Sales promotion agencies have been through a few lean years and at first glance the figures for 2003 offer little cause for renewed optimism.
However, a gradual change in the services provided by these agencies is providing the industry with significant hope for the future.
With a tightening of marketing budgets came the realisation among agencies in this sector that they had to widen their remit beyond traditional offerings. Consequently, disciplines such as direct marketing, experiential campaigns and design work have increasingly been integrated into their strategies. Long touted as the way forward by sales promotion agencies, 2003 was the year this methodology moved from theory into practice.
Toward the end of last year, client budgets began to pick up again and those agencies that have embraced an integrated approach have seen profits surge. The league tables indicate that the bulk of this growth in 2003 came from the independent, middle-sized agencies, as Iris, Catalyst Marketing, Meerkat, Gasoline and Grasshopper all registered major profit increases.More established agencies at the top of the table struggled to maintain their revenues.
As with other marketing disciplines, the sales promotion sector is no stranger to consolidation. Kevin Twittey, chairman of Triangle Group, whose clients include Guinness, believes the market has polarised between the big groups and independents. He adds that once budgets pick up, some of the successful independents will be swallowed up by bigger counterparts looking to fill gaps and expand specialisms. Rob Gray, chief executive of Mercier Gray, agrees. He believes the market will return to mergers and acquisitions, with vulnerable agencies snapped up quickly and cheaply.
Independent success
Mergers are certainly not restricted to the bigger agencies.
Catalyst Marketing, for example, merged with The Lighthouse Company in June. The fusion brought with it the Barclaycard account - worth about 拢1m - to add to recent wins including Muller. Its Valentine's campaign for the latter won an Institute of Sales Promotion (ISP) award. The success of Catalyst and other independent agencies proves brands are no longer afraid to place their business outside the big agencies. Many find that using independents enables them to deal with hands-on principals - a rarity when using bigger agencies.
In light of this, established agencies at the top of the league table must trade on their ability to deliver on a global basis, which will ensure some bigger contracts continue to come their way, according to Twittey. 'Global clients require global services and many big companies will only work with multinational agencies,' he says. 'They want reach and consistency, which they won't get from an independent 50-man shop.'
However, independent agencies are not necessarily locked out of multinationals' contracts, as many of these companies are looking for global efficiency, coupled with local application. The trend may be for centralisation of purchasing marketing services, but the development of campaigns at local level is often handed to independent middle-sized agencies.
Focus shift
Sales promotion's traditional reliance on FMCG clients to drive revenues has affected the bottom line of several agencies, as a result of budgetary pressures. Matthew Hooper, chairman of the Marketing Communication Consultants Association (MCCA), believes there is a need for diversification. 'The money is simply not there in FMCG any more, so agencies are having to find new routes to market,' he says.
'The competitive nature of the finance industry means there are bigger budgets available, while telecoms and IT is a growth sector for promotional work. Healthcare has also become a bigger spend area because of deregulation in that particular market,' he adds.
There is also still room for specialist agencies. Logistix recorded double-digit growth in 2003, despite being focused on youth marketing. According to the agency's planning director, Dave Lawrence, 'specialisation provides clarity in a cluttered sector, and the volatility of the market provides a need for a heightened level of understanding'.
Lawrence admits the agency still needs to look beyond its core food and drink clients. In addition, Logistix rebranded from its previous agency name, Logistix Kids, in June of this year to reflect its growth beyond children's campaigns alone into family marketing.
Agencies are spreading the net wider in terms of potential revenue, but it is clear that core sales promotion competence is no longer enough to win business - or even retain it. 'There are still specialist clients and specialist agencies, but clients are looking for a more holistic approach to changing customer behaviour that incorporates all appropriate marketing disciplines,' says Chris Thomas, chief executive of Proximity London.
'That said, sales promotion is still a powerful tool that can be used tactically to change customer behaviour.'
The shift from a central focus on sales promotion activity has been driven by consumers' savvy attitude toward it. The big on-pack promotions of a few years ago have become less prominent as brands adopt a more creative approach.
