Wal-Mart Goes Direct

By Peter Koeppel

A significant event in the history of direct response advertising transpired in late October. Wal-Mart, the world's largest retailer with a $580 million ad budget, selected a direct response agency to help it overcome slowing sales growth. People in our industry would classify the winning agency, Draft FCB, as a branded direct response agency, but nevertheless, it is a direct marketing agency. It beat out some of the largest traditional ad agencies in the world to secure the coveted Wal-Mart account, according to a October 26 Wall Street Journal (WSJ) article. Although other big marketers like Microsoft and P&G have used direct response advertising for certain brands, I can't recall a company the size of Wal-Mart selecting a direct marketing agency as its lead agency.

Major marketers have seen the type of accountability and customization that Internet advertising can provide, and now they are looking to more accurately measure their return from their offline advertising. Savvy marketing executives are finally realizing direct response advertising can provide them with a way to measure the ROI from their advertising expenditures.

With the tenure of CMOs averaging about two years, marketers are under the gun to deliver results. Wal-Mart recently recruited senior marketing experts from top consumer products companies, such as PepsiCo, Target and DaimlerChrysler, to help overhaul its marketing efforts. Based on their selection of a direct marketing agency for Wal-Mart, these marketers clearly understand the power of direct response advertising.

A CHANGE OF COURSE
Wal-Mart is looking to simultaneously target "low-price loyalists and high-income customers," as reported in the WSJ. It wants to appeal to higher income customers without losing the customers who shop at Wal-Mart because of the low prices. By utilizing a targeted direct marketing approach, Wal-Mart will be able to selectively reach these two diverse audiences with customized messages for each group.

The bottom line is that Wal-Mart's marketing approach was not working. The retailer decided it needed to generate measurable results from its advertising and that direct marketing could help the company achieve that goal. Most traditional ad agencies are still more interested in winning awards than generating results. This creates a big opportunity for DR agencies to step in and demonstrate how their approach to marketing can help marketers to become more profitable and accountable.

For years, brand agencies and Fortune 500 companies considered direct response marketing beneath them. However, the selection of a direct marketing agency as a marketing partner for Wal-Mart might help traditional agencies realize that all those awards are useless if they can't deliver a measurable ROI for their clients. Now is a great time for our industry to capitalize on the growing acceptance of direct marketing among Fortune 1000 companies.

Peter Koeppel is president of Koeppel Direct Inc., a full service media buying agency based in Dallas. He can be reached at (972) 732-6110, or via e-mail at pkoeppel@koeppelinc.com.