PUBLISHING AGENCIES: THE RISE AND RISE OF CONNRACT PUBLISHING - The contract publishing sector is growing at a phenomenal rate and seems to be undaunted by the prospect of recession. Andy Fry investigates

Contract publishing, once the magazine market’s poor relation, appears to be on an unstoppable growth curve.

Contract publishing, once the magazine market’s poor relation,

appears to be on an unstoppable growth curve.



According to Mintel, the UK’s publishing agencies generate a turnover of

pounds 182 million a year. If incremental revenue, such as advertising

and fulfilment services, is added, the figure leaps to pounds 302

million. These sums represent 21 per cent growth in 1997 and 17 per cent

in 1998.



More significantly, this research suggests 43 per cent of clients plan

to spend more on customer titles. This has prompted Mintel to suggest

that contract publishers will see a further 29 per cent growth over the

next four years, taking the core turnover above pounds 250 million.



Publishers cite a variety of reasons for the growth. The most frequently

mentioned is a perceived shift in the mindset of marketers.



Julian Treasure, the managing director of TPD, whose clients include

Microsoft, United Airlines, Toyota and Orange, says: ’Marketing has been

aimed at getting customers in through the front door. But there is a

realisation among marketers that existing customers are a valuable

asset. Clients must keep communicating with them if they are to stop

them leaving by the back door.’



Other publishers, such as Kim Conchie, the managing director of Brass

Tacks, build on that premise by stressing that customer magazines are

cost-effective and have been ’proven to work’.



Conchie says: ’There are now numerous case studies which make the impact

of magazines on sales directly measurable - and clients are increasingly

keen to use their databases in ways to help them retain customers.’



A final driver of growth, according to Craig Waller, Premier Magazines’

managing director, is the quality of writing in the contract sector.

’The power of journalism has been recognised,’ he asserts. ’Good

contract magazines talk to customers in a grown-up fashion - and the

readers appreciate it.’



Of course, the question for any sector experiencing growth is how to

keep up the momentum. Mintel identifies three broad categories in which

it sees potential for expansion.



The first is new product areas. Travel, finance and retail account for

nearly half the UK customer magazine market at present. But Mintel

believes fmcg, manufacturing, telecoms, IT companies and local and

central government are all ripe for growth.



Of all these sectors, fmcg generates the most interest. Heinz tried and

failed in this market. More recently, Unilever, Cadbury Schweppes and

Kimberly-Clark formed a consortium called Jigsaw which, through its

agency, BLA, is targeting nearly half a million UK housewives with

various magazine titles.



Five years ago, the notion that commodity fmcg products could form the

content of a readable customer magazine would have been dismissed

out-of-hand, Treasure says.



However, the growing power of the major multiple retailers has forced

manufacturers to look for new ways to talk to customers and drive

loyalty.



In Treasure’s opinion, there are opportunities for those fmcg customer

titles that ’can differentiate brand and service. Successful customer

magazines have got to appeal to customers of high value and enhance the

communication experience with the client’.



The second opportunity for publishing agencies lies in the international

domain. Members of the Association of Publishing Agencies claim that the

UK market is ahead of many foreign markets in its understanding of

customer publications.



As a result, some agencies see the opportunity to piggyback on the

expansion of their clients.



This is particularly true for publishing agencies that belong to

international advertising groups. Premier, for example, is part of

Omnicom, while Redwood belongs to Abbot Mead Vickers BBDO.



According to Waller: ’Part of the reason we joined Omnicom was because

we wanted help with our international expansion plans. As clients

expand, we want to be able to retain them overseas.’



Waller, like many of his counterparts, believes UK companies are

well-placed to succeed. ’The UK is a long way ahead of most markets in

this sector. Working in English as our native tongue is obviously a

benefit and the UK is still a key jumping off point between Europe and

the US.’



Redwood has made significant strides in this arena. It has a standalone

international division with offices in Cape Town, Hong Kong and

Dusseldorf.



It publishes in nine languages across 36 territories.



One of the most vivid examples of international potential is Redwood’s

relationship with Volvo. The Volvo Magazine has a 140,000 print run

domestically but distributes a further 920,000 copies overseas.

Redwood’s magazine for Dulux, Colour, which has a 100,000 print run at

home, has a further 2.3 million copies targeted overseas.



Forward Publishing, the UK market’s number two publishing agency, has

also expanded its activities overseas. It has internationally focused

clients such as Patek Phillipe, for which it has produced a magazine in

eight languages, and IBM Helpware, which is published in 12 languages

across 14 territories. The Body Shop’s Naked Body is currently being

piloted in the US. In addition, Forward has built up publishing

alliances in the US, Japan, China and Russia.



However, international growth is not limited to the big three

companies.



TPD, the UK’s fourth-biggest player, has an office in Seattle, set up

primarily to service Microsoft. The Publishing Team, whose clients

include NatWest, Shell, Virgin and Barclays, is looking at expansion

into the US, Europe or South Africa.



River Publishing, identified by Mintel as the fastest-growing company in

the UK, sees potential to use its sister agency, Mongoose, as a

springboard into the US or South-east Asia.



The third broad heading identified as a potential source of growth is

the internet. As clients attempt to grow their online transactional

base, so publishers see the opportunity to create good quality content

to drive interest.



In some ways, however, online developments disguise a more significant

trend - the desire among some publishing agencies to expand their

relationship with clients by moving up the food chain.



River’s marketing director, Nicola Murphy, says: ’Once you get to know a

particular market sector or the client’s brand, there is always more

work that can be done for them.’



At a market sector level, River’s experience with BMW has been

influential in winning it work with other prestige car brands, such as

MG. At a client level, ’we do a lot of brochures, reports and

newsletters for clients’, Murphy says. ’We also run a car club for

Lotus.’