Quentin Boyes, managing director of Liquorice, believes the fall-off in pure sales promotion work has meant there are few agencies left that deal solely in such campaigns. 'Consumers are cynical about the old mechanisms of sales promotion. They find the campaigns tedious and mistrust them.
The trend now is to lock the creative into a total brand proposition.
This has to be relevant, though, as there's no point being wacky in creative delivery for the sake of being different.'
Liquorice delivered an integrated campaign for Kettle Foods to meet two main challenges: to increase the penetration of the product, and the frequency with which it was bought. A door-drop campaign had an 88% success rate in bringing in new consumers from a base of 250,000, with 25% of these converted into frequent customers.
'The nature of the creative really got under the skin of the Kettle consumer,' explains Keith Stephens, marketing director of Kettle Foods. '北京赛车pk10s such as these are also delivering significant consumer data, which has enabled us to segment our database in a much more targeted way. This is where we see the future of sales promotion. As such, it can be used for long-term strategic benefits as opposed to ad hoc tactical hits.'
There is a growing feeling from clients that, at a basic level, sales promotion comes into its own when it evolves into a more strategic, layered initiative. To deliver on this promise, agencies need a wider understanding of media.
Jim Surguy, managing director of Results Business Consulting, believes sales promotion agencies still have some way to go before they can claim to have achieved this. 'Sales promotion is now being seen by intelligent clients as having strength beyond the one-off tactical hit,' he says.
'But this is only where promotional campaigns are built with a real understanding of customer engagement. The risk is that agencies promise high, particularly with integrated programmes, but deliver low. So the onus is on agency management to educate frontline staff to give them a real understanding of other related disciplines. As sales promotion widens its horizons, understanding how traditional media work will be increasingly important.'
Delivery on brief is crucial to maintaining longevity in client relationships and more sales promotion agencies are focusing on sophisticated models to prove return on investment. Jeremy Cochran, chief executive of Catalyst Marketing, attributes much of the agency's growth last year to its investment in research and planning. He adds that, with intensifying pressure on marketing budgets, agencies need to raise the bar continually. They must be able to justify not only why an idea will work, but also why a promotional marketing solution will deliver against a brand's objectives.
Haygarth is another agency placing more emphasis on accountability. Its proprietorial approach is called SMART targeting. This locates, identifies and profiles consumers with the greatest potential and recognises how best to interact with them. According to the agency's managing director, Sophie Daranyi, SMART has enabled it to provide innovative, integrated solutions that bring the brand to life. She cites Nokia's presence at the Newquay Rip Curl Boardmasters sports festival as proof of its success.
Measuring the activity over four days, the handset promotions undertaken by Haygarth produced a demonstrably increased association between Nokia, youth and sport within the active lifestyle market.
Advance planning to prove accountability is commendable in theory, but, with clients demanding immediate responses to the allocation of a brief, this is not always possible. Speed of reaction is something that Gasoline, whose clients include Visit London and the RAC, sees as crucial.
'There is no doubt that lead times are getting shorter. For agencies to provide the best service means being able to deliver solutions and results faster than ever. Speed to market is now a key issue in more than half of the briefs we see,' says managing director Mark Joy.
The demand for innovative strategies has led to an increase in affinity marketing deals, enabling brands to tap into other audiences. Nintendo and its partner agency Geoff Howe Marketing are consistent users of such initiatives, such as a tie-up with Virgin Atlantic in which portable Gameboys were placed in the airline's Upper Class lounge.
Nintendo has run similar third-party campaigns with Vimto and Chrysler Jeep, with the latter's activity revolving around a branded Konga beach party. 'Different third-party tie-ups offer different benefits, but there needs to be a clear synergy between the brands to make the activity relevant,' says Dawn Paine, UK head of marketing at Nintendo. '北京赛车pk10 objectives must be agreed up-front so there is no confusion in terms of what both parties are looking to glean from it.'
