Second Class No More

At age 49, Howard Draft is marking his 25th year in the direct marketing agency game. “Think about it: I was always the kid in the business. [Now] I'm just trying to stay up with all these young kids who know what they're doing,” laughs Draft, CEO of Chicago-based DraftWorldwide. No one would argue that Draft himself “knows what he's doing.” He joined Stone & Adler in 1977 as an assistant account executive, and was one of the original employees of Kobs & Brady Advertising. By 1982, he was the first president of the agency's New York office, which he established. Draft became president of the agency itself in 1986, and was named chairman/CEO the following year, when the company was renamed Kobs & Draft and repositioned as the worldwide DM arm of Backer Spielvogel Bates, then a separate entity of Saatchi & Saatchi. DraftDirect Worldwide was created through a management buyback in 1995. Today, DraftWorldwide — acquired by the Interpublic Group in 1996 — has more than 60 offices in 29 countries, and annual billings of over $3.6 billion. (2002 hasn't exactly been a banner year for the parent, however. Interpublic revised its 2002 earnings forecast in late October from $1.25-$1.35 per share to 85-90 cents per share, citing problems in its Octagon Motor Sports unit, economic conditions in Japan and Brazil, and a drop in certain marketing and PR businesses.) Draft talked with DIRECT recently about the ever-changing DM agency world.

DIRECT

You have many clients that are not ‘traditional’ direct marketers. Why do you think companies like Coca-Cola are turning to DM, and how are they using it?

DRAFT

Well, you have to take a look at the way our agency has evolved. We were once a direct marketing agency and now we're a fully integrated agency that has direct, promotional, digital and event marketing capabilities. The major shift we saw in the industry — and why we got so heavily involved with promotion on a global basis — was I didn't see that significant a difference between direct and promotion. In the DM business you built a database and remarketed to those customers, whereas promotion was big ideas, one-time hits. What we've been able to do is marry some of the scientific aspects of direct marketing with promotion and come up with promotional ways of building databases for our DM clients. In my view, the real blurring has been between the various below-the-line techniques vs. just general advertising and direct marketing.

DIRECT

Has the blurring of lines between DM and general advertising been beneficial to DM?

DRAFT

Yes. I think you're finding some cases where the direct agency is taking more of a lead on the account. Because of our ability to understand the consumer through our research and database capabilities, [we can have] strategic insights that many times have not been able to be seen by the general agencies. There will always be the big role for the general agencies, but leadership on an account is no longer just the purview of the general agency.

DIRECT

Do you think this has led to direct marketing having a more ‘respectable’ place in the big picture?

DRAFT

We have definitely gotten to a more respectable place. We used to be the second-class citizens of the industry. Now we might only be one-and-a-half-class citizens.

DIRECT

How does Draft fit into the Interpublic family of companies?

DRAFT

Most of our business comes from non-Interpublic agencies. But we have a very close working relationship with Lowe & Partners Worldwide, we share the Verizon account with them. But our goal is to be a great standalone brand, and whenever possible, work closely with Lowe, etc.

DIRECT

Do you miss operating as an independent agency?

DRAFT

No, because I still run the place as if I owned it. They've been great owners. They have been a wonderful partner for us, and they've been able to help us expand our business internationally. With their resources, I've been able to acquire companies in a number of countries, and I've been able to get good working relationships with the general agencies overseas. I work closely with Lowe throughout Europe now and we're trying to help grow each other's business. We go to joint presentations together on a regular basis.

DIRECT

Do you think all the consolidation in the agency world has been a good or bad thing for the direct business?

DRAFT

I haven't really thought about that. There's a few global players left in the DM world that can play on the global stage. But it doesn't mean there isn't a place for [small agencies]. You build by landing one major account, by building a reputation for your work. Over the years, there will continue to be good start-ups, and I think you'll see more of them when the economy starts to turn around a bit.

DIRECT

How has the economic downturn affected your business?

DRAFT

It varies by country, but obviously the growth rates in advertising as well as DM have been affected by the downturn around the world. But overall we're just running the business and working hard to work with a world-class client base. Because we're so diversified by region as well as by clients, we're not being affected negatively.

DIRECT

What are the biggest challenges facing direct marketing today?

DRAFT

Keeping the creative at the level it needs to be, continuing to push the envelope while not losing sight of the techniques that are special to our business that drive a client's results. Sometimes I see the creative is so creative it forgets that it has to get the phone to ring or get someone to purchase a product. And sometimes I see it so driven to getting the phone to ring they lose sight of how important the brand is. Finding the balance is still the challenge many of us struggle with.

DIRECT

What's your opinion on relationship marketing? Is a one-to-one approach for everyone?

DRAFT

No, again it has to be logical from a return-on-investment standpoint. Some of the packaged goods clients haven't been able to make the ROIs work on the big-ticket items like technology, cars, etc. Our clients are looking for us to do multiple things: acquire a customer cost-efficiently, build loyalty with that customer so the return on investment over the long term is valuable. And they're looking for us to build the brand at the same time.

DIRECT

This year marks your 25th anniversary in the business. What are the biggest changes you've seen?

DRAFT

The major change is that many clients that never used to think about direct marketing are now in the business in a big way and their [DM] budgets have become a big part of their marketing budget. Our relationships with clients used to be with low-level marketing managers, and now we have relationships all the way up to presidents and CEOs of major companies, because we represent a major part of the way they do business.

DIRECT

Do you think the DM agency business was more exciting then or now?

DRAFT

I think it's more exciting now. Various uses of the alternate media available to us makes it much more interesting. And the quality of the work has gone up so much, from hard-line, offer-driven direct marketing to still good offers [that are] very conscious of brand building at the same time.

DIRECT

How would you like to see the agency continue to evolve?

DRAFT

I'd like to see us take clients from one part of the world and run them around the globe. I think the general agencies have been brilliant over the last 25 years in taking a client and making it a worldwide customer. I think Ogilvy is doing that very well with IBM. Finding all the clients around the world that can really afford to use a couple of the global players and support their platform worldwide is really the future of the business.