Goodbye to the Ceiling
The $2 billion barrier has been broken. Oh, and that glass ceiling is gone, too. Total revenues in the promo 100 reached $2.18 billion in 1999, rising 49 percent – an impressive increase on the heels of the 31-percent growth rate reported for 1998. The promo 100 is an annual ranking of the industry’s top promotion agencies.
Agencies are reaping the benefits of a sea change among marketers, who continue to shift attention from advertising to promotion and other behavioral marketing disciplines. The glass ceiling that separated promo shops from ad agencies has disappeared as clients use more marketing disciplines to set strategy. That means agencies are working with senior marketing executives on the client side – a boon to both egos and bottom lines.
“People are finally believing that brand-centric marketing is the answer, not brand-centric advertising and all other marketing,” says Chuck Nardizzi, president of BEN Marketing Group, Stamford, CT.
This penchant for strategy has every business, from premium suppliers to media buyers, remodeling as full-service strategic promotions agencies. Upshot, Chicago, attributes much of its growth to parent Ha-Lo Industries, a premiums company. Same for Cyrk-Simon Worldwide, Gloucester, MA. Cyrk and Upshot were promo’s Agency of the Year in 1998 and 1999, respectively.
Elsewhere, Chancellor Marketing Group, Midlothian, VA, zoomed to $43 million in revenues from $9 million in 1997 on the strength of promotions tied to radio ad buys. Howe Marketing Group, Pasadena, CA, has spun its rebate business into a $17 million venture, up from $5.5 million in ’97.
It seems everyone is a strategist these days.
NETWORK BUILDING
Consolidation has snowballed as ad agencies continue to buy marketing services expertise and sister agencies merge to provide clients with more variety. The moves are starting to pay off in joint pitches and referrals. “It takes eight to 12 months to get the in-law thing figured out,” says Mark Shapiro, president of St. Louis-based Momentum (formerly Louis London), which was bought by Interpublic two years ago. “Once we all got comfortable with each other, the business clicked across our core services.”
Agencies are picking up new business in categories such as healthcare and financial services as marketers in those categories embrace promotion. Watch for telecoms to become a hot category over the next two years as Baby Bells enter each others’ territories. Other emerging segments: consumer electronics, utilities, and appliances.
Ironically, some credit the Internet with opening marketers’ eyes to the world beyond advertising. “All the tools they hadn’t paid much attention to in the past are getting their attention,” Shapiro says.
Others credit Wall Street. Pressure for quarterly results means “the old approach of building brand equity over the long term won’t work,” says Jon Kramer, president of J. Brown/LMC Group, Stamford, CT. “Now, marketers need to build brand equity and next-day business at the same time. That’s a very unique skill set that requires understanding of consumers, the brand, and the distribution channel. No single organization understands that as well as a promotion agency.”
While online promotion companies abounded last year, only one Internet-based agency came up on promo’s radar screen: Promotions.com, formerly Webstakes.com, which next month joins the promo 100. Dot-coms are eager to partner with real-world brands that bring budgets, exposure, and customers to the table.
In the coming year, watch for more repositionings as agencies swap their founders’ names for monikers that make them sound more like dot-coms than law firms. Wunderman Cato Johnson swapped its historic name for a made-up word, Impiric; Davidson Marketing, Chicago, adopted Communicator as its umbrella brand after merging with the London agency of the same name. Great Neck, NY-based Inmark became CoActive Marketing Group. Even little Opus Marketing changed its name to Play.
At $2 billion and counting, this industry is more than mere play.
– The promo 100 had net revenues of $2.18 billion, reflecting a 49-percent rise from 1998.
– Mergers and acquisitions continue to alter the landscape.
– Ad agencies are buying marketing services to round out their portfolios.
– New business is coming from non-packaged industries such as healthcare and telecommunications.