The remit of sales promotions has altered substantially from its traditional roots, as client budgetary pressures combined with consumer cynicism toward promotional methods have forced a change of direction. But Phil Bourne, chief executive of KLP Euro RSCG, nonetheless believes it is an exciting time to be a sales promotion agency. 'In a flat market, brands are striving to create competitive difference,' he says. 'Media-neutral agencies such as KLP are benefiting from the need to find new routes to market. In this environment, integrated strategies provide brands with an advantage and we are perfectly placed to deliver.'
THE SARBANES-OXLEY EFFECT
For companies affected by the US Sarbanes-Oxley Act, which restricts the financial information firms are allowed to make public, we have used Companies House data provided by Willott Kingston Smith. In most cases, the latest data available was for the 2003 financial year, although only 2002 data had been filed for Proximity London, Haygarth Group and Arc London. These agencies have been ranked based on 2002 figures.
Financial information filed in Companies House as gross income has been taken as equivalent to gross profit. All Sarbanes-Oxley-affected companies are listed under their group names and figures.
TOP SALES PROMOTION AGENCIES
Agency Gross profit Gross profit Chge Staff Gross
2003 2002 (%) profits
(pounds) (pounds) per head
(pounds)
1 Proximity London* n/a 23,506,454 n/a 267 88,039
2 Carlson
Marketing Group 21,669,000 26,554,000 -18 480 45,144
3 The Marketing
Store 15,236,000 15,376,000 -1 183 83,257
4 Haygarth Group* n/a 14,946,135 n/a 152 98,330
5 Arc London* n/a 13,980,000 n/a 156 89,615
6 Joshua* 13,904,144 12,278,266 13 190 73,180
7 Tequila* 11,156,312 11,089,368 1 130 85,818
8 Triangle Group* 11,065,883 12,354,223 -10 129 85,782
9 Geoff Howe
Marketing Group 10,700,000 9,170,000 17 108 99,074
10 KLP Euro RSCG* 10,190,982 11,371,862 -10 144 70,771
11 Dynamo 9,870,989 9,793,000 1 120 82,258
12 Dig For Fire 7,357,531 6,164,000 19 74 99,426
13 Logistix 6,979,000 6,223,000 12 50 139,580
14 Bd-ntwk 6,892,000 5,765,000 20 94 73,319
15 Mercier Gray 6,860,000 6,597,000 4 84 81,667
16 The
Russell
Organisation 6,850,000 6,290,000 9 110 62,273
17 Iris 6,531,911 4,288,316 52 132 49,484
18 Billington
Cartmell 6,005,000 5,611,000 7 59 101,780
19 Poulter Partners 4,605,000 4,226,000 9 140 32,893
20 Osmosis Marketing 4,282,900 3,628,000 18 59 72,592
21 Positive
Thinking 2,879,000 3,022,000 -5 42 68,548
22 GFM Holdings 2,636,000 2,923,207 -10 50 52,720
23= Sledge 2,400,000 1,600,000 50 50 48,000
23= Catalyst
Marketing 2,400,000 1,100,000 118 28 85,714
25 SMP 2,150,000 1,820,000 18 40 53,750
26 Cubo Brand
Communications 1,766,133 1,775,945 -1 23 76,788
27 Ainsworth
& Parkinson 1,638,296 1,445,000 13 34 48,185
28 Liquorice 1,600,000 1,100,000 45 34 47,059
29 Headtohead 1,370,000 1,075,000 27 17 80,588
30 Gasoline 1,338,896 425,574 215 21 63,757
31 Teamwork at Brahm 1,245,500 1,288,000 -3 40 31,138
32 Meerkat 1,200,000 691,000 74 15 80,000
33 PMA Marketing 1,124,259 955,000 18 16 70,266
34 WDMP 1,123,324 790,000 42 17 66,078
35 Swordfish 953,995 926,127 3 16 59,625
36 Inferno 873,000 500,000 75 43 20,302
37 KHWS 824,208 948,009 -13 14 58,872
38 Grasshopper 815,000 420,000 94 14 58,214
39 Angel 661,652 745,681 -11 11 60,150
40 WDPA
Communications 599,000 672,225 -11 14 42,786
41 Intelligent
Marketing 550,000 n/a n/a 17 32,353
42 Brahm
Promotional
Marketing 469,890 416,283 13 8 58,736
43 Meteorite 400,000 400,000 0 42 9524
44 23red 367,000 348,000 5 30 12,233
45 GCAS Sales
Promotions 165,024 173,472 -5 4 41,256
*Companies House financial data provided by Willott Kingston Smith for
agencies affected by the Sarbanes-Oxley Act
1. Founded 1991. Subsidiary of Omnicom. CEO Chris Thomas; creative
director Caitlin Ryan. Clients include Shell, Masterfoods, Sainsbury's.
