SEMA News—February 2013
By Steve Campbell
Finding the Right Advertising Agency
For Manufacturers, It’s the Ultimate Match
“There is a vast difference between a professional, experienced ad agency and an ‘art service,’” said Bill Holland, president of Holland Communications Inc.
“Carefully positioned messages, a feel for the market and compelling ad copy are required to get the best results. An Apple Mac does not make a marketer.”
Experience and expertise are fundamental. So is finding an agency that understands the manufacturer’s product line. But equally important is ensuring that the agency’s personnel mesh well with the company’s staff.
“The people assigned to handle the day-to-day communications with the client must be extremely knowledgeable about the market, the idiosyncrasies of distribution, the manufacturer’s product, their competitors, their sales strategies, the category, the history and what the specific goals of the manufacturer are,” said Don Fall, president of Fall Advertising.
“This person is the direct link to both major and minor decisions that affect the success of the agency and the manufacturer.”
That makes research the first priority when a manufacturer begins to hunt for an advertising firm. The agencies that we consulted referred to a number of easily accessed sources for preliminary information, including consultation with non-competitive manufacturers in the same market segment, the advertising and marketing listings in the SEMA Membership Directory (available either online or as a PDF download at www.sema.org) and through the recommendations of media professionals in both print and electronic outlets.
“SEMA’s website and SEMA News are good places to start,” advised Kipp Kington, president of KingTec Communications and the KTC Media Group. “Invest some time to find out if an agency provides consistently high-quality work, meets deadlines and can handle a variety of projects. An agency should be able to demonstrate overall reliability and the ability to grow and adapt to the market.”
Holland recommended also checking the agencies’ involvement in industry organizations, including SEMA councils, and he pointed out that an agency’s client base is an indicator of its involvement in various niches.
“It is so important that the relationship, communications skills and work processes are closely aligned between the client and the agency,” he said. “This is a long-term commitment for both parties and should be looked at as if it were a marriage. Divorce is expensive, time-consuming and disruptive.”
It’s also important to qualify an agency for the types of media it deals with. Consumer and trade publications are targeted differently, so an ad touting a component’s benefits may appeal to an end user, but its salability is probably the salient point for a distributor or jobber.
“Most products manufactured by SEMA-member companies must eventually be purchased by consumers, and wholesale buyers are much more receptive to a manufacturer’s sales overtures when they have recently been experiencing demand for that company’s products,” said Jim Wirth, president of Wirth & Wirth Advertising. “Push-pull marketing is one of the most effective sales programs in our industry because consumer demand pulls the products through the sales channels while the manufacturer’s business-to-business (B2B) sales efforts push them in the same direction. Manufacturers need to find agencies that can build that demand with consumers by brand name within the automotive marketplace.”
Meigan Powell Alexander, executive vice president of Powell & Partners, said that a strong background in research is critical to an agency’s work on either side of the consumer/trade equation.
“The agency needs to base its advertising strategy on what it finds in the field,” she said. “Whether it’s B2B or business-to-consumer [B2C], the strategy is developed from observing and speaking with people at every level—the manufacturer, the sales team, the distributors and the consumers—and understanding what is important to each segment. Anybody can create visually pleasing ads, but that doesn’t necessarily mean you’re going to sell product. You have to make sure that purpose and strategy drive everything in the campaign. At the end of the day, the purpose is to sell the product.”
Marx emphasized the need for an agency to have firsthand experience with the demographics of the manufacturer’s primary and secondary audiences, but he said that it may be even more important for trade advertising.
“The channels in the aftermarket are unique,” he said, “and hitting the hot spot with a technician versus a counterperson versus an Internet seller requires experience. It is also important to have solid relationships in place within our industry, especially with media, associations and the SEMA Show. As far as consumer advertising, it is important that the agency really understand the technical and performance benefits of a product and the brand. Someone who writes copy and designs ads for a local movie theatre will take forever to understand and promote the features and benefits of the latest engine-management software.”
“Larger retailers can quickly roll out their own knock-off products to sell side-by-side in competition with the manufacturer’s original item,” he said. “Strong consumer demand for the original is your best protection. That’s why I urge manufacturers to select agencies with strong track records for creating and developing powerful and effective brand names.”
