Ad Shops Offer Range of Services, Tracking of Results to Help Clients Spend Efficiently
Mike Pennell knows he’s apt to face pressure to cut back on advertising spending as talk of a recession looms and companies continue to watch the dot-com shake out.
The vice president of marketing at Aliso Viejo-based MindArrow Systems Inc., a 100-employee firm that delivers and tracks multimedia e-mail messages over the Internet, has a limited marketing budget and he wants to make sure he’s getting the biggest bang for his buck,particularly as 2-year-old MindArrow drives to reach profitability.
So far this year, Pennell said, the company hasn’t cut its advertising budget, but did shelve plans to expand it. And, to keep overhead down, the Internet software company recently laid off nine employees, most from its marketing department.
“The biggest problem is to figure out how to spend pragmatically and get the kind of results you had envisioned,” Pennell said. “It’s going to be a challenge for all companies, especially software Internet companies like MindArrow.”
The days of watching dot-coms spend big, run big and burn fat wads of marketing cash,only to go bust,has made other companies more diligent about how and where they spend their marketing dollars. Pennell falls in line with other company officials who are becoming more calculated about their approach to marketing and are looking at ways to track returns,not a new concept, but increasingly important in the current economic environment.
“In good times, even an average program will give positive results,” said David Murphy, chief executive of the Y & R; Companies Inc., Irvine, OC’s largest ad shop. “But when business is softening and CFOs are scrutinizing businesses’ investments, the agency’s team and the client’s team tend to be more focused on metrics.”
Ad agencies have stepped up by creating better ways to track returns online and developing “integrated marketing programs”,the new industry catch phrase for offering a wide array of services in one shop so clients don’t have to retain and coordinate multiple agencies for advertising, PR and other efforts.
Tim Hart, chief executive and president of Bates USA West in Irvine, said that offering integrated programs is a trend that has been building for the past five years as ad agencies have consolidated.
“There’s a big case to be made with integrated communications,” Hart said. “You want the message to be the same at any touch point where it reaches the consumer.”
For instance, Y & R; houses five different marketing groups: Y & R; Advertising, Impiric, Burson-Marsteller, The Media Edge and Landor, which offer an array of services, from public relations to media buying.
Murphy likened Y & R;’s palette of services to a 64-crayon Crayola box with “seven shades of green” vs. a more basic 12-crayon box.
Other agencies touting the same abilities include DGWB in Santa Ana, Newport Beach-based Schraff Group Inc. and the T & O; Group in Irvine, which has six divisions ranging from interactive to account planning to media and public relations.
That breadth was one reason Pennell looked to T & O; when searching for an agency last year. Originally he was in need of public relations work, but he wanted access to other services,without having to add agencies. In his past, he said he had dealt with multiple agencies, only to be handed dueling opinions and the frustrating task of making sure each agency delivered the same message.
MindArrow didn’t encounter that situation, but about a year ago the company did spend a good chunk of money with a large public relations firm,not T & O;,without getting favorable returns, Pennell said.
Now, MindArrow spends about $45,000 a month on public relations, some creative work and interactive with T & O.; Overall, the marketing spending is more than what MindArrow in the past spent solely on PR. But Pennell said it’s worth it; the company can meet with one team at T & O;, get across a consistent message, have access to other services as needed,and keep costs down.
“We’d probably spend about $75,000 a month in total if we tried to go to three different agencies,” Pennell said, explaining that each requires its own retainer.
And, most importantly, Pennell said, he gets to track results, both via T & O;’s tracking devices and MindArrow’s own software.
Steve O’Leary, president of T & O;, said his shop’s set-up enables it to be more efficient and give unbiased advice for clients on where they should put their money. For instance, though MindArrow was leaning toward trade advertising, O’Leary said, but T & O; pushed for an online program that would yield better results.
“You should always be aware of waste,” O’Leary said. “If a technology company that’s in its start-up phase doesn’t get the maximum return on its investment, you really won’t have a client very long. You really have to be astute managers of their funds.”
Since October, O’Leary said, clients have been cautious and are spending money on a quarter-by-quarter basis instead of planning annualized budgets.
“Those people who have limited funds really want returns. They want trackable results,” O’Leary said, adding that online planning and buying is becoming a more effective way to do those things.
Brian Schraff, president of the Schraff Group Inc., Newport Beach, agreed, saying that his shop constantly helps clients define “in real numbers what is working.” That means, he said, that messages, tactics and placement can be tracked and analyzed so clients can estimate “dollar-in and dollar-out scenarios.”
“In a tight economy, where marketing managers’ budgets are often cut first and most heavily, (return on investment) tools can actually show, in real dollars, what a marketing investment is producing,” Schraff said.
That’s not the only advice clients are getting these days.
Billy Fried, senior vice president, group manager and director of new accounts at the Newport Beach office of Doner, and Chip Shafer, chief executive at Costa Mesa-based neoBrands and Shafer Advertising, Irvine, are at least two ad execs encouraging clients to stay aggressive despite the economic downturn. Those who do, they say, stand to gain market share from competitors who don’t. NeoBrands’ client J.D. Edwards reportedly is considering the advice, toying with quadrupling its budget in the fall, according to Shafer.
“Right now is a great time to buy media because there’s a lot of inventory out there,” Fried said. “In terms of networks, it’s probably the best time to be buying at very favorable rates and we see that continuing through the second quarter.”
MindArrow’s Pennell is taking a more cautious route. He said he plans to hold to MindArrow’s online marketing strategy, without accelerating too fast.
“We’re still in the growth phase of the economy and we believe that if we cut back too heavily we’re going to hurt ourselves,” Pennell said. n
