05/19/2002

By CHERYL HALL / The Dallas Morning News

At the end of this month, a special invitation will be e-mailed to 70,000 residents near Dallas Area Rapid Transit's six new northern rail stations.

It will offer a "High-Five Survival Kit," including a five-day pass to ride free and avoid the construction mess at LBJ Freeway and North Central Expressway.

The virtual message will be delivered in the form of a vibrating pill bottle filled with the "perfect traffic decongestant" that also promises to lower your blood pressure and help you relax.

This "Webmercial" – with "rich media" sound, motion and animation – is the product of a small Dallas company, Pugh & Co., that's making e-waves.

The High-Five Survival Kit is its second DART assignment, following a highly successful campaign in November that promoted the new Dallas-to-Fort Worth rail connection.

Two years ago, when Ken and Jennie Pugh decided to reinvent their traditional graphic design studio as a Web-based marketing firm, Pugh & Co. was 80 percent traditional work – corporate brochures, logos and packaging.

Today, it's 80 percent Web-based. New times require new thinking, say the Pughs, who've been doing graphic design since 1973.

"We'd been in a comfortable niche for years and years. Now we were going to strike out into something completely new," says 57-year-old Mr. Pugh. "The Web is so big and moves so fast, we knew we had to pull this off as a team of really good people. Outsourcing wasn't going to cut it."

They've built a co-op that takes outsourcing to the next dimension, creating business ties that are far more than vendor relationships but slightly less than partnerships.

To most of the outside world, Pugh & Co. looks like a typical ad agency with creative and graphic design capabilities, public relations, publicity and technical support, and a marketing department.

But it's really four companies pooling their expertise for the common good while maintaining their entrepreneurial freedom. The overused word symbiotic comes to mind.

The group, which operates under the Pugh & Co. umbrella, has two weekly meetings to discuss work in progress, map strategy and act as a unified company. They have defined goals, including communal revenue of $1 million this year, and a clear mission statement: "Creators of Web-centered marketing programs that work."

They just don't have "a" state-registered name – they have four of them.

Some clients don't know the difference. Others can't really explain how the arrangement works, except to say it does.

"It's kinda strange, isn't it?" laughs Liz Balon, promotions director at KLUV-FM (98.7). "But hey."

The Pughs provide the creative graphic design, promotional and marketing know-how, while Kristine Tanzillo, president of Dux Public Relations, leads the PR and publicity front. Steve Elwell at Phastlink develops databases for clients and handles the technical challenges of Web deployment. Lorraine Haugen of Lorraine & Associates markets the services.

"We all own our individual businesses, so we're still our own bosses ... or so we like to think," Ms. Haugen says. "Actually, it's the clients who run the shop."

Exclusive rights

In essence, each company wholesales its services to the others on an exclusive basis.

For example, Ms. Haugen, an established sales rep for creative, photography and illustrative services, can't represent any other Web design or marketing company. In return, the Pughs can't hire anyone else to market their services.

The down-and-dirty details are all spelled out in contracts, renewable annually.

So far, the funky arrangement is paying off, garnering clients such as the Plano Economic Development Board, the Dallas Convention Center and Blue Cross and Blue Shield of Texas, which hire the tiny company to build and manage Web sites, create databases and handle direct e-mail marketing.

"There's no way we could put this all together without a huge capital infusion from outside sources," says Mr. Pugh, as his wife and three comrades in business nod in consensus. "We've brought together highly motivated, entrepreneurial people who want to be the best in their fields. Right now, this is a really comfortable working relationship.

"The way we're structured will help us weather any kind of storm."

The Pughs know all about inclement business conditions.

Their first graphic design studio, formed nearly 30 years ago, flourished until 1986, when the economy went due south.

Two years later, the couple sold their two Volvos and a three-bedroom house in North Dallas and held a helluva garage sale. They bought a 33-foot catamaran and sailed to Belize in Central America.

For the next three years, the Pughs ran a charter sailing operation out of Belize. But when the Persian Gulf War broke out in 1991, their entire year's bookings canceled in one two-week period.

The Pughs "rushed back" to safe harbor in the United States, taking six months to reach Miami. "We started home by heading south to Honduras," laughs Mrs. Pugh.

Selling the catamaran became seed money for Pugh & Co., Part Two. This time the couple was determined to keep it small, outsourcing everything but their creative work.

Three years ago, the Pughs began to dabble in the interactive world.

In the summer of 2000, they decided to go full bore into it and hired Ms. Haugen, 42, to help market their Web services. Ms. Haugen's younger sister, Ms. Tanzillo, 36, signed on early last year. Mr. Elwell, 37, who'd been doing technical project work for the Pughs since the charter sailing days, brought the technology piece on board in September.

So will all this eventually lead to one company under one roof and name?

"Who knows what the future holds?" Mr. Pugh says. "I certainly don't."

On the Web map

The November launch of the DART project put Pugh & Co. on the virtual map.

A whopping 46 percent of the 10,000 people who received DART's e-mail promoting its connection to the Trinity Railway Express clicked through for details and signed up for future promotions.

An additional 571 people who didn't get the original invitation got one forwarded to them and "opted in" as well.

"It was viraled," says Ms. Haugen, who goes on to explain: "Viral marketing is a good thing. It's not a virus."

The effort was named the most effective e-mail campaign for 2001 by the Dallas/Fort Worth Interactive Marketing Association, beating out several gorilla-size competitors.

Matt Raymond, head of marketing for DART before becoming chief communications officer for the Los Angeles County Metropolitan Transportation Authority, was blown away by the campaign. He'd gone into the project thinking a 25 percent response rate would be pretty darn good. To get almost twice that was off the chart, he says.

Nearly 12,000 people rode the Trinity Railway Express on DART's two free Saturdays vs. 6,000 riders on a typical weekday. "To get that on Saturdays when people are not going to work, they're simply trying out the train, is phenomenal," says Mr. Raymond, estimating that the first e-mail cost $6,300 to produce and deploy using names gathered by DART.

That's why Mr. Raymond signed up for the High-Five campaign, which he says is even better. It'll wind up costing more because it involves building a database of e-mail addresses.

Mr. Raymond intends to bring the MTA up to DART's e-mail speed, and he intends to give the Pugh folks first crack at it. "They're able to pull off the mass e-mail so that it's not spam and actually reaches a targeted audience."

KLUV was another client treading into new territory. The popular oldies station, where Ron Chapman hangs out these days, wanted to try online registration for its contests, but it wasn't sure how Web-receptive its listeners were.

But now the radio station is convinced, says Ms. Balon, the promotions director. KLUV ran two similar car giveaways – one via fax and mail, the other on the Web. The online method registered twice as many contestants as the traditional route.

And the number of mailed entries practically vanished. "We got almost none," says Ms. Balon, adding that it was easy to snag would-be cheaters trying to enter more times than rules allowed.

"If we do this again," she says, "it's a no-brainer. We'll use the Web site."

And, Ms. Balon says, she'll turn to the motley crew at Pugh & Co. or Lorraine & Associates or whoever the heck they are to give her a hand.

Reprinted with permission of The Dallas Morning News.