Alexander counseled manufacturers to also ensure that the agency is experienced in working with the distribution network. Ask for references, she advised, because a reputable and qualified agency should not be afraid to provide reference contacts with current or past clients who can speak to the agency’s expertise, including involvement in both traditional and electronic marketing.
“We function as what some people refer to as a ‘virtual agency,’” she said. “We have partners that we bring in who are experts in their industries, so if we have a heavy digital campaign, we will bring in our digital partner to work through the campaign so that we know we are getting an expert opinion.”
In that regard, Holland said that today’s ad agencies need to be well versed in both traditional and electronic media and be capable of capitalizing on social media.
“The agency should be able to show prospective clients examples of its web development and posted content as well as Facebook and YouTube involvement,” he said. “There has been a huge influx of smartphones and pads used for product research and to make buying decisions, so the agency must be able to implement strategies to take advantage of these mobile devices.”
Zan Martin, president and CEO of Martin & Company, pointed out that electronic media provide reporting systems that can be analyzed on a daily basis, and she suggested that one means of qualifying an agency in the electronic realm is to ask for a sample analytics report that shows the effectiveness of a buy. The agency would need to hide the client’s identity for privacy reasons, but that is easy enough to do and shouldn’t be a reason to refuse the request.
Also on the topic of technology, it’s no longer terribly important that a client be serviced by an agency in the same geographic region. Alexander said that good customer service means ensuring that the agency is available whenever the client needs to communicate, whether that is in person, over Skype, via e-mail or on the phone. Because there are now so many ways to stay in contact, physical proximity is less important than it was in the past.
“The agency should ask a smaller company about everything it would like to do––the dream scenario––and project those costs,” said Alexander, “then back up from there into what is actually realistic. Because results may not be immediately tangible, it is very difficult for small companies to determine what a marketing budget needs to be. By looking at the best-case scenario and then backing in to what is affordable, the agency should be able to provide the best bang for the buck.”
Wirth said that the process might also hinge on the client’s willingness to assume risks.
“An agency should be given a very clear explanation of the challenges facing the product line and be asked to lay out a program designed to significantly boost sales,” he said. “The client should clarify whether it wishes to be aggressive or conservative in its short-term marketing efforts and then allow the agency to suggest an effective program to see how it might fit the budget. Trim it if necessary to fit the financial situation, working closely with the agency to eliminate the least important portions of the overall program first.”
Holland pointed out that budgeting could also be affected by the client’s internal structure. Some manufacturers employ reps and large in-house sales staffs to proactively generate orders, and others rely more heavily on media outreach. In either case, he said, the advertising budget should be viewed as a cost-of-sales line item that is designed to generate profit. It may range from a few percentage points of gross income to many times that—but determining the level is where a truly professional advertising agency proves its worth.
“For a manufacturer selling through distribution only [trade], maintenance mode is 3% to 5%, growth mode is 5% to 7% and launch mode is 7% to 10%,” he explained. “For a manufacturer that sells direct to consumers, the ratio can be as high as 15%. The trap is when you are very small, at the start-up stage or are launching a new product. The dollars can be higher—and often should be. This is where a larger company can have a distinct advantage, because there will be more dollars in the budget.”
Wirth pointed out that small companies have in the past been more conservative and yet more desperate for the marketing tools to be effective in the short term, while bigger companies were able to spend money trying out a campaign to see if it worked.
“Today,” he said, “there are no companies that I am aware of that are willing to blast out a bunch of money ‘just to see if it will work.’ All companies are being very careful with their budgets, regardless of their size, which makes it doubly important for an agency to fully understand the challenges facing a manufacturer’s sales and develop cost-effective solutions to overcome those problems.”
Another important criterion is an agency’s tenure with its client base, Holland said. Long-term marketing partnerships are a good indicator of an agency’s ability to work cohesively with its clients. It’s important for the agency to understand not only the market, but also the features and benefits of the client’s products, because it’s much easier to convince prospective customers to buy something if you believe in the product.
Finding an agency is not a simple process, so making a good match takes effort. The automotive aftermarket’s multistep distribution system and outside market forces add further layers of complexity.
“The mix of a near-recession economy, wary consumer confidence and the complications of tax-free Internet purchase options make the whole dynamic of planning a marketing strategy with a brand-new ad agency a daunting prospect,” said Martin. “That is why it is essential to partner with an agency that fully understands and operates within every sphere of the aftermarket.”