I started on the client side of direct marketing in 1981, then opened my own direct marketing agency in 1986, so my perspective is agency- (not client-) centric. With that caveat, let’s go for a ride.
Back in ’86, direct marketing and direct mail were virtually the same thing. About 90% of a client’s direct marketing spend would be direct mail. The agency occasionally would be asked to create a fulfillment package, free-standing insert or small-space ad for newspapers or magazines but, by and large, direct mail was the workhorse.
Back then, direct mail was the place to be, if you wanted to run an agency that made money.
First, you could concentrate on just one craft—direct mail—and, if you were really good at it, new-business acquisition was easy. Just find a potential client who was suffering from low program performance and show them how to fix it. Prove your idea worked with a small, fast test or two and voila, another agency’s revenue became your revenue.
New-business acquisition was inexpensive, too. While general agencies were spending ba-jillions of dollars on new-business presentations and spec creative, then flying all over hell to make those pitches. I was writing four- to eight-page strategy documents in my office and closing over the phone.
And, best of all, the purchasing departments never got involved. We never negotiated our fee structure. Our position was, “Take it or leave it.” And we took markups on all production.
“Do you mark up production?” a client would ask? “Yes,” I would answer. “What is the markup?” “None of your business,” I would reply. “If you like the price, sign the agreement, if you don’t, don’t.”
Ah, those were the days, We provided full agency service at a lower cost than if they did all the work themselves, so what business was it of theirs how much money we made?
You can’t get away with that today. Purchasing departments have killed the agency business. First, the general agencies got killed, and, finally, they got around to the direct marketing shops. Truth be told, since purchasing got involved, client direct marketing costs actually have gone up. The corporate pukes can’t run fast enough to catch us.
Today, direct mail is still the biggest medium in direct marketing, but an agency has to offer all media to get new clients. One the traditional side, they must offer broadcast and print, as well as direct mail. Their data-management shops must be first-rate, too.
State-of-the-art research and analytics are mandatory. The agency also must offer a full suite of online services—stuff like search-engine marketing, search-engine optimization, social-media optimization, digital-asset optimization, display/banner ads, static- and rich-media mobile marketing, transactional microsites, e-commerce website, landing pages, e-blasts and much, much more.
The net effect, I think, is interesting. Thirty years ago, a team could be trained to be truly expert at direct mail. Today, how can any client expect its agency team to be truly expert at everything on the agency’s service menu? Truth is, they can’t.
There’s a very well-known direct marketing agency in California that can’t even do a direct-mail package anymore! Everyone went crazy to go on television shoots, win awards at Cannes and learn the new online stuff, and nobody can do direct mail anymore. So they don’t. They outsource it, even though it’s still the lion’s share of their clients’ direct marketing spend.
For clients looking to hire a new direct agency, figure out what they do well and what they have to outsource before you hire them. And make sure you see the work of the specific individuals who will work on your business.
Also, get some feeling for their fee structure before you sign. The menu of hourly billable rates doesn’t tell the whole story. What you really want to know is how much they’ll charge for a specific scope of work. Remember, the true cost is number of hours X the billable rate. Some agencies are much more efficient at getting work out the door and their per-project cost will be lower.
I sure miss the old days.
•
Bob Hacker and his wife, Jo Anne, sold The Hacker Group to FCB in 1999 and it was renamed HackerAgency, now Seattle’s largest advertising agency. When not on a deep-sea fishing trip, he spends time with his Arcanum direct-marketing consulting agency. You can reach him at rchacker@arcanumltd.com.