Member ISP, MCCA, DMA. www.proximitylondon.com
2. Founded 1961. Subsidiary of Carlson Group. Chairman Robert Janes; MD
Paul Moore. No clients given. Member ISP, MCCA, DMA.
www.carlsonmarketing.co.uk
3. Founded 1986. Privately owned. Chairman Graham Kemp; MD Charles Croft.
Clients include McDonald's, Walkers, Asda. Member ISP, MCCA, DMA.
www.themarketingstore.com
4. Founded 1984. Subsidiary of High Co. Chairman Stephen Morris; MD Sophie
Daranyi. Clients include Nokia, Tropicana, Columbia TriStar. Member ISP,
DMA. www.haygarth.co.uk
5. Founded 1968. Subsidiary of Publicis. Chairman John Quarrey; MD Mike
Spicer. Clients include Procter & Gamble, Fiat, Diageo. Member ISP, MCCA,
DMA. www.arcww.co.uk
6. Founded 1998. Subsidiary of Grey Global. Chairman Peter Thomson; MD
Nick Spindler. Clients include Post Office, NatWest, Air Miles. Member
ISP, MCCA, DMA. www.joshua-agency.co.uk
7. Founded 1992. Subsidiary of Omnicom. CEO Tim Bonnet; creative director
Nick Schanche. Clients include Hewlett-Packard, Barclays, O2. Member ISP.
www.tequila-uk.com
8. Founded 1975. Subsidiary of Publicis. Chairman Kevin Twittey; creative
director Nick Presley. Clients include Lloyds TSB, Diageo, Britvic. Member
ISP, MCCA, DMA. www.thetrianglegroup.co.uk
9. Founded 1978. Privately owned. Chairman Geoff Howe; MD Steve Connors.
Clients include Ladbrokes, Hitachi, Hill's Pet Nutrition. Member ISP, DMA.
www.geoffhowe.com
10. Founded 1974. Subsidiary of Havas. CEO Phil Bourne; MD Hugh Treacy.
Clients include PepsiCo, Britvic, Diageo. Member ISP, MCCA, DMA.
www.klp.co.uk
11. Founded 1990. Subsidiary of Incepta. Chairman Iain Sanderson; MD Peter
de Wesselow. Clients include Danone, Sainsbury's, Anheuser-Busch. Member
ISP. www.dynamo.net.uk
12. Founded 1983. Privately owned. Chairman Charles Buddery; MD Charles
Glover. Clients include Little Chef, Travis Perkins, First Direct. Member
ISP, DMA. www.digforfire.co.uk
13. Founded 1989. Subsidiary of Equity Marketing. Chairman Ian Madeley; MD
Liz Taylor. Clients include Kellogg, Burger King, Capri-Sun. Member ISP,
MCCA. www.logistix.co.uk
14. Founded 1990. Privately owned. Chairman Ghill Donald; MD John
Donnelly. Clients include Coca-Cola, Orange, Peugeot. Member ISP, MCCA.
www.bd-ntwk.com
15. Founded 1993. Privately owned. Chairman Rob Gray; MD Anton Mercier.
Clients include Beiersdorf, Sega, Kraft Foods. Member MCCA.
