The ability to measure campaigns will continue to be direct marketing's saving grace in the current economic downturn, according to agency executives and marketers.
"For those willing to spend big in a downturn, the opportunity for share growth is huge," John D. Hayes, EVP global advertising and brand management for American Express Co. said. The attractiveness of direct marketing in hard times is furthered by its accountability. "We know the one-, two- and five-year return on a dollar" spent on direct response advertising, Hayes said.
Hayes made his remarks at "Examining the State of the Direct and Interactive Marketing Industry in the Current Economic Climate." The discussion group included : Lawrence M. Kimmel, chairman/CEO at Grey Direct and David M. Sable, president/CEO at Wunderman, New York and Russell Stravitz, chairman/CEO at cataloger Brylane.
In the current climate marketers wishing to expand could buy media at substantial discounts, and that print and production facilities were suffering from unused capacity, Kimmel said.
But prospecting for new customers shouldn't represent a marketer's total focus. "There are no more customers," Stravitz said, noting that the total number of consumers has remained more or less steady. "Somebody new is not going to show up to help you make your number." In place of prospecting, Stravitz recommended trying to increase the value of each transaction.
The panelists were asked about companies that were doing customer communications well. Sable cited BMW's customer contact program, which is continuous throughout the payment cycle of the automobile as an exceptionally good one. According to Sable, BMW bill stuffers contain hints and tips about getting the most out of the car. Six months before the car payments finish the company sends out a mailer containing five financing options and corporate contact information. At three months customers receive a similar mailing, with the contact information changed to that of a local retailer.
Sable also cited Costco, the bulk retailer that needed to find a way to get customers to return frequently. "Costco knows free-standing inserts are inefficient," Sable said. "How do you get back a client if they have just purchased a box of toothbrushes – or a pallet of toothbrushes?" The answer is what Costco refers to internally as a "treasure hunt," according to Sable. This consists of merchandise priced at a premium, such as $2,400 large screen televisions being quietly sold at $900. People return to look for these bargains, and they also call friends to come in and see what Costco has. The panelists were less enthusiastic about marketing practices of online firms. "We are at the infancy of online best practices," Stravitz said. Pressed for an example of an Internet marketer doing something right, he mentioned Amazon.com's collaborative filtering recommendation engine
For Kimmel, the ability to measure direct marketing's impact represents its saving grace. He said that his agency had not seen any decline in advertising spending since the events of Sept. 11 because direct response marketing can demonstrate a return for the dollars spent.
"Direct and interactive marketing will increase in importance," Kimmel said. "At my agency, the question is in which bucket the dollars will go. Direct marketing is the future."
The session was hosted Wednesday morning by the New York University School of Continuing and Professional Studies Marketing and Management Institute.
