Deresolto
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Intro
Direct Services is a Romanian direct marketing company trying to use its core competences to offer related services to its partners. In this case, its client is a publishing house, DeResolto, offering collection magazines to its clients who can order it by telephone. Direct Services gets a database of purchase orders and create a package, send it and collect the money.
DeResolto was a multinational company, with operations in the entire Europe. Everywhere, it used to outsource all the aspects of its activity but the production of the content of the magazines. Therefore, the company had clear standards of quality and level of price, based on its previous experience in other countries. Direct Services won the bid for fulfilling the orders after DeResolto terminated the contract with its previous subcontractor because, rumors says, the subcontractor asked for an increase in tariffs.
Shortly after the activity begun, the executive manager of Direct Services realized that the activity is more complex than he assumed it will be and that everyone is complaining about this project. He wanted this project to be a lesson for the organization, some kind of a pilot project from which the organization should learn how to manage these kind of projects in order to attract more. Instead, all the people involved were complaining about the activities that the project implied and they were never meeting the deadlines. Besides the fact that the project seamed doomed, it seamed that the company can not effectively and efficiently manage these kinds of projects — mail order projects. This translated into a lost opportunity, as he estimated that this multi million Euro business in Europe will increase very fast in Romania in the next years.
Discovery
Direct Services was launched in 1997 as a full service direct marketing agency. At that time, there were virtually no Romanian clients for marketing direct, as economy was in an early phase of development and local managers did not have sophisticated knowledge of marketing. Because of that, the first clients of the company were multinational firms who explicitly requested to the advertising agencies for direct marketing services.
Direct Services was one of the first three companies of marketing direct in Romania so, as from the experience point of view, it offered the best to its customers. Oddly, these were not the companies that really needed and benefited from the services of Direct Services, but the advertising agencies.
Almost all resources that were spent on marketing and outsourced by Romanian companies, local or multinational, were directed to an advertising agency. According to the request of the clients and the desired effect, advertising agency used the budgets efficiently. Unfortunatlly, if given a choice, the advertising agencies preferred to invest in the kinds of activity that they did in house, like TV and radio ads, which brought more profit to them than using the budget to create and operate direct marketing activities thru specialized companies. This meant that the direct marketing market growth was somehow controlled by the advertising agencies. In spite of this, the growth was estimated at 40-50% per year — the rate being subjected to a high degree of uncertainty because of the “invisibility” character of direct marketing activities.
On the other hand, when a project was not delivered in time and with acceptable quality, the news travelled fast. Being a relative small market from the point of view of the number of companies offering services and because the major customers were only a hand full, one can not treat a project but very careful. In case something went wrong, the risk of loosing reputation was fairly big.
There were only five big players on the Romanian direct marketing market and Direct Services was one of them with a 20-25% market share, estimated by its executive manager. He was also the founder and the owner of the company and one of the most experienced direct marketers in Romania. The way he differentiated Direct Services was simple: it was the only company that could provide all direct marketing services “under one roof”: direct mailing, emailing, online and mobile marketing, letterbox marketing, promotion support and call center (outbound and inbound). As the market become more and more sophisticated, the project often included more than one channel of direct marketing and Direct Services offered them all, integrated, easy to use and manage. But there was a problem.
While he knew that the company’s position on the market is relatively stable and that it will grow with the market, he also knew that the market growth is given partially by the advertising agencies and he needed to find a way around this.
One solution, obviously, was to work directly to the client. This meant a lot of good things: better communication, better understanding of the project, more flexibility, more feedback, training the client in direct marketing usage, etc. And, certainly not last, it meant more money. When direct marketing serviced passed thru advertising agencies, these were imposing a somehow unjustified fee and less money were actually given to direct marketing companies, even if that meant poor or less services.
But this solution could only come from the client. One can not risk the relations with the advertising agencies as they were, after all, the biggest clients. Loosing an advertising agency could account for 10% of the business easily, so it was very important to keep very good relations.
Fortunately, on the market, there were companies that used direct marketing often enough to realize that they get a higher quality of service and more service for the money if they worked directly with the direct marketing company. These companies were like gold and Direct Services managed to attract some of them, accounting for more then 15% of the revenues.
On the other hand, there were companies like DeResolto that had a model of business that could use services offered by direct marketing companies, but had no benefit from involving an advertising agency as their usage wasn’t for marketing purposes. Their reliance on the direct marketing company was higher because there were no variances on the marketing budgets or marketing methods, they needed the services and competences of direct marketing companies to fulfill their main activity. For example, DeResolto was selling collection magazines and they needed a company to create the packages, to send them and to collect the money — all this activities being usual for a direct marketing agency.
These were the kind of companies that Direct Services wanted to attract next. They