The Direct Approach: Shape up for the third age

Consumers' needs and beliefs are rapidly changing and evolving, and direct marketing, the worker ant of the agency colony, is better equipped than most others to change with them.

I have a theory. I think the agency sector, at present, resembles a group of doctors confronting a new condition. They've labelled the symptoms (media fragmentation, customer control, lower levels of brand reach), they've come across isolated cases, but there's no consensus on how to treat it.

Those of us whose skills are rooted in direct marketing are better placed than most to find a cure for this marketing malaise. However, we will only succeed if we retain our principles but abandon most of the practices. Success will come from doing things differently, not from doing the same things better. For those who work this out, the next decade could be a golden age; for the rest, it'll be inexorable decline and a funereal footnote in Campaign.

From the outset, we were the industry's grafters, the ones at the coalface, so you'll excuse me if I adopt the mining analogy. In the first age, through to the early 90s, times were good. There were rich veins close to the surface that we could prospect for, lists were plentiful and fresh. We could show off our creativity, confident in our ability to show a decent ROI. And if our advertising brethren looked down on us, they were just jealous because we knew the customer better than they did (or so we thought).

In the mid 90s, two ideas merged to herald the Second Age. The first, started by Don Peppers and Martha Rogers, was to shift targeting to the individual level: one to one. The second came not from the marketing sector, but from IT sales. The disciples of CRM hailed the supremacy of the system and a focus on finding and maximising the most valuable customers.

As we move into a new age, with data and effective personalisation of communications more valuable than ever, we must reappraise how we do things. We talk about the impact of digital technologies and media on our individual behaviours - using peer recommendation, creating our own content, personal media replacing mass media. What we don't seem to talk about is how flawed our existing CRM models are for dealing with such changes.

At the heart of the problem is the idea that brands can and should manage their customers. I've always thought this to be a specious argument, and, today, it's a formula for failure. Successful brands invert the model, make it easy for customers to define and manage the relationship they want to have with the brand. Google is the obvious example, but First Direct and BA also do many things well.

The best creative work typically adds value by giving customers something that is useful or entertaining. A great benchmark is Blendtec's "Will it blend?" videos. Talking with clients, agency and friends alike, this campaign succeeds wonderfully. There's something deliciously voyeuristic about watching an iPhone blended to a small pile of grey powder, but there is also a strong subtext about how good the product is. If it can blend metal, it can blend my soups and smoothies better than any other blender.

Let's examine another change I consider essential. Which of the following communications should a direct agency be capable of producing? A campaign microsite where users can upload their own content? Billboards they can interact with via their mobile phones? Widgets on social networks for charity donations? Facebook or Flickr groups to bring together people with shared interests? Blogs that let them talk directly to the people behind the brand? That elusive viral video?

I believe the answer is "all of the above". They all create action or interaction at an individual level. But can this model create work that works?

Beyond the behaviour and the creative, direct work generates data that we should be able to measure and model. The word "should" is important. I think media agencies have stolen a march on direct agencies when it comes to measurement. However, the proliferation of non-traditional media gives us the chance to reclaim our status. To achieve this, we need to turn our traditional thinking on its head.

At the heart of direct has been the test and learn philosophy. Done well, you can find out what works and what doesn't, and simultaneously manage the investment risk. We've always been proud of how we've built our test matrices to isolate individual variables - such as creative, media, and timing - and had the data skills to show the significance of apparently small variations. We now need to accept that this approach represents a blunt tool, better at telling us which route is less likely to fail than which path leads to sustainable success.

The problem is that most of our classic measures are "downstream". They tell us the final decision a customer has made: to buy or not to buy. What they don't tell us is what journey the customer took, the influences they felt. We have to take the measurement upstream to understand different customers' different journeys, and how their willingness to interact with the brand varies according to context. (Do I get a car insurance quote from a company because that brand came up first on Google, or because it's one of the cheapest quotes on a comparison site, or perhaps because I know and trust the brand?) Just as importantly, we must measure wider, external influences: not just what's being said through traditional media channels but what people are hearing on the proverbial grapevine - influences that will probably have far more impact than any marketing. When we put these strands together, we can see the whole customer journey and understand where the engagement opportunities are.

We are entering a third age of direct. We can prosper if we remember the fundamental principles; but we also need to evolve and adapt, not just new skills and techniques, or an ability to apply our creative talents through a wider range of channels. We need to understand how this world, and the people with whom we are trying to engage, have developed some quite different beliefs and codes of behaviour.

Making these codes work for our clients requires us to rethink our own beliefs and behaviours. For those of us who get it right, we're on the brink of a golden age; get it wrong and our future is grave. But doing nothing is not an option. The path ahead is clear, and fortune will favour the brave.

- Amanda Phillips is the former chief executive of Proximity London.