In its most ambitious move to date, Murphy is heading the company’s move

into brand consultancy with the launch of River Direct. ’Our aim will be

to look at the whole customer journey. We will act as a consultant - but

will also seek to create opportunities to publish communication vehicles

off the back of it,’ she says.



This route has been pursued vigorously by TPD, which sees itself as

being in ’customer value management’. Talking to customers through a

magazine is the first step in ’a much more rich and complex process’,

Treasure believes.



TPD’s approach has been to form a liaison with the direct marketing

company, Manifesto. ’They look at the customer value methodology,’ he

says. ’We then deliver the communication. Whether it is intranet,

extranet, interactive, multiple media or multiple language, we see

ourselves as part of a much wider process that also involves call

centres and customer service in shops.’



At the heart of this shift in positioning is the increasing ability of

clients to target the right customers with the right information. ’New

technology means clients can reduce wastage and increase value,’

Treasure says. ’A key goal is to define the return per customer. There

are great benefits for those companies that can find the 20 per cent of

their customers who generate 80 per cent of their profits.’



Neil O’Brien, the managing director of The Publishing Team and the

chairman of the APA, agrees. ’Companies are getting more sophisticated

in using databases to target people more closely.’



TPT’s best example is Barclays, for which it publishes eight titles on

topics as diverse as small business banking, the Euro and travel.



’As the customer magazine industry grows, one of its key opportunities

will be to drill down into the relationship between the advertiser and

specific customers,’ O’Brien explains. ’Financial services has always

been at the forefront in using databases as a marketing tool. That sort

of knowledge can also be used to talk to customers in sectors like

retail.’



This is already happening in some sectors. Forward reckons to be

producing 15 different types of publication for Tesco such as Tesco

Clubcard and Tesco Baby Club. It also produces books and material for

Tesco’s website.



John Brown Publishing publishes four titles for Virgin Atlantic Airways

and one for Virgin Trains.



Within this broadening of the client-agency relationship, the internet

will clearly have a role to play - though no-one knows when it will have

real commercial value to clients.



O’Brien says: ’Online is a small part of what we do right now. But we

see it as a growth area. Clients have spent a lot setting up websites

but have then not been able to maintain them. As a sector, our

opportunity lies in refreshing websites so there is a reason to keep

going back.’



Waller is also cautious in his appraisal of the net. ’I think online

customer publishing is a possibility when it is an adjunct to

e-commerce. When people have a reason to keep going back to a site to

buy tickets or get information, then our skills will be valuable in

making that shopping experience more pleasurable.’



Neil Mendoza, managing director of Forward, echoes Waller: ’We do some

work for Tesco’s internet site but e-commerce has to become a more

important part of the business before we spend too much time on it. We

don’t want to push the internet at clients just for the sake of it.’ At

Redwood, online is taken seriously enough to have a standalone

division.



Most of the above opportunities for growth are real enough - but some of

them raise new questions. First, publishing agencies that seek to move

upstream will face resistance from existing players in those markets -

some of which will see the reverse opportunity to branch out into

publishing.



Second, new jobs require new skills. At the most basic level, Conchie

says, ’publishing agencies entering the online environment have to

appreciate there is a real difference between push and pull media when

talking to customers.’



Mendoza, who has clients such as Tesco, Lloyds TSB and Nasdaq, sees

opportunities for growth but is keen to ’stick with what we know. We

don’t want to stray too far from our core publishing competencies. A lot

of effort has gone into getting clients to divert budgets out of

traditional disciplines into publishing projects - and that is still our

core focus.’



Waller agrees: ’We don’t want to move out of our core competence. We

wouldn’t dare venture an opinion on advertising or direct marketing and

I don’t think there is a company in our sector which has the credibility

to do so.’



The need to stay focused takes on deeper significance in the context of

new competitors in customer publishing. Sally O’ Sullivan’s start-up,

Cabal, and Haymarket (publisher of Campaign) have both ventured into

contract publishing.



Dennis Publishing formed Dennis & Beyond in 1997, which publishes titles

for Toshiba, Thomson Holidays and CompuServe. A danger for contract

publishers might lie in taking their eye off the ball and allowing

aggressive newcomers to steal a march.



Mendoza sees merits in drawing on the expertise of other businesses.



Forward has a joint venture with Conde Nast which, he claims, ’has given

us global access to the luxury goods market’.



Forward is 50 per cent owned by Maurice Saatchi’s media group,

Megalomedia.



’That has been invaluable as a means of gaining introductions to

companies,’ Mendoza says. ’We have worked with M&C Saatchi on

accounts.’



Formal ownership by ad agency groupings is already a significant feature

of the UK market. But strategic alliances are also expected to underpin

further growth. Conchie says Brass Tacks has worked closely with the

likes of Brann on a variety of Royal Mail titles and with Finisterre on

the RAC’s Motoring magazine.



Despite the threat of competition from non-traditional players,

publishing agencies are bullish. Most play down the threat of recession.

Redwood’s new-business director, Matt Prior, sees the prospect of an

economic downturn as a chance to grow. ’Clients look to improve the

efficiency of their budgets in a recession and that represents an

opportunity. The evidence of the last recession is that client companies

which kept up their communications with customers benefited during the

recovery,’ he says.



Whether or not there is a recession, there is one classic sign that the

sector is maturing. Murphy expects ’two more years of easy organic

growth then more fighting among ourselves’.



The market-leading sectors are not immune to attack. Waller says:

’Financial services is most in need of improvement.



I believe the heavily divisionalised approach of banks has led to a lot

of extremely bad magazines which don’t relate to customers

effectively.



The first client to come up with a proper, grown-up personal finance

magazine will do well.’



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