From DM to DOTCOM - Direct marketing agencies should be well placed to ride the new-media wave. But is the industry ready, Eleanor Trickett asks

From almost a standing start two years ago, the direct marketing industry has undergone something of an epiphany. Surrounded by get-rich-quick stories about the dotcom revolution, the truth slowly dawned. As one industry veteran so elegantly put it at a recent conference: e-commerce is simply a tarted-up version of mail-order.

From almost a standing start two years ago, the direct marketing

industry has undergone something of an epiphany. Surrounded by

get-rich-quick stories about the dotcom revolution, the truth slowly

dawned. As one industry veteran so elegantly put it at a recent

conference: e-commerce is simply a tarted-up version of mail-order.



Time, then, for DM agencies to clean up? In theory, yes, but there is a

severe skills shortage and the plain fact is that the average wage (and,

incidentally, the profit margin) at new-media agencies is higher than at

their DM counterparts. While DM agencies can offer the whole range of

customer relationship management skills so vital to a successful online

business strategy, the new-media skills are still sitting comfortably in

the digital agencies, most of which claim an acceptable level of CRM

savvy themselves.



But the DM agencies are beginning to put their money where their mouths

are, buying new-media shops, bringing in specialist skills from those

outfits to sit in the main agency, launching digital offshoots or going

the whole hog and merging with a digital agency.



It’s this last option that many predict will be the enduring business

model. While DM and new-media agencies scrap for every last digital

dime, when it comes down to it, it’s an effective symbiosis of each

one’s core skills that the client needs.



The first significant merger of this kind in the UK was two months ago,

between the Havas-owned Evans Hunt Scott and its sister new-media and

design outfit, Realtime. The chairman of the new agency, Terry Hunt,

explains why it was timely: ’For the commercial websites to survive,

they have to do business, and it’s about the quality of visitor, not

just quantity.



So all the skills of targeting, loyalty and general relationship

management are crucial.’



Barraclough Hall Woolston Gray is another agency that has formed a close

strategic alliance with its sister digital agency, Traffic Interactive,

and its chief executive, Simon Hall, explains: ’We are still going to

maintain specialist skills in the on- and offline areas in the same way

that a media agency will have people who are good at TV, press and

outdoor. The danger with interactive agencies is that they are a

one-horse stable. Offline is still an absolutely vital ingredient in all

communications; what we can do is bring it together with online.’



Nigel Grimes, the head of direct marketing at BT, uses a combination of

DM and new-media agencies, but strategically it’s the former that take

the lead. ’The internet is about building long-term relationships and

the DM agencies are the only ones that know how to do this,’ he

says.



’Online agencies know the technology, but they don’t have skills to

maintain relationships.’



Conversely, of course, there are things that a digital shop can do over

and above a DM agency. Digital agencies are exposed to the online market

full-time, which is key in an environment that evolves by the

minute.



And the high volume of website development they undertake provides them

with an in-depth knowledge of which elements make a customer click

through to the next level, and which make them turn off altogether.



As Nigel Sheldon, the head of MindShare Digital, says: ’We have access

to all the media owners and web entities, creating and negotiating

partnerships.



If ever there was a medium formed on the back of partnerships, it’s the

interactive area.’



It’s perhaps these unique specialisms that deter some slower-thinking DM

agencies from getting involved in the revolution. Grimes agrees that

some are being left behind. ’They are either being put off by the

mystique of the web or they just feel that they should concentrate on

their core direct marketing skills,’ he says, adding: ’What they don’t

realise is that that’s exactly what online is.’





JASON GOODMAN, BMP Interaction



Is new media the birthright of direct marketing? Anyone who thinks they

have a right to own a market in the current digital economy has missed

the point about revolutions - particularly this one.



Client companies and brands have asked and are still asking a lot of

questions about how the digital revolution affects their business. In

the professional and marketing services sectors, all manner of companies

are capable of answering these questions. But clients looking for

solutions want answers tomorrow and will, inevitably, turn to those

companies they see to have the requisite knowledge and experience.



So here’s a guide to what clients want and who can give it to them. If

DM agencies are not in some of the following lists, then it’s because

they lack one or both of the necessary qualities.



The first question you tend to hear from clients is: how will new

digital technologies affect my business? The answer to this can be

provided by management consultancies, technology consultancies and

new-media agencies.



The second question is usually: can I use digital channels to extend my

business/brand and how? The companies providing these answers are the

same as for the first question, plus advertising and media agencies.



The answers to the third question - how do I develop this reinvention of

my business or completely new digital business? - are again provided by

those answering question one.



Finally, question four. How do we build relationships with empowered

consumers in this increasingly open and personalised economy? This is a

question for the new-media agencies, but it also provides a window of

opportunity for traditional direct marketers. The good ones have both

the knowledge and experience to manage the two-way flow of data required

to sustain the relationship between brand and consumer.



New-media agencies know that data specialists are a valuable resource in

the full-service digital mix, which is why BMP Interaction recently

purchased the leading Danish direct marketing consultancy Generator. But

the opportunity is closing for many direct marketing agencies as clients

learn to rely on those companies capable and equipped to answer their

questions - today.



Jason Goodman is the managing director of BMP Interaction.





COLIN LLOYD, DMA



The online business model is selling goods and services, and collecting

and managing data. That sounds like direct marketing to me. The bottom

line is that DM is the commerce in e-commerce and only the DM and sales

promotion industries have the skill-set to make e-commerce

profitable.



