Marketers leapfrog agencies to get closer to consumers

It has traditionally been accepted practice for retailers to handle flyers and print on their own, but to have an outside agency take charge of broadcast work and media buying. Today there are many variations on that custom in Canada, and...

It has traditionally been accepted practice for retailers to handle flyers and print on their own, but to have an outside agency take charge of broadcast work and media buying. Today there are many variations on that custom in Canada, and a new model arrives with next year’s invasion by giant U.S. retailer Best Buy, which does everything, including broadcast production, in-house.

Flexibility and responsiveness seem to be the main reasons marketers handle advertising activities in-house. The cost savings, company execs say, are a bonus.

The in-house agency of Minneapolis-based electronics and appliance retailer Best Buy believes it has everything it takes to do the entire job in-house for Best Buy’s 400 stores, as well its other retail brands: Sam Goody, Suncoast, On Cue, Media Play, and Magnolia Hi-Fi.

Best Buy Advertising (BBA) boasts a staff of more than 300 people handling print and broadcast creative, production, and media buying. It is the second largest advertising agency in Minnesota and has annual media billings in excess of $400-million US. Up until recently it handled all media buying, but last fall when the $12-billion US retail chain entered the New York market, Starcom Worldwide was hired to deal with national TV network and cable TV buying. BBA continues to negotiate spot TV buys in 117 markets across the U.S. as well as print (425 newspapers each week) and radio.

Barry Johnson, BBA’s marketing communications manager, says the in-house agency has been built over 20 years and its expertise in retail, consumer electronics, consumer insight and communications is well established.

He says there is also an efficiency aspect to the operation: ‘The efficiency is in both time and money. We create our Sunday ad insert with 100% digital technology in as little as eight weeks, where our competitors take 12 to 15 weeks to do something similar. Each week we can also create 130 market-specific versions of that insert. Because it’s digital, we can easily plop it onto our Web site, and wherever consumers are, they type in their zip code and see the version for their market area.’

When it comes to cost savings, Johnson says the in-house production is where that is really evident.

‘The AAAA [American Association of Advertising Agencies] will tell you a typical 30-second television commercial costs a little over $300,000 to produce. For Best Buy, since we are the client, agency and production company all rolled into one, we can create that same 30-second commercial at a cost of about $175,000.

‘We see significant cost savings in handling it the way we do.’

Johnson says the company is still formulating its approach for Canada but believes the way the work gets done in the U.S. is easily transferable to Best Buy Canada.

Best Buy plans to open 15 stores in Ontario in fall 2002, with a total of 65 scheduled to open nationally over a three-year period.

Rupert Brendon, president and CEO of the Institute of Canadian Advertising, says in-house agencies are effective for advertisers who produce highly mechanical or repetitive work, such as retailers and industrial/technical companies, but beyond that, it’s risky.

‘I can’t see how it works once you need the addition of truly innovative minds who bring a combination of objectivity and fresh insight from working on diversified kinds of business that an agency works on.

‘Otherwise, I think accepted orthodoxy or company dogma sets in, which is why an advertiser itself looks for new management and new ideas.

‘More importantly,’ Brendon adds, ‘agencies create big, enduring campaigns which help to grow important brands.

‘I’m sure even the biggest retailers like Shoppers Drug Mart, which uses TBWA Chiat/Day, do some work internally. But for something that requires real consumer insight, they tend to go outside and look for someone with experience in that area, particularly for broadcast.’

Johnson disagrees. ‘We don’t feel that there’s any sacrifice in creative quality working with in-house creatives. In fact, we think they know the customer, know the brand so well that they can achieve things that we would probably be hard-pressed to do as easily with an agency.’

For Toronto-based Pizza Pizza, responsiveness is the main reason for using an in-house agency. The company has used ad agencies previously, but for the past seven years the Ontario chain of 415 stores has farmed out some production and media buying but taken care of most of its needs through its in-house unit. Its mixed-media campaigns are primarily promotion-based and co-branded with a roster of big name partners and integrated all the way through to its Web site.

Pat Finelli, VP of marketing for Pizza Pizza, says having the work in-house allows for faster turnaround and the ability to jump on the latest trends immediately. And it has worked. He says Pizza Pizza has grown same-store sales by double digits the last three years in a row.

Having a young, dynamic team is the key, says Finelli. Its energy and consumer insight help the company keep up with what’s hot – particularly when it comes to teen-focused promotions – to be responsive to competition, and to continually come up with new ideas.

‘We’re in your face constantly,’ says Finelli. ‘We go out and pitch it [the idea] to the partners we want, start putting the deal together, start designing everything and decide if we want to do radio, TV or print.

‘Turnaround time is important. We’re doing a lot of cross-promotion with big companies. When dealing with these partners, they get fast response and a face instead of an agency.’

He says many of Pizza Pizza’s in-house ideas have resulted in new media options or manufacturing opportunities such as the wrap and tip-in ad vehicles on TV listing books offered by newspapers. The company’s most recent big promotion, ‘Crack the Cardboard,’ with Bret ‘The Hitman’ Hart of WCW (World Championship Wrestling), meant developing a system for embedding prize information between the cardboard layers of pizza boxes.

Prizes for that promotion include a Fernbrook Home valued at more than $200,000, five 2001 Toyota Celica GT model cars as well as cruises, cameras from Black’s Photography and a wide range of savings and products from Blockbuster Video and Canadian Tire.

Pizza Pizza’s summer ‘Crack the Cardboard’ campaign will be in partnership with Rogers Communications and the Toronto Blue Jays, with Carlos Delgado as ad spokesperson.

Its teen promotions are built around its pizza slice tray and the summer contest, ‘Flip ‘N Win,’ has teens flipping the tray over to peel a sticker and reveal prizes that are popular with the group, such as CDs, wakeboards, trampolines, bikes, theatre passes, and pizza for a year.

Canada’s oldest retailer also has one of the country’s oldest in-house agencies. Hudson’s Bay Company, like competitor Sears, handles flyer and newspaper creative in-house, but it has also had an in-house media planning and buying agency since 1982. In 1986 the in-house shop began buying everything but flyers and newspapers for both The Bay and Zellers.

The media department, rather than raising the ire of agency competitors, has built an excellent reputation in the industry for its skillful and efficient buying. Rick Padulo, chair and CEO of former Bay agency Padulo Integrated, says over the years the retailer’s in-house media department has consistently been able to negotiate lower rates than many of the national media agencies, and with exceptional delivery of GRPs.

The department has 12 people on staff and Anne Burton, director of media services for HBC, says with Zellers, for example, on 280 radio stations this year, if it was part of an ad agency it would have to double its size to cope with the account.

Burton says if you’re in-house, you’re very close to what’s going on and you can anticipate what’s going to happen. Since the in-house agency sees sales statistics everyday, it knows when something will be happening or a change will be needed. She says it’s important that the media department is flexible, can react quickly and is staffed with experienced media people.

‘I worked in agencies for about 20 years,’ Burton says. ‘In an ad agency you meet with the client and decide the next six months (or in the [old] days, the next year): here’s the plan and here’s what we’re going to advertise.

‘Retail is much closer to the bone. You might have the president say, okay I have to sell this product and I want it on radio. Then it’s one phone call from the vice-president of marketing, here’s the money let’s go. We already know the market list, the stores in those markets and what has to be done.

‘The biggest issue in retail is, get it happening.’