DVC

The New Jersey innovator blazed paths into healthcare marketing, brand-building, and the Internet. Now, 20 times bigger than it was in ’91, the former Dugan Valva Contess finds itself at a crossroads.

It was a decade of wildfire-like expansion for the promotion marketing industry, with client expenditures leaping from $55 billion in 1991 to more than $90 billion today. In the `90s, promotion agencies took their rightful seats next to the ad folks at clients’ brand strategy sessions. The action-initiating discipline took root and flourished in non-packaged goods sectors such as telecommunications, financial services, and automotive. Indeed, communications conglomerates lacking in below-the-line capabilities started picking up hot promo shops like lunch tabs at Le Bernardin. And privately held promo agencies, stretched to their limits by booming business opportunities, fell willingly into the corporate ranks. As the decade closes, the promotion-hungry Internet promises to further swell the fortunes of professionals skilled in calling consumers to action.

Whether courageous or just plain foolhardy, promo’s editorial staff decided to designate a promotion agency whose fortunes over the past 10 years best embodied promotion in the `90s. We decided that this agency should meet all five of the following criteria: significant and sustained growth, strong creative, a portfolio of strategic brand work, AOR assignments for marquee clients, and a record of innovation – especially in the areas of Internet marketing and groundbreaking programs for companies outside of promotion’s packaged goods hotbed.

After poring through six years’ worth of promo 100 entries, placing several probing calls to current and ex-clients, and much spirited discussion, the editors reached the consensus that the unassailable choice for Agency of the Decade was Morristown, NJ-based Dugan Valva Contess, which now goes simply by the name DVC.

“They experienced meteoric growth. They did a lot of right things, and they did it with their own money,” says Keith McCracken, who observed DVC’s progress as president of the Association of Promotion Marketing Agencies Worldwide. Last year, he left the agency he founded, Minneapolis’s McCracken Brooks Communications, o head DVC’s Midwest office.

The DVC story is truly a ’90s one. In 1991, the agency had one big client, fewer than 20 employees (account people doubled as copywriters), and less than $2 million in net revenue. Ironically, the trend of packaged goods companies building in-house promotion staffs in the early part of the decade turned out to be the fuse that lit DVC. Rather than parry with agencies for dwindling CPG business, it launched a strategic effort to pursue the telecommunications and pharmaceutical giants surrounding its New Jersey base.

Neil Contess’s arrival in ’91 was a turning point. The ex-AT&T marketer who gained account-specific marketing experience in a stint at J. Brown & Associates won the AT&T business without a review. Soon to follow were clients such as Johnson & Johnson, Novus Financial, Warner Wellcome, and Lucent Technologies. Funny thing was, these non-CPG marketers insisted that DVC work with them as strategic marketing partners, from planning through execution. When packaged goods business came streaming back later in the decade, that experience would serve DVC well in winning several key agency-of-record accounts.

In the meantime, the agency’s growth was off the charts. Net revenue shot from $2.6 million in ’92 to $13 million in ’95 to $27 million in ’98. DVC could hardly keep the cubicles full enough to handle all the business that was coming its way, resorting to running an ad campaign on commuter trains that attempted to convince Jerseyites who worked on Madison Avenue to come work for DVC and stop paying those New York City taxes. During the same time span, the agency’s employee ranks swelled from 74 to nearly 300, and packaged goods names like Coca-Cola, Pillsbury, and Lever Bros. rounded out the client roster.

DVC was on a real roll. With resources available to get things done right, and the attitude required to stir innovation, it was riding the cutting edge of what it preferred to call marketing communications instead of sales promotion. It had skill-expanding training sessions for employees. It set up an executive succession plan, complete with stock sharing. It urged employees to take active part in cause-related and community-building activities, and they did.

“We were both at companies where we were treated like the hired help. When we started this company, we said, `Never again,'” says Peter Dugan of himself and co-founder George Valva.

“We wanted to work here, too, you know?” adds Valva with a laugh. “That’s the attitude that got us where we are.”