www.merciergray.com
16. Founded 1982. Privately owned. Chairman Rob Allen; MD Keith
O'Loughlin. Clients include BMW, Orange, Vauxhall. Member ISP. www.tro-
group.co.uk
17. Founded 1999. Privately owned. MDs Ian Millner, Stewart Shanley.
Clients include Sony Ericsson, T-Mobile, Shell. Member ISP, MCCA.
www.irisnation.co.uk
18. Founded 1990. Privately owned. Managing partners Ian Billington, Paul
Cartmell. Clients include Nestle, GlaxoSmithKline, Vodafone. Member ISP.
www.bcl.co.uk
19. Founded 1969. Privately owned. Chairman Peter Toynton; MD Gary McCall.
Clients include Britvic, Gala, Young's Bluecrest. Member ISP, MCCA, DMA.
www.poulterpartners.com
20. Founded 1986. Privately owned. CEO Vincent Tickel; creative director
Stephen Bushe. Clients include Carlsberg, Nestle, Diageo. Member MCCA.
www.osmosismarketing.co.uk
21. Founded 1994. Privately owned. CEO Tim Miller; MD Julian Reiter.
Clients include Royal Caribbean, American Airlines, C&G. Member ISP, MCCA.
www.positive-thinking.co.uk
22. Founded 1994. Privately owned. Chairman Peter Sakal. Clients include
News International, Telegraph Group, Bourne Leisure. Member ISP, DMA.
www.gfm.co.uk
23= Founded 1991. Privately owned. Chairman Nic Cooper; MD Ed Will.
Clients include JP Morgan Fleming, O2, Taylor Woodrow. www.sledge.co.uk
23= Founded 2001. Subsidiary of Incepta. MD Jeremy Cochran; creative
director Michael Quinn. Clients include Barclaycard, Muller, Unilever.
www.catalystagency.co.uk
25. Founded 1983. Privately owned. MDs Chris Simpson, Simon Mahoney.
Clients include Kimberley-Clark, Unilever Best Foods, Budget Car Rental.
Member ISP, DMA. www.smp.uk.com
26. Founded 1995. Privately owned. MDs Chris Walmsey, Kerry Simpson.
Clients include Busch, Scotch Whiskies Group, Liverpool Victoria. Member
MCCA, DMA. www.cubo.com
27. Founded 1990. Privately owned. Chairman Tony Ainsworth. Clients
include Nando's, Arla Foods, Princes. Member ISP. www.a-p-salespromo.co.uk
28. Founded 1998. Privately owned. MD Quentin Boyes; creative director
Alan Gilby. Clients include Johnson & Johnson, Kettle Foods, The Tussauds
Group. Member MCCA. www.liquorice.net
29. Founded 1996. Privately owned. Chairman Rod Geoghegan; MD Walter
Denny. Clients include BUPA, Johnson & Johnson, Direct Wines.
www.headtohead.net
30. Founded 2002. Part subsidiary of Chime. Chairman Chris Killingbeck; MD
Mark Joy. Clients include Visit London, RAC, Yellow Pages. Member ISP.
www.gasoline.uk.com
31. Founded 1981. Privately owned. Chairman Mike Baxendall; MD John
Morgan. Clients include Kellogg, McCain, Silver Spoon. Member ISP, MCCA,
DMA. www.teamworkbrahm.com
32. Founded 2002. Privately owned. Chairman Graham Green; managing partner
Paul Vines. Clients include McArthur Glen, Diageo, Dulux. Member MCCA.
www.meerkatmarketing.com
33. Founded 1992. Privately owned. Chairman Richard Mortimer; MD Leslie
Fleischman. Clients include L'Oreal, Sports World, Bose. Member ISP.
