Direct mail’s role as a mass-marketing response driver has all but vanished during the past decade, according to a study from consulting firm Winterberry Group. But opportunities still exist for leveraging data in pursuit of better targeting, and for integrating mail with other channels, the study said.
First, the bad news. Winterberry cited the collapse of several brands within the mortgage and lending, retail banking and credit card segments as taking several billion pieces out of the mail stream. Additionally, a May 2008 postage hike saw rates increase by an average of 2.9%.
According to Winterberry, spending on direct mail in the United States declined approximately 3%, from $58.4 billion to $56.7 billion, with 2009’s level estimated at $51.8 billion, a level not seen since 2005. The economic recession is forcing marketers in several verticals to dramatically curtail their investment in costly high-volume acquisition programs;
Direct mail volumes declined even more precipitously than the falloff in spending, as mailers sought to integrate more precise targeting methodologies, production efficiencies and other value-focused initiatives in an attempt to cut costs and preserve the economic return of their mail programs;
On the vendor side, the decline in demand for production volume accelerated both price degradation and demand for better data, analytics and multichannel integration capabilities throughout virtually all sectors of the production industry;
In terms of direct mail volume declines, the biggest losers included mortgage and loan solicitations, which were off by 38.8%. This was followed by credit cards (down 21.8%); technology, which dropped 16.6%; automotive (off 9.4%); travel and leisure (down 4.7%); and investments (down 4.2%).
According to Winterberry, the impact of the economic downturn has so far been most severely felt by high-volume mailer sectors such as financial services, which tend to have lower costs per piece. But as these high-volume mailers pull back, there has been a ripple effect amog service providers.
How does the picture for direct mail look for 2009? Given the continuing economic recession, not great. Winterberry sees direct mail spending as falling between 8% and 9% in 2009. Here’s why:
While direct mail volumes traditionally bounce back after a period of economic stagnation, the magnitude and timing of the current recession are expected to affect the direct mail channel in a long-term, systemic way, effectively ending the prevalence of untargeted, high-volume campaigns;
The accelerating shift from “mass” to “targeted” direct mail programs has been enabled by an increasingly powerful array of marketing automation technologies, many of which are making their way into the tool sets of marketers both large and small; and
Independent the effects of the recession, rising postage rates, declining volumes, an increasingly complex array of postal regulations and other threats to delivery efficiency may compromise the viability of the Postal Service as the principal mail delivery channel.
What are marketers doing to keep themselves in the mail? According to respondents to a Winterberry survey, 45% turned to less expensive paper and raw materials as a means of offsetting budget pressures, while 39% percent opted to use smaller or cheaper formats. These findings mirrored what service providers have been seeing.
Will overall economic recovery lead to direct mail’s resurgence? Winterberry seems to feel the current declines, rather than being cyclical, are systemic – they reflect a profound shift in channel use, rather than normal fluctuations based on the economy’s health. Winterberry predicts that mail volumes will drop by another 10%-15% in 2009.
The Opportunist’s Take: For marketers who can take a loss, this is a great time, and a less-cluttered channel, to build market share. For service providers who need volume just to keep the plant lights on, this might be a good time to explore cost- or risk-sharing between marketers and service providers. And as Generation Y comes into financial prominence, marketers who know how to engage them (as opposed to pitching to them) might want to consider targeting them with the mail channel, which will have novelty value through its non-electronic nature. One high-ROI test will cause, if not a gold rush, at least a strong reconsideration of direct mail. Will it be enough to offset mass direct mail declines? Probably not, but don’t write off mail entirely yet.
