CAMPAIGN REPORT ON DIRECT MARKETING: Leading the DM field - The top direct marketing agencies are providing clients with ever greater marketing effectiveness and as a result are taking on increasing power and consequence. Ken Gofton reports

Late last year Campaign took an in-depth look at three of the fastest growing new-generation international communications groups - Snyder Communications, Mosaic Group and Lighthouse Global Network. Trailing a long way behind the likes of WPP, Omnicom and Interpublic, all three had nevertheless been very aggressive with their acquisition strategies over the previous two or three years, especially in below-the-line areas like direct marketing. The key question was: how big could they get?

Late last year Campaign took an in-depth look at three of the fastest growing new-generation international communications groups - Snyder Communications, Mosaic Group and Lighthouse Global Network. Trailing a long way behind the likes of WPP, Omnicom and Interpublic, all three had nevertheless been very aggressive with their acquisition strategies over the previous two or three years, especially in below-the-line areas like direct marketing. The key question was: how big could they get?

Andrew Melsom, the founder of the consultancy Agency Insight and a seasoned observer of the marketing services scene, took a cynical view. In three to five years' time, he said, organisations such as WPP would be buying groups rather than agencies. When that happened, the so-called next generation would be vulnerable to acquisition.

'After all,' he added, 'isn't that the plan?'

All he got wrong was the timing. WPP has demonstrated its appetite for big targets this year with its takeover of Young & Rubicam. Meanwhile, Havas was due to complete its drawn-out purchase of Snyder last week, while Cordiant has snapped up Lighthouse - a move that means, among other things, that the DM/SP agency Communicator will be merged into Bates' 141 Communications.

The past year has seen a number of other takeovers and mergers (see panel, p5). And it's a continuing trend. Just last month, the multi-discipline agency Interfocus announced a management buyout from the Lowe Group, transferring a majority stake to the publicly quoted Canadian group Maxxcom, and buying Osprey London.

And there's clearly room for further rationalisation, even if many of the biggest and best individual agencies have already forfeited their independence. A study of Willott Kingston Smith's latest direct marketing league table with this article (p4) shows there is not an independent left in the top 20.

That's not to say there are no attractive UK targets, with good creative and business records. In each of the past three years, for instance, the overall winner in the Direct Marketing Association awards has been an independent - DP&A for Goldfish in 1997, Rapier for Cable & Wireless in 1998, and Clark McKay Walpole for Hyundai in 1999. All get regular invitations to join one or other of the global communications networks.

The most courted of the remaining takeover candidates, however, are playing hard to get. Most say they value their independence, and still have things to achieve. But as Mike Cornwell, the chief executive of TBWA GGT Direct, points out, it is not in their interests to sell at the moment, either.

'The market is buoyant,' he says. 'Unless someone comes along with an urgent, strategic imperative that means they have to buy now, even at a silly price, the independents will continue to knock back all the advances.'

Fortunately, acquisition is not the only route to growth. There's still a lot of client demand for direct marketing - and a broadening definition of what the term covers.

Thus Cornwell can say of his agency: 'We are increasingly involved in the digital channels because clients are finally realising that, fundamentally, it's direct marketing.'

Internet and new-media skills are just part of the story, although a very important part. Below-the-line agencies appear to be adding new disciplines and new departments, or striking alliances with specialists, at every turn.

Clients themselves are increasingly aware of the importance of having an agency with a wide range of skills. Peter Thompson, the chairman of Joshua, says that this can mean a solution that has integrity.

'More and more clients are looking for strategic advice that genuinely makes a difference to their business,' he adds. 'It sounds obvious but everyone is focused on results now and looking for effectiveness much more than they did in the past. Agencies steeped in direct marketing are used to that.'

Triangle's heritage is in sales promotion, and the chairman, Kevin Twittey, is the first to admit it is not seen as a classic DM agency. Yet one of its major contracts is to send a quarterly mailer, with targeted offers, to 2.2 million TSB cardholders.

'Clients are not interested in what label you wear,' he says. 'They want initiatives that impact on their business and they don't care what form that takes. Increasingly, we find companies have a budget of pounds x to address particular issues and they'll put the brief to an ad agency, a DM agency, a sales promotion agency and even an internet specialist.'

Terry Hunt, the chairman of ehsrealtime, points to the fact that a number of accounts that have been seen as the preserve of ad agencies have recently gone to DM shops - such as Jersey Tourist Board, won by TBWA GGT Direct.

Perspectives, bought by WPP a year ago, runs an integrated campaign for Eurobell, embracing everything from logo design to direct mail, posters and TV commercials.

