The decline of traditional direct marketing is posing media agencies and their clients a number of critical questions about how they should best secure the highest number of responses to campaigns. Should direct operations be merged with digital? How does branded advertising relate to direct marketing? And should campaigns revert to sending messages en masse or pay a premium to develop capabilities to deliver to hard-to-reach target markets.
Aegis agency Carat, having rolled Carat Direct into the rest of the agency as part of a wider restructure in 2006, has now decided that it can better handle direct clients through a distinct direct marketing division.
The agency argues that the re-formed Carat Direct is in keeping with the restructure that saw direct split into three of the agency's six self-contained business units, in that digital will continue to perform a central role across the agency. Digital planners will sit next to direct planners, with strategic comms staff added in to reflect the importance of all media channels on direct marketing.
As David Beale, head of direct at Carat, points out: "We need to build our insight on consumer behaviour and produce properly integrated on and offline direct marketing. It's not about going back to the days when it was just direct marketing planners and buyers."
Clients' requirements
The question of whether agencies decide that direct demands a distinct unit or whether it should be merged into their other media operations can be rendered obsolete, depending on clients' approaches, according to David Kyffin, managing director of direct and digital at WPP's trading arm GroupM.
"Some clients are structured in silos and expect either digital or direct teams to turn up on any given day, so we tend to structure ourselves to clients' requirements," he says.
Big direct spenders in WPP's fold include MediaCom clients RBS and Sky, who take different approaches to direct marketing. RBS sees it as inextricably linked to its activity across all media and has consolidated spend within MediaCom as a result.
Meanwhile, Sky runs its media and ad operations based on which individual agency delivers the best results on any given medium, with the new definition of direct marketing covering a number of channels.
This is reflected in Sky's agency roster, where WPP's MediaCom hand- les the bulk of the broadcaster's media spend, Aegis's Diffiniti works on online media and natural search, while part WPP-owned Syzygy agency Unique Digital handles paid search.
MediaCom has a stand-alone direct department of 95 people, structured as a self-contained agency, according to joint managing director Clive Howse. MediaCom Direct claims billings of £225m, making it the 11th largest media agency in the UK in its own right.
Sister WPP agency Mediadge:cia, meanwhile, wraps its direct and digital operations into one entity, under MEC:Interaction. Managing partner Jason Dormieux says agencies don't need to restructure to deal with direct. "We resisted the urge to integrate direct marketing in the structural sense in the extreme ways other agencies have," he says. "We can drive integration from behavioural change. Brand planners might not be expert in direct marketing, but they need to know how it affects client sales."
Dormieux admits this approach is tough to implement. Direct marketing is not in vogue, and convincing TV planners to make it central to their plan is not an enviable task.
Under threat
Making direct response a theme throughout media plans is essential, however, as the days of people picking up a leaflet and calling a number to request a loan or credit card appear numbered.
Spencer Stratford, media director at Mike Colling & Company, says: "Mass cold direct mail is increasingly under threat. Markets such as car insurance are dying a death as a result, as buying addresses in bulk doesn't make economic sense."
The internet is largely responsible for the change. While purchases have often been made on the price promised by clients through direct marketing promotions, the rise of price comparison sites means potential customers often consider the best-value offers, with the company that owns the best brand winning out.
Mike Colling & Company has a pedigree in direct marketing, but has had to change to offer clients a range of media options, exemplified by its work in reversing declining subscriptions for Which? (see box).
The agency redirected Which?'s media spend from 95% direct marketing to 95% on a mix of TV, radio and press inserts. All of these ads contain a call to action, but are more creative and brand-enhancing than mail on the doorstep.
Carat and MediaCom have settled on a model where they have a stand-alone direct department containing planners with cross-media experience.
Direct marketing has moved a long way from being seen as a provider of junk mail and media agencies have had to bring in knowledge and skills from all other disciplines to cater for the differing approaches of clients in this new environment.
WHICH? CASE STUDY
Problem Consumer advice source Which?'s membership had declined from more than 650,000 to under 500,000 in a decade from 1996
Action Mike Colling & Co developed a multimedia schedule where each medium had a role. TV, press and inserts were favoured over direct mail, which previously accounted for 95% of Which?'s media spend. By using a range of media, the agency could target a "behavioural and attitudinal group" rather than a demographic group
Result Long-term subscriber decline reversed, while return on investment trebled in 12 months. Revenue growth enabled Which? to fund new product launches