BUSINESS Junk Mail Giants

Prudent” may not seem like the proper word to describe the business tactics of two guys who planned their partnership in a strip joint. But that’s the word Jimmy Dunne chooses again and again to describe the way he and his fifty-fifty partner Bob Mohr have taken care of business at Direct Response Group. In seven years, their prudent business decisions built DRG into one of the most profitable direct mail advertising agencies around-so profitable that it grabbed the attention of a major New York firm, Doyle Dane Bernbach, which bought the Dallas direct mail agency in January for the equivalent of about $3 million in stock. Yes, that’s the Doyle Dane Bernbach Group Inc. involved in the $5 billion megamerger with BBDO International, Inc. and Needham Harper Worldwide, Inc. With the melding of that global megashop, renamed Omnicom Group Inc., Dunne and Mohr became two of the largest individual stockholders with 220,000 shares apiece. To think it all began back in 1974 at The Patch on Oak Lawn Avenue….

Direct marketing is becoming one of the fastest-growing areas of the selling business as advertisers learn the benefits of marketing their goods directly to the consumer through the mail. Dunne and Mohr’s DRG, following the merger with Doyle Dane Bernbach, became the fourth largest direct response advertising agency in the country with gross billings of $83.5 million for 1985, up from $57.6 million in 1984; in case you don’t have your calculator handy, that’s a 45 percent gain. Growth rates like that are enough to make other industries foam at the mouth. You may not read the four-color junk mail peddling everything from luggage to lipstick that’s stuffed into your American Express bill every month, but someone out there is not only reading it-they are buying the products. The direct mail industry is becoming increasingly more sophisticated with the use of specialized computer software and, say Dunne and Mohr, much more effective. To their clients, that translates into more bang for their advertising buck.

The DRG client roster is an all-star lineup including Associates Financial Corporation, National Car Rental, Oblate Missions, Hilton Hotels and Inns, People Express, Trans World Airlines, Rosewood Hotels, USAir, The Dallas Morning News, Fine Jewelers Guild, a Zale Corporation subsidiary, and the list goes on. If you belong to any of the frequent flier programs of the aforementioned airlines, you learn about your accumulated mileage from DRG-produced direct mail. Your frequent flier card came from DRG. If you’ve ever contributed to Oblate Missions of San Antonio, you probably read copy created by DRG writers. Even within the industry, it’s still called junk mail, and a lot of it gets pitched in the trash. But when it does, Mohr knows about it. Thanks to customized computer programs, he can tell DRG’s clients who got the piece of mail, who responded, and who didn’t. He can tell them who tried the product and who continues to buy the product. Then he can go back and figure out the demographics or psychographics of those who responded and give the clients the information needed to close the loop on the sale.

“I think it’s much more difficult to get somebody to actually respond to an advertising effort rather than just make an impression. And in direct mail you don’t have the benefit of sight and sound; it’s a much greater creative challenge,” Dunne says.



DRG was bom in “a pretty high-class strip joint,” says Dunne, using one of my favorite oxymorons to describe the scene of that important handshake. (It’s easy to imagine the two of them at The Patch drinking scotch or bourbon, smoking and laughing, each holding a fistful of dollar bills: twelve years later, boyish good looks intact, Dunne and Mohr would fit right in carousing on a college campus.) Mohr was down from Burlington, Massachusetts, to install a computer system at Dunne’s father’s company, Airline Passengers Association, where Dunne worked at the time. Dunne took Mohr out on the town, and they ended the night at The Patch. There they found they had similar interests and goals beyond an affinity for strip joints: both wanted to work hard, to play hard, to build a successful business. And they were perfectly matched, it turned out, for the future of direct mail: Mohr was an MIT man with the management information systems background essential to create a vast database; with Dunne’s political science degree from Indiana University and an entrepreneurial spirit, they would set the industry on its tail by bringing computer technology to the field of direct marketing. During the next four years, Mohr stayed with Epsilon Data Management in Burlington. Dunne moved on to Bozell & Jacobs, Inc., where he became a one-man direct mail division. But the two kept in touch.