Saab, similarly, has a cinema commercial on screens at the moment. It was made by Lowe Direct, whose managing partner, Tony Watson, confirms that client needs are dictating an increasingly diverse approach from agencies. He points in particular to more international work, more involvement with packaged goods brands, more new media, and more conventional advertising.

'These days, you have to be widely knowledgeable,' Watson adds. 'Agencies have to respond to this demand for increasing diversity. You can't ignore it.'

Besides diversifying, several of the big agencies are adding consultancy strengths to increase their potential for adding value. An example is the Y&R offshoot Impiric (the new name for Wunderman Cato Johnson). Impiric, whose failure to provide auditors' confirmation of their accounts disqualified it from inclusion in the table on page 4, would otherwise top the league with turnover of pounds 59 million in 1999.

The agency has taken the drastic step of abandoning one of the best-known brands in the business 'to reflect changes already in place', as its managing director, Richard Bagnall-Smith, puts it.

As a result of the Y&R takeover, Impiric now finds itself a sister agency within WPP to its long-standing rival OgilvyOne.

Both are striving to establish unique positionings in the market, although the truth is that the differences can be seen primarily as a matter of emphasis.

Thus OgilvyOne's chairman, Nigel Howlett, says: 'This year feels like the most significant yet in terms of the balance of our business, and the main driver in that is the demand for interactive capability.' The agency's team of interactive specialists has tripled in size to 150.

Yet at the same time he can point to a restructuring of the agency's substantial consultancy arm to form a customer relationship management (CRM) practice, responsible for overall one-to-one strategies, including e-business.

Bagnall-Smith, on the other hand, stresses the prime role of CRM in Impiric's positioning, but says the agency is now doing as much work online as offline.

He claims it is involved in the interactive activities of 80 per cent of its clients.

Similar strategies are being pursued in other agencies, and one of the arguments revolves around whether interactive specialists should be in a separate team, even a separate agency, or mixed in with everyone else.

It can pose a dilemma for the international networks, when everyone in marketing services appreciates the importance of the new disciplines.

Bates Interactive, for instance, was part of 141 Communications but has been relaunched as a separate network, CCG.XM, reporting directly to New York. Until he resigned recently, the move had 141's managing director, Jeremy Shaw, stressing that XM continues to share the same building in London, with the two agencies working closely together on developing interactive strategies for a number of major clients.

John Shaw, the managing director (European agencies) at Brann, has pursued the integration route. He says Brann now frequently deploys creative teams consisting of three - an art director, a copywriter and an interactive specialist.

Lowe Direct is another that has resisted what it regards as separate 'new-media ghettos'. Evans Hunt Scott has merged with the digital design agency realtime to form ehsrealtime, and its chairman, Hunt, stresses that it is a true merger, with every department from creative to account handling brought together.

On the other hand, WWAV Rapp Collins has probably been making a strategic point - akin to WCJ and O&M Direct changing their names - by establishing a couple of high-profile offshoots. Zalpha is its CRM consultancy, built around an enhanced planning department. But the agency has also set up an interactive unit, based on a strategic partnership with a leading-edge US agency, Isis.

WWAV's business suffered in 1999, not least because a string of City takeovers together with the dotcom phenomenon created uncertainty among its many financial services clients.

This year, its group chief executive, Chris Gordon, claims, the group is experiencing double-digit growth, thanks to increased client spend and the success of the Zalpha and new-media initiatives.



DIRECT TIES: ROBERT GRAY PROFILES THE MERGERS AMONG THE TOP 40 agencies IN THE LAST YEAR

EHSREALTIME

In July 2000, Havas merged the DM specialist Evans Hunt Scott with the digital agency realtime to create ehsrealtime.

The combined agency has a turnover of pounds 63 million and employs 303 people. Clients include Tesco, BMW, British Gas, National Savings, Diesel, Canon Europa, COI and Buzz.

The chairman, Terry Hunt, the chief executive, Andrew Harris, and the managing director, Louise Wall, are former EHS staff, while the vice-chairman, Phil Jones, and the commercial director, Allison McSparron-Edwards, have come from realtime. The digital director, Peter Pedersen, departed in the wake of the merger.

Wall says: 'We are providing a leading-edge, future-proof agency that puts the customer at the heart of every communication.'



MOSAIC'S PROJECT COLOUR

Mosaic Group, the Canadian marketing services network, is to merge its four UK agencies - stretch the horizon, ZGC, Dialogue ZGC and Creative IQ - in order to become a top-ten DM player. The merger will take effect on 1 January next year. The new entity is being referred to as Project Colour and is being run by the managing director, Samantha Smith, who joined in August from FCA!. The agency will employ about 160 staff and work for clients including Coca-Cola, Barclays and Barcardi.

