Promo Agencies Ride the Wave

Posted on by Chief Marketer Staff

Whether it was due to clients’ insatiable desire for measurable results, a new urge to drive brand image with premiums and contests, or simply a thriving economy, boom times rolled on for the nation’s small but influential group of promotion marketing agencies last year.

Net revenue for the PROMO 100 agencies, the benchmark for tracking annual growth, totalled $1,245,086,305 in 1997, a heady 14 percent lift over 1996’s receipts of $1,088,898,002. Toasts were hoisted over ’97 results at nearly every promo shop in the land; the median two-year growth rate of the Hallowed Hundred weighed in at a hefty 40 percent.

Though agencies cashed in on a host of burgeoning opportunities – from classed-up continuity programs to spates of Internet sweeps and samples to a re-strategizing tobacco industry – they no doubt were among the many business beneficiaries of economic good times. Marketers from a wide range of industries – including financial services, automotive, and high-tech – joined with the usual package goods players in a mad marketing spending spree, all looking to grab their fair share of America’s growing disposable income. Advertising spending has been going great guns, rising from $60 billion in ’95 to $67 billion in ’96 to $73 billion last year, according to Competitive Media Reporting in New York City.

The world of promotion marketing continues to be dominated by a handful of mega-agencies. The top 10 shops accounted for nearly 60 percent of the total net revenue claimed by the PROMO 100, raking in $739 million.

Cyrk-Simon Worldwide’s crashing of the hundred-million-dollar barrier was emblematic of two key trends in promotion: the continued popularity of big-brand continuity programs and agency consolidation. The Gloucester, MA-based promotional products company that helped design and run both the Pepsi Stuff and Marlboro Miles programs increased its revenues and widened its premiums scope with last year’s acquisition of Simon Marketing and Tonkin, Inc. (Simon runs McDonald’s Happy Meal promotions worldwide; Tonkin is a corporate identity firm.)

Help wanted Creative services were in short supply industry-wide last year as agencies competed fiercely with each other over a dwindling pool of concept development and account talent. “The huge growth in the communications industry is putting tremendous pressure on the job market. There is a lack of qualified candidates,” says McCracken Brooks ceo Keith McCracken, who is president of the Association of Promotion Marketing Agencies Worldwide.

It’s a cyclical problem that needs addressing in these boom times, says McCracken. “Not long ago, we were overrun with people, and so we cut training programs and didn’t attract new talent. Now it’s come back to haunt us.”

APMA is helping attack the problem, in part, with seminar programs for college students run concurrent with the group’s meetings throughout the world. A program at its spring conference in Buenos Aires in April attracted 97 students, and APMA is expecting a capacity crowd for a college seminar built around its annual meeting in Chicago this October.

The call for new hires figures to go on for some time. Not only are package goods companies intensifying their promotion efforts to augment image ad campaigns and hit specific targets, but industries such as computers and automotive are bringing promotion agencies new business in consumer calls-to-action for higher ticket items.

In the past year, a number of ad campaigns have focused on brands’ premium giveaways and contests. Miller Brewing’s National Football League advertising last fall focused almost exclusively on its You Could Be a Cheerleader contest, offering the winning consumer an appearance on a TV spot and a trip to the Super Bowl. And 7 Up employed ESPN announcer Dan Patrick in commercials in which he sarcastically dispensed digs to consumers collecting the very premiums being offered in the spots. In some cases, promo agencies nailed advertising business. Chicago-based Upshot worked promo efforts and created ads for Coca-Cola’s hot youth brand, Surge.

“We’re seeing a lot of behavioral campaigns, where brands are issuing a call to action as opposed to an image. That’s long been the province of promotion agencies,” says APMA executive director Vincent Sottosanti. “So there’s a blurring of the lines. More promotion agencies are doing advertising, and more advertising agencies are doing promotions – or hiring promotion companies to do it.”

The roster of finalists in the Promotion Marketing Association’s Reggie Awards served as the signpost of the arrival of new breed of client for promotion agencies. Oldsmobile’s Buzz Tactics guerilla marketing campaign for the new Intrigue model was up for a Super Reggie, which was won by Hewlett Packard for its Home Delivery campaign. Not only did the big winner represent a non-package goods industry, but the direct mail effort – handled by New York City’s b. little & company – was not directed at consumers, but 5,000 computer dealers, resellers, and salespeople.

“Non-package goods business is supporting increased activities,” says McCracken, “but all of corporate America is expecting accountability. Promotion is one of the more accountable disciplines, so more dollars are being spent on promotion marketing.”

Strategic opportunity? There was a buzz of opportunism in the corridors of promotion agencies following this year’s annual meeting of the American Association of Advertising Agencies. There noted adman Martin Sorrell blasted consultants for their “rapacious” incursion into the strategic marketing planning turf of ad agencies, warning that “Brand advertising in the next 20 years is going to demand a great deal more than the ability to write, produce, and place a 30-second spot on network TV.”

More than a few promotion agency chiefs saw this state of affairs as their opportunity to displace ad agencies as the favored marketing counsels of top corporate management. “All they know is making TV spots,” one promo agency president said of his advertising counterparts. “We understand consumers as well as they do, but we’ve also been out in the trenches with the trade and the wholesalers. We understand the whole business proposition.”

This band of promotion jingoists sees the coming few years as an unprecedented time of opportunity for those among them who have the right knowledge and who proffer it aggressively and intelligently.

But promotion agencies have a ways to go before they start tilting swords with the ad bigs, according to one longtime client who made a recent sojourn to the agency side.

“For the most part, clients have never looked at promotion as a strategic initiative. Promotion agencies continue to be an afterthought of middle management: ‘I need some POS and some premiums and get it to me in 48 hours.’ They’re the Kinkos of the agency services business,” says Rick Hill, who as marketing director of Barq’s Root Beer directed a full-bore promo strategy against mighty Coke and Pepsi, producing award-winning programs like the Soviet Union Going Out of Business Sale. Hill spent the last year as creative director of Marketing Corporation of America’s promotion agency, and now is president of National Beverage Corporation’s in-house agency.

“There seems to be more of an association between promotion and advertising. It’s not image advertising if it’s an ad for a sweeps or a buy-one-get-one-free offer,” Hill continues. “Still, an increase in promotion of this nature doesn’t represent a real strategic shift. Promotions are just not considered to have anywhere near the strategic value of advertising.”

Now there’s a call to action.

* An increase in the number of players and programs helped net revenues climb 14 percent.

* The promotion marketing agency business is still ruled by an elite aristocracy. The top 10 shops accounted for 60 percent of the net revenue of the PROMO 100.

* Booming business has its down side. Agencies are in a constant scrap over a small pool of qualified job candidates.

* Non-traditional business continues to roll in. Last year’s Super Reggie-winning program was a Hewlett-Packard direct mail campaign for dealers.

* Many agency bigs see the coming years as crucial in establishing themselves as strategic partners with corporate marketers.

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