The DM industry has 25 years’ experience of selling goods and services

remotely. It has all the skills and knowledge to assimilate customer

information, manage data and create rich streams of business

opportunity.



So where has the DM industry been on the internet in the past three

years?



Asleep as the train left the station.



Apart from a few enlightened suppliers, DM has been noticeable by its

absence and is now playing catch-up. The consequence of this is a list

of disastrous consumer experiences that are bringing e-commerce into

disrepute. A few gems: 27 per cent of consumers falsify online

registration because of privacy concerns. Across the EC, one in ten

goods never arrived. In two separate surveys, when product information

was requested online, 65 per cent and 42 per cent of companies

respectively failed to respond at all.



Of those that did, only half used e-mail.



Direct marketing has the knowledge systems and skill base to solve these

problems. My message is that the back end is more important than an

all-singing, all-dancing website if you want to do real business.



This is vital in the business-to-business sector, where the real

e-commerce opportunity lies. Nine-tenths of world trade is B2B and world

online sales in this sector is expected to be worth dollars 7.29

trillion by 2004.



I am concerned about the ability of the DM industry to respond to the

demand for secure e-commerce, especially given the skills shortage for

traditional DM. According to Barclays Bank’s HR department, the normal

routes for graduates have been usurped by the lure of dotcom millions.

This will have a serious effect on the whole marketing sector, let alone

DM.



Perhaps the glimmer of hope is in the DM support services area. This is

mainly where the fulfilment and processing skills are in abundance and

what is most needed. The e-commerce train may well end up in their

station.



Colin Lloyd is the chief executive of the Direct Marketing

Association.





AMANDA MACKENZIE, Air Miles



The principles behind direct marketing should hold true whatever

revolution should come along.



I phoned a jeweller the other day to get an up-to-date valuation, the

previous one being 11 years old. I made a disparaging remark about there

being no way he’d have the original and offered to send a copy. Within

seconds, the voice on the phone said: ’Madam, I have it right here. We

don’t use computers.’ I was gobsmacked.



I think I’d forgotten what proper customer service was about. And it was

refreshing and delightful. For all the technical revolutions that have

beguiled and tempted us over the past ten years, what we want to achieve

as regards the customer is the same - it’s just that our tool-kit has

become more sophisticated.



With Air Miles, for example, you can now register and collect Air Miles

online with a new website to wrap it all up. These developments came

from a strategic decision to expand our business online and be able to

give customers more choice, flexibility and relevance to their lives.

Developing a new-media strategy wasn’t a question of just expanding

direct marketing, it was about seamlessly integrating the on- and

offline environments for all our customers.



Five years ago, new-media ideas probably needed to be incubated

separately as the two worlds were much more segregated. This is no

longer the case. It is important that there is a thread running through

the relationship we have with a customer (which, for them, doesn’t

differentiate by channel). What new media does is give them a host of

benefits they couldn’t access previously.



So where does that leave direct marketing agencies? On the whole, they

are still segmenting their world from the new-media world. While there

will always be room for specialism at the point of translating a

brilliant idea into a (technological) solution, the vision delivered is

what will drive a relationship for the customer and find a unique place

in their heart for your brand. There’s no time for navel-gazing.



Everyone can have good ideas, everyone can be audacious in their

thinking and we all know what a great customer relationship feels like.

New media can help us get there quicker.



Amanda MacKenzie is the marketing director of Air Miles.





JAY BINGLE, Impiric



The digital revolution has engendered a fundamental shift in

marketing.



We are moving from ’push’ marketing, when the consumer was bombarded

with information, to ’pull’ marketing whereby, via the internet, our

response to the consumer’s needs can be almost instantaneous and can be

tailored to the individual. Consumers can post their needs

electronically and invite businesses to respond with appropriate and

individualised solutions. The job of our industry is to help companies

respond to these requests both in real time and with creative,

compelling messages.



A strategy toward digital expertise must be based on the ability to

provide a complete set of marketing capabilities that help clients

better serve their customers in a digital economy. This necessitates

core competencies embodying a complex mix of human skills and

technology. In my view, these skills need to cover the spectrum of

e-business strategy consulting, complex account management, creative

design and copy writing, multimedia customer service functions, public

relations and online interactive capabilities for the internet,

intranets and extranets.



The transition of the old economy to the internet is a transition from

atoms to electrons. Instead of mailing physical documents to customers,

we are now able to send content-rich digital information directly to

consumers on behalf of our clients.



Increasingly, we are conducting multimedia interactions with our

clients’ customers combining internet functions, telephony and

interactive video.



Combined customer relationship and marketing services is a central

function in the new economy. Unfortunately - both for themselves and

their clients - there is a danger of some service organisations trying

to occupy this business space through hasty and opportunistic

acquisitions that they are ill-equipped to integrate. All the players in

this industry need to ensure that their offering is properly thought

through so that they are able not just to tick the box on a range of

marketing and technology competencies, but to implement them in a

controlled and integrated manner in their clients’ interests.



For sure, those organisations that do not embrace new-media methods to

communicate with customers will lose.



Jay Bingle is the worldwide president of Impiric.



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1 Job description: Digital marketing executive

Digital marketing executives oversee the online marketing strategy for their organisation. They plan and execute digital (including email) marketing campaigns and design, maintain and supply content for the organisation's website(s).