A client audit identified demand for the four agencies to share their expertise. Smith says: 'They wanted all the agencies to join together, to add more specialist skills and to give a more holistic approach.'



CLAYDON HEELEY JONES MASON

In 1999, the Omnicom agency Claydon Heeley launched the DM offshoot Jones Mason Barton Antenen as a joint venture with BMP DDB. On 1 February this year, the two entities were brought together again. Jon Claydon is the chairman with Nigel Jones and Edward Mason as joint chief executives. The creative director, Rob Scott, is from CH, while his number two, Rod Marsh, is ex JMBA. JMBA founders Steve Barton and Simon Antenen have both left.

The merged agency has 210 staff and clients such as BA, Pepsi, Unilever, PlayStation, Compaq and Credit Suisse.

Claydon says: 'Jones Mason was hard-wired into BMP and DDB, which gave it a planning firepower that we weren't set up to replicate.'



CLARKE HOOPER MOMENTUM

On 1 January 2000, Abbott Mead Vickers BBDO merged the below-the-line agencies Clarke Hooper and Momentum. Annual billings are about pounds 30 million and clients include BT Cellnet, BT Global Mobile, Ordnance Survey, Yellow Pages, Volvo, Jet, Mars and Gillette. Clarke Hooper people took the top jobs with Barry Clarke becoming the chairman, Andrew Roberts the chief executive and Warren Moore the creative director.

Ian Jacob, formerly the chairman and chief executive of Momentum, is now the chief executive of another Omnicom group company Alcone UK, while the vice-chairman, Ed Downey, left to form his own agency.

The company now reports to Proximity London, which was formed on 1 July this year, and brings together the CRM and promotional marketing interests of the AMV Group. Clarke says: 'Clarke Hooper Momentum was a sensible first step in strengthening the overall creative and client service resources within AMV's promotion marketing companies.

'We have taken the process a stage further with the creation of Proximity London and the Proximity Worldwide Network to provide clients with a high level of expertise across all brand communications on- and offline.'



PROMOTIONAL CAMPAIGNS GROUP/DIALOGUE MARKETING PARTNERSHIP

The WPP-owned Ogilvy Group acquired Dialogue Marketing Partnership this summer and intends to merge it with Promotional Campaigns Group early next year. The name and management structure remain unclear but the 60-strong agency will have offices in London, Henley and Hampton Court.

PCG's chief executive, Hugh Taylor, and Dialogue's chief executive, Richard Church, are expected to have senior roles. Clients will include Bestfoods, IBM, Amex, AA, Gillette and Duracell. Taylor says: 'The breadth of offer expected from a below-the-line agency is much broader these days.'



