By Peter Arkwright
Direct Marketing is a very common mechanic in the marketing mix for most businesses, NGOs and governments. In our experience, we have found common issues which arise time after time in the course of negotiations. The importance of adopting a modeled approach with an awareness of the these issues improves the value and return on investment.
All commercial relationships require specific advice. This briefing note distills the issues for structuring the commercial relationship between the direct marketing agency and the brand promoted.
Direct Marketing Agency
The key issues to address are:
for the cost plus model: agree mark up on cost of sales.
Include TUPE costs.
The direct marketing agency should specify the size of the team with right to vary to avoid drain on resources if customer response to client marketing campaign is poor.
Agree which data fields are compulsory in order to get paid. Certainty is crucial as with any claim for payment. If a fulfillment process is required to convert the data once collected, take it in house or otherwise ensure direct marketing agency controls the conversion process.
Payment on delivery of customer data - not on conversion. If not agreed, obtain the customer data turnaround obligation or final payment date from the client.
If payment on delivery of data is not agreed, agree liability for agency fraud or misrepresentation, exclude liability for "gone aways" or other holes in data where that data was provided by the client (as opposed to the customer), distance selling drop outs, customer transfer process issues outside agency control (particularly utilities and financial services clients), failure to convert as a result of any act or omission of the client.
Do not pay staff until direct marketing agency itself has been paid, or agree overdraft charges with client as part of amortised set up cost.
Amortise set up cost, factor in RPI. Take security.
Use technology to support the sign up process. For instance, use customer credit card to populate database fields in the sign up form. This will reduce risk of fraud and lowers customer identification validation costs. Use payer /payee banks that permit paperless direct debit sign ups. Research fully the business process of the client to find out the extent to which paperless customer transfer can be used.
Warranties from client regarding data, where supplied by client.
Client bears suppression and validation costs.
Client service level agreement on a frequency with which and volume of data is supplied.
Exclude liability for poor redemption rates, cost per contact, market place effectiveness of campaigns.
Only agree those service level agreement provisions that you know you can comply with.
Client
Issues for the client to consider are:
Client control conversion process.
Payment when customer comes online.
Reserve right of set off.
Exclude liability for data supplied.
Payment By Results only (PBR). Open book on costs.
All TUPE or other set up costs solely for the account of the DM agency.
Client reserves right to vary size of team.
Reserve right to reject incomplete applications.
Data clean up costs borne by DM Agency.
Reserve right to terminate for bringing brand into disrepute.
Reserve right to mystery shop and audit performance of direct marketing agency.
Conclusion
"You get what you pay for" applies in direct marketing as with any other industry. Increased fraud, incomplete applications, erroneous brand uptake indicators, poorly trained or unmotivated staff, and brand degeneration can all be consequences of PBR. Similarly, the brand can find itself having paid out so much to keep the direct marketing agency engaged that an unfeasibly high conversion rate is required to justify the marketing spend. Provided both parties are willing to work together, a working commercial relationship is possible.
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