How smart companies are selling more and spending less
we've long been impressed by how innovative start-ups are when it comes to marketing their products and services. Forced by lack of resources to be creative, they come up with great ways to get around the usual channels of distribution, the traditional advertising media, and the expensive outside agencies. We've noticed lately that they aren't alone. We've talked to dozens of companies recently, some old, some new, some with revenues of less than a million, some with revenues in the tens of millions. They all have one thing in common: they're doing more of their marketing in-house and they're liking it better.
Some words and phrases come up over and over as owners explain why they've decided to leave their typesetters, ad agencies, public-relations firms, or marketing consultants.
* Control: In this chaotic economy, managers want as much control as possible over all phases of their operations, to keep their businesses on track.
* Flexibility: As competition keeps apace, chief executives have to be able to move quickly and aggressively, and they have a much better chance at that when the work is done inside their companies.
* Clutter: To get a product or service noticed these days, a company has to be innovative to get through the clutter of advertisements and direct mail.
* Quality: To a person, those we talked with thought the quality of work done in-house was far superior to that farmed out. The common refrain ran, "No one knows our company like we do."
* Savings: For the most part, managers reported significant cost savings by doing all or part of their own marketing.
Overall, the companies we've been talking with are evangelical about their do-it-yourself approach to marketing. And one thing's for certain: it's hard to argue with the results.
In-House Creative
Across the country, company owners are finding not only that it's less expensive to do their own advertising and promotions, but it's also much more effective. John Hewitt has been in the tax-service business for 22 years. His company, Jackson Hewitt, is based in Virginia Beach, Va. It operates in 27 states and the District of Columbia, and is expected to do $28 million in sales this year. Hewitt figures he knows his business as well as anybody this side of H&R Block and Uncle Sam. That's why he decided in 1989 to fire the company's ad agency (its second) and bring the work in-house.
"When you go with an agency, you lose the drive," says Hewitt. He notes that agencies get a percentage of billings and thus have little incentive to get the best deal for their clients. "It's a conflict of interest."
Hewitt says the seasonality of his business works well for him when it comes to buying media time. That, he claims, was not fully appreciated by his last agency. "Most agencies don't understand how lean and hungry the first quarter is for TV and radio stations," he says. "Well, that's when we do all our advertising."
Hewitt recalls an instance in January 1989 when he went into the Buffalo market and told his agency he wanted to pay around $10 per gross rating point for TV airtime. (A gross rating point is 1% of the audience at a given point in time.) His ad agency balked when he named what seemed a ridiculously low price. "We were told the range is $30 to $60 per gross rating point. They said H&R Block was paying $30 a point." Hewitt said he didn't care; he remained steadfast on price and sent his agency back to negotiate further with the station. "We ended up paying $10.66."
With both agencies he employed, Hewitt estimates, it took two years to bring them up to speed on the nuances of the tax-service business. "With an agency, there's always a learning curve," he says. "They have to understand who we're after. Agencies tend to talk in terms of age groups and income levels." Hewitt claims his market is much more fragmented and fast changing than that. An early tax-return filer tends to be a blue-collar wage earner, a late filer an upper-income individual with a more complex return. Fifty percent of the population files its returns between January 1 and February 20. "If you're not ready, and you don't know who those people are, then you've lost 50% of your market right there," says Hewitt, whose airtime buys range from prime time to 3 a.m., depending on the week of the year.
Hewitt says annual revenues have increased by 100% each year and costs per ad have declined by 10% since he began doing his own advertising. The product, he believes, is also better. "An ad agency might have 30 to 40 clients. They don't have the time to understand us as well as we do."
Robert Kullman of Kullman Industries, a $50-million commercial construction company in Avenel, N.J., didn't do any advertising until the company's revenues reached $8 million. And he didn't take any stabs at public relations until the company reached $17 million. With the goal of diversifying the company's markets, Kullman and his vice-president of sales, Chuck Savage, began interviewing PR agencies a few years ago. They were shocked at the fees: $10,000 to $25,000 retainers, plus monthly expenses. "Also," says Kullman, "I wasn't super impressed by any of the firms we talked to; they didn't appear to have press contacts."
Savage's own efforts at publicity persuaded them to stay in-house: a story he wrote about a synagogue project made the cover of The New York Times real-estate section and led to a $10-million deal.
Through the efforts of marketing director Amy Delman, the company has written and placed more than a half dozen articles in trade journals covering industries where Kullman is trying to build market share. Recent stories penned by Delman in American School and University, for example, have already brought Kullman a private-school project worth $2 million.
"We're a small-to-medium-size company," says Kullman, "and for the type of PR firm we'd attract, we'd be just another account. Our in-house PR person knows the company inside and out; she lives it every day. She's part of the management of our company. That's much different from going to a public-relations firm."
