For folks who can’t get enough catalogs, who swoon at the idea of a stack of double postcards filling their mailboxes, and who feel the streets of Shangri-la are paved with direct mail offers, 2005 is going to be their year. Direct marketers are going to be renting more lists and sending more mail, according to a survey of Direct magazine readers.
Take Sharper Image Corp., which is ahead of this trend. At midyear, it had increased catalog circulation for the first six months of 2004 by 13% — and for its pains realized a 21% increase in catalog-generated revenue. (The company did slightly offset this circulation jump by cutting its solo direct mail volume by nearly 2% during the same period.)
Why the rush to increase mailings? As in Sharper Image’s case, the proof is in the payoff: Survey respondents reported higher revenue during the first three quarters of 2004, compared with the same period in 2003. The number noting declines was nearly half last year’s level. Margins matched this trend, with those reporting higher profits increasing and fewer saying their margins had dropped.
A pending postage rate hike, set for 2006, probably hasn’t suppressed the sense of urgency among mailers, either.
Urban Outfitters is another retailer that’s boosted its fortunes through direct marketing. Direct sales totaled $23.5 million during the third quarter, compared with $12.7 million last year at this time, and accounted for nearly 11% of total company revenue.
Those numbers look even better when you leave out the 20 new stores added by the firm during the intervening year. On a same-store basis, direct sales made up more than 13% of corporate revenue, compared with 8.9% in 2003.
Money follows money, and in addition to making more, respondents are spending more — at least on direct marketing. Last year respondents earmarked a quarter of their total marketing budgets for DM; this year that jumped to 45%.
What are they spending it on? Well, after several years of mailing to house lists, DMers have put prospecting back on the front burner. Marketers are allocating 62% of their budgets to consumer acquisition, compared with 58% last year and 46% two years ago.
Look for them to rent more lists: Fifty-five percent send direct mail to outside files, compared with 51% last year. And 54% anticipate boosting their total mail volume in 2005, vs. exactly half of them last year.
It makes sense. Even companies with the best of retention programs and most desirable products have a certain level of organic house-file decay. Mailers’ actions confirm this. There’s been an uptick in the number of respondents indicating they’re going to send less to their existing files than they did last year, while the number saying they’ll step up such efforts has dropped.
Perhaps they’re mailing less to house files because they’re mailing smarter through analysis and increasingly sophisticated targeting. Survey participants expect response rates to the existing customers they do solicit will rise in 2005.
Direct and catalogs continue to be the workhorse channels, but DRTV and search engine marketing and optimization are grabbing bigger shares of mind and wallet at DM firms.
Not surprisingly, given the regulatory environment and consumer sensitivity, outbound telemarketing continued its multiyear slide. When those still doing telemarketing were asked to rate how much of an impact the do-not-call list had on their activities, nearly a quarter of them said it was significant. That’s up from 13% last year.
While most firms that use telemarketing have not shifted resources from the medium, one in five have moved some dollars previously allocated to it to direct mail. Roughly 14% put a bit of that money into e-mail, and 12% transferred it to online marketing.
Companies in general are taking steps to protect their customers’ privacy. For the first time, more than half our survey participants said they have both opt-in options on e-mail lists, and opt-out options on house mail lists.
Asked where they do their DM creative design, the overwhelming majority of those surveyed said they use in-house agencies or staff. Just under a third indicated that they use advertising agencies, and a similar amount rely on freelancers. On average, readers devote 10% of their direct marketing budgets to ad agencies.
Then there’s this: Direct marketers, often the strongest users of DM for their own purchases, continue to be increasingly protective of the channels used to reach them personally. Sixty-two percent said they’d signed up for a do-not-call list, up from 59% last year.
| INCREASE | DECREASE | NO CHANGE | |
|---|---|---|---|
| Advertising on other Web sites | 47% | 7% | 47% |
| Blow-ins or bind-ins | 22% | 16% | 63% |
| Card packs | 15% | 19% | 65% |
| Catalogs | 37% | 12% | 52% |
| Co-op mailings | 31% | 11% | 58% |
| Direct mail to customers | 52% | 6% | 43% |
| Direct mail to prospects | 59% | 5% | 36% |
| Direct response promotions | 41% | 7% | 52% |
| DR radio advertising | 24% | 6% | 70% |
| DR space advertising | 25% | 12% | 63% |
| DRTV advertising | 30% | 8% | 62% |
| E-mail to customers | 56% | 2% | 42% |
| E-mail to prospects | 54% | 3% | 43% |
| Fax marketing (outbound) | 24% | 21% | 56% |
| Freestanding inserts | 21% | 9% | 70% |
| Inbound telemarketing (including 800 numbers) | 29% | 7% | 64% |
| Outbound telemarketing | 36% | 14% | 50% |
| Package inserts | 36% | 10% | 55% |
| Point of purchase | 37% | 5% | 58% |
| Search engine marketing | 58% | 2% | 41% |
| Search engine optimization | 53% | 2% | 45% |
| Space advertising | 34% | 14% | 52% |
| Statement stuffers | 37% | 8% | 56% |
| Web site development/maintenance | 51% | 4% | 46% |
| **Information is based only on those respondents that will use this method. | |||
Network