By May of 1978, Dunne was itching to get out on his own. He exited Bozell & Jacobs and leased 600 square feet of office space on Carlisle. Without a penny of capital investment and with one client, Airline Passengers Association, Inc., he put out the Direct Response Group shingle. Dunne worked by himself for about a month, then hired a helpmate. That October, Mohr made the move from Massachusetts to Dallas.

Because direct mail is a great cash flow business, Dunne and Mohr were able to create DRG without start-up capital and keep it debt free. In the beginning, the company serviced clients by farming out all of the work. During the next few years, DRG accumulated enough cash to purchase the hardware it needed to bring those skills in-house. DRG’s capabilities today include custom database development and management, marketing result analysis, complete creative work, telemarketing, mailing list research and brokerage, media planning and purchasing, credit and transaction clearing, and on-site and vault storage of materials and documents. We’re talking a lot of hardware here. DRG occupies a 28,500-square-foot office warehouse on Carpenter Freeway, the majority of which is devoted to housing the hardware.

A short wait in the DRG reception area reveals something else about the “prudence” of Dunne and Mohr: these guys could have coined the phrase “no frills” flying for their airline clients. Judging from the quarter-inch of dust on the one pitiful corn plant in the DRG reception area, it’s obvious that they consider plant services an extravagance. The company once had fresh flowers delivered weekly for the reception desk, but that was eventually deemed unnecessary. And the flowers really would have been out of place with the bus terminal decor, random broken ceiling panels, and the complete absence of a color scheme. DRG does not embrace the typical plush ad agency look.

To Dunne and Mohr, “lean and mean” is not a catch-phrase of the mid-Eighties, a result of an overbuilt real estate market and an ailing oil industry. “Lean and mean” is the way DRG has always operated. The two didn’t have a secretary until two years ago when they hired one that they share with seven different people. But add to the lean and mean description a large measure of fun. DRG has earned a reputation in this town for throwing a damn good party. These guys arc much work, much play. Perhaps that explains the casual, unaffected way Dunne and Mohr have dealt with the sale of their com-pany. Business has continued as usual.

Before I met Dunne and Mohr, I had already heard a lot about them from friends in the business. I thought I knew what to expect: young guys make good, get rich, are wild with excitement. But when I asked them if they were blown away by the sale of their company, they answered almost simultaneously: “Well, we aren’t exactly rolling in it.” Money, that is. When I found out they started the company with “no money down,” couldn’t believe it-isn’t that an infinite return on investment? It had to be only a matter of months before these guys would be doing the Ramada Inn seminar circuit, writing books and making more millions by telling everyone else how to do what they did. Weren’t they going to go out and buy a Rolls or something? I should have known better. Prudence.

They are going to continue to take care of business. The deal with Doyle Dane Bern-bach was done through a tax-free restricted stock exchange, so they aren’t rolling in cash. But they no longer have to wonder, at thirty-five, whether or not they have obtained success. They have. And everyone in the business knows they have.



Selling DRG or taking the company public were goals for Dunne and Mohr from the beginning. About two years ago, DRG hired a New Orleans investment banking firm to investigate the opportunities. Going public was attractive except for one thing: Dunne and Mohr would have to spend three years doing a continuous dog and pony show for analysts and bankers. That’s an area where they had almost no experience-the DRG client presentation had been little more than “kicking it around” in the conference room and a tour of the company, perhaps a slide show for the hard-to-sells. And Dunne and Mohr had only one experience with a banker.

“We framed our one and only bank note,” Mohr says, swiveling around in his desk chair to retrieve it from the wall. “On December 10, 1979, we bought a computer system. Our first and only attempt at borrowing.”

“We borrowed $120,000 from a guy [loan officer] named T.J. Hammer,” Dunne says. “He had a terrible hangover and didn’t want to talk about collateral or anything else.”

“He just asked us if we’d pay it back, and we said yes, and he gave us the money,” Mohr says.

That was the beginning of the not-so-dumb luck that Dunne and Mohr would see much more of before the payload from Doyle Dane Bernbach.

“We’ve really put nothing into this business,” quips Mohr, “nothing but our lives, our children’s lives…the harder you work the luckier you are, right?”

But there really was an element of luck involved in landing DRG’s first major client. Airborne Freight Corporation of Seattle, Washington.

