Monday, February 21, 2005

The Coming Global Vendor Battle

The evolutionary battle for direct and interactive marketing is shaping up quietly as marketing services companies flesh out their portfolios in anticipation of eating DM agencies’ lunch. Not everyone sees the coming clash. But leading clients are open to alternatives, because they experience the agency model as severely broken.

The antagonists address the problem of creating integrated marketing programs from two different and distinct perspectives. Agencies have been selling insight-driven creative, media planning and buying and project management at high margin retainers exclusively to one firm in each category since the late 60s. An agency’s assets are its talent and its bench strength. They sell big ideas.

Marketing services firms own hard assets; principally compiled lists, software or printing facilities. They aggressively sell to many or most players in each category and have acquired allied and ancillary services, usually at the behest of clients, which are competitively priced, often on a commodity basis. They sell infrastructure and discrete products.

If you are handicapping the title bout it will be Wunderman, OgilvyOne, Draft, MRM Worldwide, Digitas, Euro RSCG 4 and what’s left of Rapp Collins versus Harte-Hanks, Acxiom, Experian, Donnelly and D&B competing on a global stage. The focus will be on the high tech, financial services, travel and hospitality, automotive and retail industries.

Clients, starved by years of flat budgets and hiring freezes, need external marketing resources that understand their business, move quickly and can deploy nuts-and-bolts services on an as-needed basis at competitive costs. Clients want results measured in terms of demand generation, cross-sell, upsell and in increments of awareness or loyalty. They want to count on having a single butt to kick; a partner with skin in the game who is always on-call, doesn’t make excuses and offers predictable pricing.

The marketing services crowd has no creative pretensions and few claims about strategic insight into industries. They are agile and can execute quickly. They produce effective lists, do merge/purge, design and execute online and offline campaigns (including landing pages, sophisticated lettershop work and print on-demand), build, host and operate websites, handle sophisticated teleservices and teleweb interfaces, collect, track, monitor and analyze customer and prospect data, do search engine marketing, produce and distribute collateral and handle POS messaging and promotions.

Most claim they can present a single point of access, control, billing and operational responsibility to clients. The marketing services value proposition is “we will do it for you faster, cheaper and with less ado than agencies but with the same or better quality, coordination, command and control.” The next logical step, they argue, will be to outsource all marketing processes and retain only a few marketing strategists and leaders within a client organization.

Agencies, boasting brand names and faded glory, claim to offer superior service, industry specific expertise and insight and value-added project management spanning the globe. In fact, many of the components of agency service (e.g. lists, teleservices, CRM, lettershop, print or video production) are bought from marketing services firms. The value add from agency management of ed these services varies widely in quantity and quality.

To better track the coming battle, assess agencies and marketing services firms from the perspective of client “must-haves”.

Integration and Coordination. During the last fifteen years, agencies have created separate profit centers to offer media, production, interactive and consulting services. These units are charged with making profits independently. As a result they buy and sell services within the agency rubric which complicates relationships with clients, reduces easy integration and coordination and often adds to the bill. The quality of service and the tenor of the relationship rest on the skills of account management.

In marketing services firms, each component sells separately. Relationships are based on successful past sales and the perception of the value and quality of component products.
They are just beginning to create client-centric menus of services with pricing incentives to buy combinations or packages of services. They are new at responding to the need for integrated services and in some cases don’t yet see themselves in this arena. They do not have a cadre of seasoned account managers that see the forest for the trees.

Industry Expertise. With few chiefs and many, often under-trained Indians plus significant turnover, claims of deep industry expertise are hard to sustain. Agencies know how to create stuff and manage their own internal production processes, but hardcore understanding of markets and product niches is often hard to come by. Knowledge management in agencies is in its infancy. Given client exclusivity, agencies often cannot or will not share what they really know among or between clients. This is ironic since clients often choose an agency on the basis of its track record for a particular allied or competitive client.

Marketing services people tend to know their product. They are list mavens, printing whizzes and call center jockeys. Sometimes they also know allied products in their company portfolio. Most aren’t yet thinking in terms of broadband client service or client throughput. But recent acquisitions and management moves make clear that these firms are headed in that direction. Some have put coordinating structures in place to better package and price their offerings. There is little or no effort made at knowledge management.

Global Reach. Agency global networks, especially in the DM space, are a mixed bag. Central control and coordination is difficult. Time zones, wide variations in talent, different business practices and expectations and a variety of ownership models complicate the process. Many clients end up funding what should be an agency’s internal wiring.



Marketing services firms have regional hot spots and regional expertise but cannot yet present a consistent package of global services to clients. At this point in their development they probably don’t see enough potential demand to justify the internal plumbing or new acquisitions necessary.


The forces affecting the next generation of direct and interactive marketing are working their way into place. Today, neither DM agencies nor marketing services firms can provide clients with the full menu of services they currently demand. But sometime soon a leading major client will defect and the battle will be joined. Stay Tuned.

3 Comments:

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