Olson agency acquires Denali Marketing: The addition of the fast-growing loyalty marketing firm creates a one-stop shop aimed at becoming an “agency of the future.” [Star Tribune, Minneapolis]

Jun. 7--The Minneapolis ad agency Olson is expanding its horizon into customer loyalty programs, a growing niche, with the acquisition of Denali Marketing, a fast-growing four-year-old firm whose client base includes Sun Country Airlines, Toys 'R' Us and Best Buy.

The merger, terms of which were not disclosed, is effective immediately and creates the largest independent ad shop in the Twin Cities in terms of head count, with 300 employees.

Denali will operate as a "specialty discipline" in the Olson operation and will be called Olsondenali. Employees of both firms were told of the deal late last week.

"It's about redefining everything we're doing for a marketplace that is in a constant state of flux," said Olson founder John Olson, who will be chairman of the Olson board in the new structure. "A loyalty practice completes the circle."

Denali President Margaret Murphy becomes president of Olsondenali and Denali co-founder Mark Lacek becomes senior vice president of Olsondenali and a member of the Olson board of directors.

Olson's Kevin DiLorenzo becomes CEO of Olson.

The combined firm expects to do $50 million in revenue this year, up from Olson's "mid 30s" in 2009, Olson said, while noting that the agency will be hiring more employees in the near future.

Lacek said Denali's revenue grew by 110 percent last year.

The loyalty industry has gone far beyond the days of the billfold-size punch card that earns a customer a free cup of coffee. Loyalty programs have grown in sophistication to the point that marketers can track the likes and dislikes of consumers and determine what makes them tick in detail. With that information, businesses can better plan promotions and target customers. Denali even has a propriety software program called Tally to track and analyze consumer behavior.

"Tally provides end-to-end loyalty tracking," said Murphy. "This allows a company to learn preferences, frequency, spending habits and how customers react to promotions."

Lacek said Olson's advertising side creates and promotes the client's brand. "Then it's up to our side [Olsondenali] to retain the customer and get a greater share of their wallet," he said.

'Good tactical move'

George John, chairman of the marketing department at the Carlson School of Management, said Olson's merger with Denali "probably is a good tactical move" although he said many ad agencies have been shedding assets in recent years after trying to go global by acquisition.

"We've gone through a couple of brutal years with a decline in secular media," John said. "There's a certain amount of fear out there so you want to determine what the world is going to be and go forward. You have to pay to play."

The Olson-Denali merger talks got serious late last year but the principals in both agencies knew each others from their years in Twin Cities advertising marketing circles. Murphy, for instance, came to Denali in 2007 after 16 years at Carlson Marketing. DiLorenzo had stops at Carmichael Lynch Spong and Fallon Worldwide before joining Olson.

Both agencies have also come to the attention of their peer groups. AdAge earlier this year put Olson on its "Agency to Watch" list.

Time will tell if a one-stop-shopping approach will work.

"Everyone we work with uses loyalty," Olson said. "We're not doing this because clients are asking for it. We're doing this as an agency of the future."

DiLorenzo said the firm has plans to hire about 50 more employees in the next year for both the agency side and the Olsondenali operation. Denali has about 80 employees.

"We have a very complimentary and shared client roster" which includes UnitedHealth Group, DiLorenzo said.

Marketing professor John isn't completely sold on the one-size-fits-all approach. "That's been the siren song, but the reality is that some companies don't like to turn over all of their [advertising] work to one firm because they want to have other insights."

And then there's the integration of separate corporate and professional cultures. There are the traditional creative types on the advertising size and the analytical brains on the customer-tracking side.

Or, as John puts it, "You have geeks in front of a computer screen trying to get someone to spend more money and those at the agency who spend their time naval gazing wondering what the next campaign will be."

But Murphy said the new management team is not worried about redundancies.

"This is not about cost-cutting," she said. "The client is looking for the public voice [the brand] and then comes the engagement voice."

David Phelps --612-673-7269

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