DM's New Wave
campaignlive.co.uk, Friday, 09 July 2004 12:00AM
In response to a growing frustration with consolidation in the DM industry, a new independent breed of start-up is emerging. Claire Billings reports. Some of advertising's healthiest brands right now are also some of the industry's newest. Mother, Fallon, Miles Calcraft Briginshaw Duffy, Clemmow Hornby Inge: adland's tenderest companies have ridden the recession more comfortably than their more established rivals.
So perhaps it's not surprising that the direct marketing industry is also proving fertile ground for start-ups, some of them even launching on the back of those newer creative agencies.
In the direct sector there are two distinct models emerging: those attached to advertising agencies - such as Miles Calcraft Briginshaw Duffy's Elvis and Hall Moore CHI - and independent shops such as Barraclough Edwards Chamberlain and Keevill Lee Kershaw, which are starting from scratch.
The founders of these agencies tend to be experienced practitioners disillusioned by constant pressure on margins from the networks. Second, they put creativity and getting under the skin of clients at the top of their agendas.
Nick Smith, the director of marketing and strategy at British Gas, is broadly supportive of these entrepreneurs, but warns that their success will be determined by their ability to work with other agencies as part of a client's overall communications programme.
However, he adds that being aligned with an agency from another discipline does not guarantee backstage passes to their siblings' accounts. Smith, for one, prefers to decide himself which agencies will work together to crack his brief.
Tristia Clarke, the marketing director at Carphone Warehouse, whose agency roster includes the fledgling direct marketing agency Hall Moore CHI and WDMP, says her experience of start-ups, across all disciplines, has been positive. "They're hungry and dedicated and creatively they have a fresh approach," she says.
But Leo Campbell, the deputy chairman of Claydon Heeley Jones Mason, sold to Omnicom in 1998 for £29 million, argues that the independent start-ups face bigger risks. "The spin-offs from advertising agencies get automatic business and a safety net, the independents don't," he says. Though he admits that the greater the risk, the better the reward. "If you get it right, the financial prize is big," he adds.
The time certainly seems right for a new slew of direct agencies. The last ones, which launched in the late 90s, included Partners Andrews Aldridge, Archibald Ingall Stretton and Harrison Patten Troughton (now Harrison Troughton Wunderman and part of WPP).
Stuart Archibald, a partner at AIS, welcomes the newcomers and believes that if they get the mix of creativity, planning and account management right, then there is plenty of business out there to be snatched from the bigger players. "A lot of the big agencies are still chasing margins rather than creativity," he says. "These start-ups could skim a lot of the low-hanging fruits from the big players."
BARRACLOUGH EDWARDS CHAMBERLAIN
Founders: Chris Barraclough, Steve Edwards, Nic Chamberlain
Age: One year
Clients: Scottish Widows, Emap, Macmillan Cancer Relief, Shelter, DMC,
Nova Media, Soccerex
First year billings: £250,000
Barraclough Edwards Chamberlain celebrates its first birthday this week with nine staff and a healthy client list that includes Macmillan Cancer Relief, Scottish Widows, Emap and Shelter.
The agency positions itself as a creatively led specialist direct agency, which can provide high-standard, fast-turnaround work. It is majority owned by the former Proximity London chairman and chief executive Chris Barraclough, with the rest distributed among the other partners, Nic Chamberlain and Steve Edwards, and the finance director, Peter Jakob.
Barraclough and Edwards have worked together for ten years and met Chamberlain at Barraclough Hall Woolston Gray where he was a graduate trainee. Chamberlain was lured from EHS Brann, where he was a senior account director on accounts such as O2, Tesco.com and the Football Association. This is no inexperienced start-up team and it is, in fact, the second time around for Barraclough.
His first entrepreneurial venture, BHWG, was successfully sold to Omnicom in 1995 for £9 million after four years.
Nomadic working is a big feature of the BEC offering. Edwards and Barraclough relocate to clients' offices with their mobile phones and laptops and there they develop the work for a couple of days at a time. They say that working in this way enables them to get the creative product right more quickly because clients can be involved at every step along the creative process.
The agency is unlikely to sell for at least five years, Barraclough says, although he would be prepared to work more closely with a compatible agency before then. In three years, the agency aims to have billings of between £2.5 million and £3 million and income of £1 million, and a client list that includes blue-chip clients across all major sectors.
Founders: Martin Semmens, Mark Leversedge
Creative directors: John Treacy, Dan Colley
Age: One year
Clients: P&O Cruises, Radio Times, Mitchell & Butlers, Cadbury, L'Oreal,
Bacardi, COI Communications, Historic Royal Palaces
First year billings: Undisclosed
The agency with the most memorable name in direct marketing is only just a year old, but it already has 24 staff and is looking for premises independent from Miles Calcraft Briginshaw Duffy, the ad agency that backed its launch.
