Is Wal-Mart 'Going Direct'? Reported Move to Hire Draft FCB Signals a Move Toward More Data-Driven Marketing
Friday, 27 October 2006
You know times are changing dramatically when a mass-marketing behemoth like Wal-Mart Stores turns its attention to data-driven, measurable direct marketing. But such a move looks to be the case if the Wal-Mart, the world’s largest retail chain, is indeed on the verge of hiring Interpublic Group’s Draft FCB. While it has not been officially announced, the move is being widely reported today.
According to The Wall Street Journal, Wal-Mart is expected to name Draft FCB to overhaul its advertising and woo low-price loyalists and higher-income customers simultaneously. Wal-Mart, which has been plagued by anemic sales growth in recent months, has signaled it will trade its mass-marketing approach for customized appeals to suburbanites, ethnic groups, and city dwellers.
The Chicago Sun Times this morning reported that, while nothing is yet official, rumors of a pending announcement from Wal-Mart about the Draft FCB win were swirling yesterday in Chicago’s ad industry and beyond. Draft FCB was formed just last month by merging two Interpublic agencies — Draft and Foote Cone & Belding — that had very different histories and cultures.
A Draft FCB spokesman would offer no confirmation, referring inquiries to a Wal-Mart spokeswoman, who would neither confirm nor deny the momentous victory. "We will have an announcement shortly," the Draft FCB spokeswoman told the Sun Times.
Draft FCB Chairman Howard Draft was on a plane back from Asia and could not be reached for comment, according to the Sun Times.
Wal-Mart spends an estimated $570 million a year on advertising in major media like television, print, radio, the Internet and outdoor advertising, making the change one of the biggest account shifts in recent years, according to The New York Times.
The Wall Street Journal today reported that the decision to pick a new advertising agency signals Wal-Mart’s interest in tapping its vast storehouse of customer data to develop targeted ads whose results can be measured more easily. Draft FCB, the Journal said, would enable Wal-Mart to quickly adopt a more targeted sales approach using direct marketing, in-store ads, and customer-relationship marketing, a technique that employs data mining to learn about customers.
Moreover, the Journal reported that people close to the company said Wal-Mart hopes to launch a new campaign next year initially targeting three distinct groups of customers: its price-sensitive loyalists, picky higher-income suburbanites whom it calls “selective shoppers,” and fashionable city dwellers who are willing to spend $300 on a jacket that they will pair with a $3 T-shirt.
In addition, the Journal reported that at meetings with Wall Street analysts this week, the retailer’s executives said rising costs and slowing sales gains are prompting Wal-Mart to apply more rigorous financial measurements to new spending.
Meanwhile, The New York Times today reported that Wal-Mart yesterday had notified GSD&M in Austin, TX, which has worked for it since 1987, that the agency would be dismissed at the end of January.
Last August, Wal-Mart gave a similar thumbs-down to its other longtime agency, Bernstein-Rein in Kansas City, MO, which has worked for the company since 1974. According to The New York Times, the retailer will replace Bernstein-Rein with Carat USA, which is part of the Aegis Group. Carat will handle media services: planning where ads should appear and then negotiating to buy the time and space.