www.pmamarketing.com
34. Founded 2002. Privately owned. Chairman Gavin Wheeler; MD Craig
Wheeler. Clients include eBay, British Gas, Carphone Warehouse. Member
MCCA, DMA. www.wdmp.co.uk
35. Founded 1998. Privately owned. Chairman Mark Whitmore; MD Steve
Richards. Clients include BBC, Reebok, Direct Debit. Member ISP.
www.swordfish.co.uk
36. Founded 1999. Privately owned. Partners Frazer Gibney, Tim Doust.
Clients include Asda, Budweiser, Britvic. Member ISP. www.inferno-
group.com
37. Founded 1993. Privately owned. MDs Andrew Watts, Nick Hawkes. Clients
include Sony, ExxonMobil, Geopost. Member ISP, DMA. www.khws.co.uk
38. Founded 2001. Privately owned. MD Hugh Taylor; group head Nick
Frearson. Clients include Siemens, Ubevco, COI. www.grasshopper.uk.com
39. Founded 1998. Privately owned. MD Trevor Rudder; managing partner
Paula Ronan. Clients include Coca-Cola, BT Wholesale, Emap Performance.
Member ISP, DMA. www.angellondon.co.uk
40. Founded 1999. Privately owned. CEO Russell Abbott; creative director
Christian Nelson. Clients include Tesco, Radisson Edwardian Hotels, 3663.
Member MCCA, DMA. www.wdpa.co.uk
41. Founded 2003. Privately owned. MD Tricia Weener; creative director
Paul Jackson. Clients include Diageo, Woolworths, Ferrero Rocher. Member
ISP, DMA. www.intelligent-marketing.com
42. Founded 1983. Privately owned. MDs John Morgan, Julie Morgan. Clients
include SigmaKalon, Warburtons, Mapa-Spontex. Member ISP, DMA.
www.brahm.com
43. Founded 1988. Privately owned. Chairman Hugh Bishop; MD Debbie Smith.
Clients include Whitbread Restaurants, Homebase, Nokia. Member MCCA.
www.meteorite.co.uk
44. Founded 2000. Privately owned. Chairman Jane Asscher; MD Adam Wylie.
Clients include AG Barr, COI, Ladbrokes. Member ISP, DMA. www.23red.com
45. Founded 1994. Subsidiary of GCAS Group. MD Sara Callanan. Clients
include Bass Ireland, Kerry Foods, Translink. Member ISP.
www.gcasgroup.com
*Companies House financial data provided by Willott Kingston Smith for
agencies affected by the Sarbanes-Oxley Act
TOP 10 FOR GROWTH - BIG AGENCIES
Agency Gross profit Gross profit Change
2003 (pounds) 2002 (pounds) (%)
1 Catalyst Marketing 2,400,000 1,100,000 118
2 Iris 6,531,911 4,288,316 52
3 Sledge 2,400,000 1,600,000 50
4 Bd-ntwk 6,892,000 5,765,000 20
5 Dig For Fire 7,357,531 6,164,000 19
6 Osmosis Marketing 4,282,900 3,628,000 18
7 SMP 2,150,000 1,820,000 18
8 Geoff Howe Marketing 10,700,000 9,170,000 17
9 Joshua* 13,904,144 12,278,266 13
10 Logistix 6,979,000 6,223,000 12
TOP 10 FOR GROWTH - SMALL AGENCIES
Agency Gross profit Gross profit Change
2003 (pounds) 2002 (pounds) (%)
1 Gasoline 1,338,896 425,574 215
2 Grasshopper 815,000 420,000 94
3 Inferno 873,000 500,000 75
4 Meerkat 1,200,000 691,000 74
5 Liquorice 1,600,000 1,100,000 45
6 WDMP 1,123,324 790,000 42
7 Headtohead 1,370,000 1,075,000 27
8 PMA Marketing 1,124,259 955,000 18
9 Ainsworth & Parkinson 1,638,296 1,445,000 13
10 Brahm Prom. Marketing 469,890 416,283 13
*Companies House financial data provided by Willott Kingston Smith for
agencies affected by the Sarbanes-Oxley Act