In 1995, the agency’s embrace-the-new culture led it to form DVC Interactive, a unit dedicated to exploring the awesome promotional potential of interactive technology, especially the Internet. Ever the innovator, DVC was among the first promo shops to take the leap into cyberspace. But, as the decade closes, it might find itself lost there.

A promotion agency’s biggest investment is in people. Internet ventures, however, require significant capital expenditures in technology. DVC made those investments in 1998, acquiring a Web page designer called Muffin-Head Productions and a systems architecture developer named Visient for an estimated $10 million. The financial pressure exerted on DVC by the acquisitions, say sources close to the company, led to the recent departure of chief rainmaker Contess.

As the century turns, DVC – formerly known as Dugan Valva Contess – finds itself in an oh-so-`90s quandary: How does a smallish, privately held company continue to fan the flames of meteoric growth without surrendering itself to the consolidation squad?

Liftoff

The Dugan Valva Contess that became one of the promotional stars of the decade got its big break one day in 1992 when Neil Contess won the AT&T account. Personal relationships at the company and an inside knowledge of its account-specific needs helped him secure the business in quick fashion.

“I remember coming back to the office and telling George that we got the business,” says Contess. “He looks at me dumbfounded and says, `Just like that? No more presentations? No other agency reviews? The account’s ours?'”DVC ‘s first big program for AT&T worked so well that it is still running today, some six years after its debut. The International Hotel Program, or IHOP, used cooperative advertising created by DVC to help hotels fill rooms. In return, hotels put placards in rooms telling guests how they could easily access AT&T long distance service, plus AT&T logos on card keys and complimentary newspapers and magazines. The campaign helped DVC forge its integrated, marketing communications approach, calling on skills as diverse as database management, premium incentive merchandising, technology procurement, and advertising. In IHOP’s first two years, participating hotels grew from 300 to more than 4,000, and AT&T realized incremental long-distance revenues in the tens of millions of dollars.

DVC held true to the one-stop-shop promise made by so many agencies. But more than that, DVC strove to build the skill sets that would allow it to offer clients solutions to their problems, not tactics tailored to fill the bill.

So it was able, in ’95, to develop an account-specific program for Kellogg’s Frosted Flakes in which it not only designed the displays but created the TV spots tied to local retailers. Results were four to five times what the Kellogg sales force had projected.

DVC did not shy away in 1996 when AT&T executives asked them to take on what they themselves considered a near-impossible task. The AT&T Olympic Savings Guide teamed 14 separate business units on one promotional effort that sought to leverage AT&T’s sponsorship to position it as “the company that helps bring the world closer together.” It was a first at Old Ma Bell.

And in ’97, DVC could be accused of being downright courageous when it dared to employ packaged goods tactics to get cancer patients to take their drugs and help cure themselves. Intron A, an interferon drug marketed by Schering Oncology Biotech, keeps skin cancer from spreading to the lymph nodes, thereby helping patients avoid death. Problem is, it must be taken daily for a year, costs $35,000, and makes you feel like you have the flu all the time. DVC’s Crossing Bridges continuity program used toll-free numbers staffed by medical professionals and patient “buddies,” sent out newsletters and encouraging letters accompanied by premiums and coupons, and ended up raising Intron A compliance levels to 66 percent of melanoma patients from 50 percent the year before.

“The AT&T business made us more disciplined,” says Dugan. “We learned a lot, and one of the most important things we learned is that marketing boils down to changing people’s behavior. Whether it’s telecoms, packaged goods, or financial services, it’s the same thing.”

The agency’s work for Schering and other pharmaceutical accounts, feels Dugan, provided the ultimate proof of that theorem. “The model for healthcare marketing was all messaging. The big pharmaceutical advertising agencies did all the broadcast and high-level magazine work, but there was a huge gap in promoting to consumers in an effort to change their behavior,” says Dugan. “Promotion turned out to be very important for healthcare companies. Instead of measuring incremental sales, we were measuring `patient outcomes.'”