THE TOP 40 DIRECT MARKETING AGENCIES

Rank Company name                                Year end       Year end

                                                   latest       previous

1    WWAV Rapp Collins                          31 Dec 99      31 Dec 98

2    Colleagues Group                           31 Dec 99      31 Dec 98

3    Carlson Marketing Group                    31 Dec 98      31 Dec 97

4    Brann                                      31 Dec 98      31 Dec 97

5    OgilvyOne Worldwide                        31 Dec 99      31 Dec 98

6    Joshua                                     30 Sep 99      30 Sep 98

7    IMP                                        31 Dec 98      31 Dec 97

8    Barraclough Hall Woolston Gray             31 Dec 99      31 Dec 98

9    Evans Hunt Scott Eurocom                   31 Dec 98      31 Dec 97

10   Tequila UK                                 30 Dec 98      30 Apr 98

11   The Marketing Organisation                 31 Dec 99      31 Dec 98

12   Citigate Albert Frank                      28 Feb 99      28 Feb 98

13   The Triangle Group                         31 Dec 98      31 Dec 97

14   KLP                                        31 Dec 99      31 Dec 98

15   Claydon Heeley International               31 Dec 98      31 Dec 97

16   Clarke Hooper Consulting                   31 Dec 98      31 Dec 97

17   WWAV Rapp Collins North                    31 Dec 98      31 Dec 97

18   Interfocus Network                         31 Dec 99      31 Dec 98

19   Tequila Payne Stracey                      31 Dec 98      31 Dec 97

20   WWAV Rapp Collins Scotland                 31 Dec 99      31 Dec 98

21   Craik Jones Watson Mitchell Voelkel        31 Dec 98      31 Dec 97

22   GGT Direct Advertising                     31 Dec 98      30 Apr 98

23   Lowe Direct                                31 Dec 99      31 Dec 98

24   Judith Donovan Associates                  31 Dec 99      31 Dec 98

25   Momentum Integrated Communications         31 Dec 98      31 Dec 97

26   1995 Ventures                              31 Dec 99      31 Dec 98

27   Target Direct Marketing                    31 Aug 99      31 Aug 98

28   Haygarth Promotional Marketing             31 Mar 99      31 Mar 98

29   Marketing Perspectives                     30 Sep 98      30 Sep 97

30   Marketing Drive                            31 Dec 98      31 Dec 97

31   Rapier                                     31 Dec 98      31 Dec 97

32   Team LGM                                   28 Feb 99      28 Feb 98

33   Tullo Marshall Warren                      31 Dec 98      31 Dec 97

34   Black Cat Agency                           31 Oct 99      31 Oct 98

35   stretch the horizon                        31 Dec 98      31 Dec 97

36   Zimmer Gellett Constantinou                31 Dec 98      31 Dec 97

37   141 Blue Skies                             31 Dec 98      31 Dec 97

38   FFWD Precision Marketing                   30 Sep 99      30 Sep 98

39   Billington Cartmell                        31 Dec 98      31 Dec 97

40   Cramm Francis Woolf                        31 Dec 98      31 Dec 97

    Company name                          Turnover    Turnover    Change

                                            latest    previous       (%)

                                           (pounds     (pounds

                                              000)        000)

1   WWAV Rapp Collins                       57,966      71,374    -18.79

2   Colleagues Group                        54,910      43,501     26.23

3   Carlson Marketing Group                 49,043      43,408     12.98

4   Brann                                   47,706      43,782      8.96

5   OgilvyOne Worldwide                     43,345      28,994     49.50

6   Joshua                                  38,005      37,721      0.75

7   IMP                                     36,200      41,874    -13.55

8   Barraclough Hall Woolston Gray          33,813      25,308     33.61

9   Evans Hunt Scott Eurocom                32,962      36,831    -10.50

10  Tequila UK                              30,111      18,164     65.77

11  The Marketing Organisation              26,447      22,371     18.22

12  Citigate Albert Frank                   19,015      13,582     40.00

13  The Triangle Group                      17,989      14,747     21.98

14  KLP                                     16,651      20,007    -16.77

15  Claydon Heeley International            16,178      10,120     59.86

16  Clarke Hooper Consulting                16,024      12,504     28.15

17  WWAV Rapp Collins North                 15,975      17,018     -6.13

18  Interfocus Network                      14,525      16,315    -10.97

19  Tequila Payne Stracey                   13,200      13,058      1.09

20  WWAV Rapp Collins Scotland              12,355      11,884      3.96

21  Craik Jones Watson Mitchell Voelkel     11,951       8,880     34.58

22  GGT Direct Advertising                  11,516      10,439     10.32

23  Lowe Direct                             11,475       8,307     38.14

24  Judith Donovan Associates               11,100      11,340     -2.12

25  Momentum Integrated Communications      10,587      10,143      4.38

26  1995 Ventures                            9,848       9,684      1.69

27  Target Direct Marketing                  9,783       8,293     17.97

28  Haygarth Promotional Marketing           9,689       8,523     13.68

29  Marketing Perspectives                   9,457       5,848     61.71

30  Marketing Drive                          8,185       5,875     39.32

31  Rapier                                   7,803       9,822    -20.56

32  Team LGM                                 6,902       6,363      8.47

33  Tullo Marshall Warren                    6,519       5,373     21.33

34  Black Cat Agency                         6,354       6,381     -0.42

35  stretch the horizon                      6,344       7,654    -17.12

36  Zimmer Gellett Constantinou              6,224       5,946      4.68

37  141 Blue Skies                           6,206       5,556     11.70

38  FFWD Precision Marketing                 5,037       3,380     49.02

39  Billington Cartmell                          -           -         -

40  Cramm Francis Woolf                          -           -         -

    Company name                              Pre-tax profit      Change

                                            latest    previous       (%)

                                           (pounds     (pounds

                                              000)        000)