“It’s not often that you run into a VP of marketing for a national advertiser who didn’t have a lot of preconceived notions about advertising. I had a clean slate,” Dunne says. “1 met this VP while in Phoenix on a trip with Bozell & Jacobs. They just brought me along as sort of an afterthought -’bring along the junk mail guy.’ B&J was trying to get the Airborne business because Federal Express at the time was spending $10 million on TV and that was real attractive.”

The Airborne guy had a modest direct mail budget and eventually Dunne convinced him to commit. Soon after, though, he quit Bozell & Jacobs, leaving the agency without a direct mail department, so Airborne eventually went to DRG. At that time, Airborne had about a $420,000 advertising budget to market its Express Pack, a close cousin of the Federal Express Courier Pack. The company spent $400,000 to do media tests-radio and TV, in New York, Cleveland, and Los Angeles. At the same time, Airborne spent $20,000 with DRG to do a direct mail campaign in other markets. It was money well spent.

“In those three markets where we did not mail, there was no growth in product,” Dunne says. “But in all of the other markets where we mailed, we basically doubled the volume.” The Airborne story is now a standard part of Dunne’s soapbox speech on direct mail: tangible results for the client measured in sales dollars. Over the next year, DRG was gradually given the entire Airborne advertising budget. That account alone essentially launched DRG.

In August 1985, Dunne and Mohr ran into their biggest stroke of luck yet. Yes, they had hired an investment banker to explore selling the company, and it carne through with three offers for them. But one day the phone rang.

“It was a random call from Doyle Dane,” says Dunne. “We didn’t even know what it was about. This guy [Richard M. Victor, general manager of domestic subsidiaries for Doyle; Dane Bernbach, who eventually coordinated the sale] called and asked if he could come down and talk to us about what we did. That week he flew to Dallas; we sat around in the conference room and chatted. He asked us to provide him with, actually, a very limited amount of financial information and a few other odds and ends.”

The rest of the deal proceeded just as casually. Victor came to Dallas again, this time with the chief financial officer of Doyle Dane Bernbach. The two of them spent a couple of hours with Dunne and Mohr and were ready to make an offer. After meeting four times over two months with lawyers, they consummated the deal.



So, now what? “That’s a good question. One of our problems is that we never had any plans beyond our goal of selling the company,” Dunne says.

But their new parent company, Doyle Dane Bernbach, did have some plans in mind. It already owned a marginally profitable direct mail firm, Rapp & Collins, Inc. Dunne moved to New York late in July to become chief executive of Rapp & Collins USA, the new company formed through the merger with DRG. Dallas has just about gotten used to New York City sending ad executives south to run newly acquired agencies, but what will New York think when Dunne brings some of DRG’s lean and mean strategy north?

“The New York office has about 100 folks and a substantial amount of pretty high-priced office space,” Dunne says, adding sarcastically that there are no plans for expansion there. Given Dunne’s “lean and mean” philosophy, it’s a good bet that heads will roll before the old Rapp & Collins folks have time to figure out what in the Sam Hill has happened.

As for Mohr, he’s content to stay in Dallas at what is likely to become the flagship office of Rapp & Collins USA. He’s moving- and upgrading-the Dallas offices to a 48,000-square-foot building in Las Colinas. He’ll remain executive vice president, at his own option, and will bring in a new president to fill Dunne’s spot-Steve Cone, a guy who started work at Epsilon Data Management the same day Mohr did back in 1972.

And how has the megamerger affected the deal? The price of Doyle Dane Bernbach stock slid since the merger. Prior to the announcement on April 27, Dunne and Mohr watched their newly acquired 220,000 shares apiece shoot up to almost 27. Late in August, Doyle Dane Bernbach had fallen to 21.25. Most analysts say the stocks were bid up above an appropriate value in anticipation of the merger. But they are telling stockholders to hang on, since their stock shouldn’t move | much for the next six months.

Regardless of the fall in the stock price, Dunne and Mohr are very happy with the sale. But as the largest individual stockholders of the biggest advertising agency in the world, these home-grown boy wonders are eager for some say-so. The sun truly never sets on this new ad infinitum agency, and Dunne and Mohr want to help lend to the empire: they want a couple of seats on the board of directors. Although those thrones weren’t negotiated in the sale of DRG, it’s a goal they’ll probably reach. The coronation is around the corner, and strip joints across the world wait to be conquered….