DVC was also counting healthcare industry billings that eventually topped $10 million, as companies such as Marriott Senior Living Services and Prudential Healthcare sought out the agency’s promotional expertise, now provided through a separate unit, DVC Active Care.

Strategy Ho!

As the decade wore on, packaged goods companies that had exhausted the creative capacities of their internal promo staffs started knocking on agency doors again. DVC was one of the belles of the ball, thanks in large part to the capacities it had picked up in its non-CPG assignments.

“In the early days, packaged goods companies looked at us as an executional arm. It was, `What’s your bid on three FSIs in the fourth quarter?'” says Contess. “Our work with the non-packaged goods companies helped us learn howto build brands.”It might surprise all the marketing pioneers in New York, Cin cinnati, and Atlanta, but DVC’s new breed of Jersey clients wouldn’t have it any other way. “DVC understands our business and our clients’ businesses well. They work very, very closely with us and we share with them our strategies on both the corporate brand level and the program level,” says AT&T vp of marketing communications worldwide Steve Graham.

When apprised that many packaged goods marketers are hardly that forthcoming, Graham responds, “If you’re going to have a partner, you’ve got to have an open relationship. If you can’t tell a partner who is helping you execute your strategy the inside details of your strategy, then you’ve got a problem.”

Clients such as AT&T presented DVC with a new paradigm, and a new platform for growth. Most of the non-CPG clients paid the agency retainers, and that let DVC build a mighty infrastructure, gain greater leverage in acquiring resources, and plan more soundly.

“When the packaged goods companies came calling again, we took them on our own terms,” says Contess. “They also came back with the attitude that promotion could have as much to do with growing their brands as other disciplines like advertising.”

On DVC’s 1998 client roster, alongside AT&T, Schering Plough, and Lucent, one also found Coca-Cola, Pillsbury, the National Basketball Association, and Fisher-Price. All was right in the integrated, multi-functional world of Dugan Valva Contess.

The Next Decade?

But nothing that seems so perfect can last forever. DVC will enter the next decade minus the services of Contess, who is widely credited for snaring most of the high-profile clients that made the agency a `90s powerhouse. That’s the reason for the name change to DVC.

Industry insiders and ex-employees contacted by promo say financial pressures exerted on the agency’s bottom line by the Muffin-Head and Visient acquisitions caused turmoil in the executive suite. Like so many companies eager to get in on the World Wide Web, DVC may have overpaid.

“It was usual for interactive companies to go for four-times revenues,” says Peter Nesvold, an analyst who follows marketing services companies for Brown Brothers Harriman, a blue-chip Wall Street investment bank. “But people were overpaying, and now Internet-related acquisitions have slowed down a lot. I sense a company like DVC would have trouble going forward.”

Denise Ubertaccio ran DVC’s human resources department during the go-go years before leaving for a post at retailer Linens & Things. She affirms that, last year, the mood at the agency degenerated from ebullience to nervousness.

“[Dugan and Valva] put people’s needs first. Their hearts are really in the right place,” says Ubertaccio. “But the DVCI division is hanging over their heads. They’re going for a really big number, and they’re not near that number. This year, they either fold DVCI or go public.”

Going public is the preferred option of the remaining partners, who appear determined to bring their visions to fruition despite the absence of Contess.

“We wouldn’t be the agency we are today without Neil,” says Valva. “But that doesn’t change the fact that this has gone from being a cottage industry with small capital requirements to a technology-driven business with significant capital requirements. My guess is we’ll be a public company in the short-term.”

The story of DVC in the `90s is one of a company come full cycle, without exuberant highs, disappointing lows, fortunate happenstances, fabulous growth, and the inevitable internal strife all that is likely to bring.

“The agency experienced tremendous growth throughout the decade. But I think the growth has not come without its challenges. It has not come without exacting a price,” says Contess, who at presstime was considering an offer from a large marketing services company.

The agency’s success lay in its ability to change consumer behavior, according to Dugan. One has to wager that the `90s’ greatest agency will prove adept at changing itself.