1   WWAV Rapp Collins                        4,364       4,951    -11.86

2   Colleagues Group                         3,325       2,092     58.94

3   Carlson Marketing Group                  2,799         999    180.18

4   Brann                                    4,210       1,955    115.35

5   OgilvyOne Worldwide                      3,851       2,633     46.26

6   Joshua                                     794       1,086    -26.89

7   IMP                                      1,916       2,149    -10.84

8   Barraclough Hall Woolston Gray           2,012       2,134     -5.72

9   Evans Hunt Scott Eurocom                 1,111       1,279    -13.14

10  Tequila UK                                 350      -1,385    125.27

11  The Marketing Organisation                 971         771     25.94

12  Citigate Albert Frank                      -83         704   -111.79

13  The Triangle Group                         614         526     16.73

14  KLP                                        823         661     24.51

15  Claydon Heeley International             2,322         990    134.55

16  Clarke Hooper Consulting                 1,685       1,106     52.35

17  WWAV Rapp Collins North                    622         617      0.81

18  Interfocus Network                       1,158       1,129      2.57

19  Tequila Payne Stracey                      508         892    -43.05

20  WWAV Rapp Collins Scotland                 742         469     58.21

21  Craik Jones Watson Mitchell Voelkel        543          13   4076.92

22  GGT Direct Advertising                     342         393    -12.98

23  Lowe Direct                               -177      -1,137     84.43

24  Judith Donovan Associates                  428         495    -13.54

25  Momentum Integrated Communications       1,046         954      9.64

26  1995 Ventures                              689         636      8.33

27  Target Direct Marketing                    215         155     38.71

28  Haygarth Promotional Marketing           1,343         925     45.19

29  Marketing Perspectives                     670         148    352.70

30  Marketing Drive                          1,398       1,156     20.93

31  Rapier                                     150       1,185    -87.34

32  Team LGM                                   189         321    -41.12

33  Tullo Marshall Warren                      376         164    129.27

34  Black Cat Agency                           127          88     44.32

35  stretch the horizon                      1,414         799     76.97

36  Zimmer Gellett Constantinou                337         151    123.18

37  141 Blue Skies                           1,340         842     59.14

38  FFWD Precision Marketing                   767         235    226.38

39  Billington Cartmell                        718         737     -2.58

40  Cramm Francis Woolf                        370         427    -13.35

    Company name                            Turnover per head     Change

                                            latest    previous       (%)

                                          (pounds)    (pounds)

1   WWAV Rapp Collins                      222,235     274,515     -7.39

2   Colleagues Group                       453,802     348,008     30.40

3   Carlson Marketing Group                134,364     121,591     10.51

4   Brann                                   49,539      53,458     -7.33

5   OgilvyOne Worldwide                    201,605     204,183     -1.26

6   Joshua                                 190,980     205,006     -6.84

7   IMP                                    244,595     282,932    -13.55

8   Barraclough Hall Woolston Gray         163,348     129,122     26.51

9   Evans Hunt Scott Eurocom               177,215     216,653    -18.20

10  Tequila UK                             298,129     248,822     19.82

11  The Marketing Organisation             211,576     199,741      5.93

12  Citigate Albert Frank                  288,106     266,314      8.18

13  The Triangle Group                     109,024     103,126      5.72

14  KLP                                    120,659     140,894    -14.36

15  Claydon Heeley International           188,116     136,757     37.56

16  Clarke Hooper Consulting               258,452     235,925      9.55

17  WWAV Rapp Collins North                319,500     354,542     -9.88

18  Interfocus Network                     149,742     153,915     -2.71

19  Tequila Payne Stracey                  159,036     171,816     -7.44

20  WWAV Rapp Collins Scotland             287,326     339,543    -15.38

21  Craik Jones Watson Mitchell Voelkel    243,898     227,692      7.12

22  GGT Direct Advertising                 143,950     179,983    -20.02

23  Lowe Direct                            182,143     153,833     18.40

24  Judith Donovan Associates              201,818     185,902      8.56

25  Momentum Integrated Communications     211,740     211,313      0.20

26  1995 Ventures                          193,098     225,209    -14.26

27  Target Direct Marketing                171,632     129,578     32.45

28  Haygarth Promotional Marketing         276,829     266,344      3.94

29  Marketing Perspectives                 193,000     132,909     45.21

30  Marketing Drive                        199,634     163,194     22.33

31  Rapier                                 139,339     196,440    -29.07

32  Team LGM                               135,333     171,973    -21.31

33  Tullo Marshall Warren                  105,145     111,938     -6.07

34  Black Cat Agency                             -           -         -

35  stretch the horizon                    181,257     239,188    -24.22

36  Zimmer Gellett Constantinou            127,020     135,136     -6.01

37  141 Blue Skies                         121,686     101,018     20.46

38  FFWD Precision Marketing                     -           -         -

39  Billington Cartmell                          -           -         -

40  Cramm Francis Woolf                          -           -         -





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