Elvis' rapid growth is perhaps testament to the benefits of launching as a spin-off from an already established and highly reputable above-the-line agency such as MCBD.
The former Claydon Heeley Jones Mason managing director Mark Leversedge and Martin Semmens, the client services director at Inferno, helped MCBD on the direct marketing element of its Department of Work and Pensions business. The partnership proved successful and Elvis was born.
The agency positions itself as a specialist direct marketing, customer relationship management, sales promotion and digital media shop. It will also offer its clients brand, media and research planning through its partnership with MCBD.
Elvis taps into MCBD's account planning resources, an area in which Leversedge believes below-the-line agencies are traditionally weak. "We're a bit cynical about account planning below the line because clients don't buy into it," he explains.
Mark Hamilton, the senior product manager at L'Oreal, believes Elvis' structure has helped "raise the bar in terms of what to expect from an agency" as far as the quality of work and service are concerned.
The agency would not disclose MCBD's shareholding and the ownership structure of the business; however, it has withheld a number of shares to make available to staff in the future.
Although there is no buyout clause in place, the partners have rights protecting them if MCBD decides to sell its stake.
Leversedge says the agency's three-year plans are modest because its emphasis is not about becoming a big agency but working with the right clients and producing good work. He gives forecasted billings for the first three years as £4.5 million and income of £2-£3 million.
HALL MOORE CHI
Founders: Simon Hall, Warren Moore
Age: Barely out of the womb
Client: Carphone Warehouse
Simon Hall, one of the most established talents in direct marketing, was set to ditch the agency world for good until he found that Clemmow Hornby Inge shared his vision for the ultimate integrated offering, and Hall Moore CHI was conceived. Hall is being joined by the former Proximity creative director Warren Moore.
"Most integrated offerings don't work because the people aren't good enough," Hall claims. "CHI has an ambition to create great ideas. We can enrich these ideas and make sure they're not just advertising ideas, but that they work wherever the customer comes into contact within the brand."
Johnny Hornby, the managing partner at CHI, says the offering will not just exist as a DM agency bolted on to the ad agency, but as an entity inside CHI. Hall will work with the CHI account teams to ensure the solutions to clients' business objectives take into account one-to-one relationships.
Moore will sit in the creative department making sure the creative ideas will work below the line. "It's about populating the agency with talented people from through-the-line disciplines," Hornby explains.
"DM people are better at thinking about advertising from an ROI point of view, and are better at understanding how to communicate with customers on a one-to-one basis."
The venture is jointly owned by CHI, Hall and Moore, although how the shareholding was split was not divulged. The aim, Hall says, is to dissolve the agency within five years so it becomes part of CHI's integrated offering.
Hall's first project at CHI has been working as a consultant to Carphone Warehouse, CHI's flagship client, which uses WDMP for its direct marketing activity. However, although Hall aims for most of his clients to be shared with CHI, Hall Moore CHI will be prepared to work with other agencies.
Hall says they are testing a new model, and won't give specific figures for growth targets. But his ambitions are clear: he aims for a similar rate of growth to CHI.
KEEVILL LEE KERSHAW
Founders: Phil Keevill, Lisa Lee, Simon Kershaw
Age: Seven months
Clients: Commission for Architecture and the Built Environment (CABE),
Standard Chartered Bank (Singapore)
The art director Phil Keevill and the copywriter Simon Kershaw are famous for their work for clients such as Land Rover and Gordon's Gin at Craik Jones Watson Mitchell Voelkel. They teamed up with the creative-turned-suit Lisa Lee, formerly of Ogilvy, last December.
Keevill and Kershaw wanted to test their entrepreneurial flair. But the fact that they worked as freelancers during the period before launching the agency, the challenge has been to persuade people they are now a credible agency.
And although the agency claims to be in talks with a number of different advertisers looking for top-end creative and strategically led work, in seven months there is little evidence of clients beating a path to their door.
In line with its positioning as a creative specialist, KLK forecasts that as much as 25 per cent of its business will be consulting clients on strategy rather than simply creative treatments.
"Clients are coming round to appreciating the breadth and depth of expertise in the discipline, and we are happy to supply this at the strategic end without necessarily producing and managing the creative work that results," Kershaw explains. He says the agency will not compete on scale or price though he believes the proposition will make KLK a popular "wild card" or "challenger" choice on pitchlists.
The agency does not rule out offloading a stake to a network, but claims it is not interested in selling out and the three partners will look to reduce their shareholding in the agency by releasing equity to staff.
In three years' time, it aims to be attracting clients in the automotive, telecoms and financial services sectors and expects to have income of £3 million.
This article was first published on campaignlive.co.uk
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