part of the marketing mix for its Axe brand since its launch in 2002 and has relied on GMR, which has earned its place for the agency's ability to execute some fairly complex programs, says Kevin George, VP-North American deodorants for Uni-lever.

"The experience to execute events well is really a lot of the driver of our choice," he says. "There's a lot that can go into executing one of these ideas well that you don't always see."

Missed opportunities
Public-relations shops, while they have some of the same event-planning and logistical wherewithal as the promo shops, largely haven't moved into the live-marketing space.

And that may be a missed opportunity.

One of the more memorable experiential-marketing programs of all time, Mr. Tesmond says, was essentially a PR effort in which Geneva Steel Co., facing criticism of its environmental record, paid its employee bonuses in $2 bills in 1989. As the bills made their way through the community, they helped dem-onstrate how far the plant's economic impact reached. (That notwithstanding, the company closed in 2002, a victim of lower-cost overseas competition, not pollution regulations.)

But a bigger missed opportunity may be among consumer ad agencies, many of which are seeing more client dollars move to event marketing, which PQ-Veronis data have shown growing at more than twice the rate of other media in recent years.

"All I can say is we're in our fourth year of approximately 50% growth," says Brad Wirz, senior VP-experiential marketing at Havas' Euro RSCG 4D Impact, Chicago. "Find an ad agency that's growing at that rate."

A different model
Euro RSCG, which always has tended to be more developed on the marketing-services end than most other agency networks, has gotten in on the growth of the segment, but Mr. Wirz says he understands why more agencies are reluctant to do so.

"It's a tough business to figure out," he says. "From the outside looking in, it seems like a nightmare from an operations perspective. You've got to add 100 people to your payroll for 60 days and then get rid of them all. A lot of the big networks don't like the financial implications of that and the financial liabilities you take from having short-term employees driving trucks and managing heavy equipment."

The business model of an events agency is entirely different from that of an ad agency, he adds. Almost all event work is on a project basis, and even the biggest clients generally are active for only three or four months out of a year.

For ad shops used to working on retainer as agencies of record, it can seem unpredictable.

In reality, however, the events business can be more predictable, Mr. Wirz says, because a shop may have 50 or more clients spending less than $1 million a year, so the loss of any one is negligible.

"We're still the stepchild of the industry -- but less and less so," Mr. Wirz says. "We're now getting involved at a way earlier stage. We're now getting involved for 2008 opportunities. That's a major change over the past few years that we've got a major seat at the table."
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