E-MAIL MAKES THE A-LIST

DMers turn from traditional media and embrace online efforts PICK a marketing channel, any marketing channel. Chances are its use declined in 2000 from 1999 levels, according to DIRECT’s most recent reader survey. Well, maybe not every channel – e-mail grew in popularity. But most other direct response methods remained at 1999 levels or declined – at least in terms of the number of companies using them.

For example, only 39% of the firms surveyed sent catalogs this year, compared with 47% in 1999. And fewer readers used direct mail.

But e-mail was used by 42% of respondents – some 14% more than in 1999.

That’s only one shift reflected in this year’s survey. Another is that companies expect to spend 15% less on customer retention in 2001 – and 15% more on customer acquisition. Does that mean DMers have given up on customer relationship management? Hardly. It may mean that they feel a need to replenish their house files and boost revenue.

“Everyone accepts that marketing to your existing customers is a gold mine,” says James Hoffman, CEO of Bigfoot.com, a New York-based online marketing consultancy. “But when push comes to shove at the end of a sales period, acquisition is scalable. You have a much larger audience with whom you can communicate.”

There is, of course, one other possibility. “Maybe they have focused so much on CRM that the bloom is just a little bit off that rose,” says Ron Jacobs, president of Jacobs & Clevenger, Chicago.

Performance Slightly more than one-third of all respondents predicted their direct marketing revenue would grow during 2000, a small increase over last year. Only 20% of consumer firms expected an upturn, compared with 34% of all business-to-business marketers.

In addition, fewer consumer firms expected a decrease. But the positions were reversed when it came to revenue. Margins went up for 30% of respondents; consumer firms were more likely to see an improvement than B-to-B firms.

Budgets Budgets are headed upward, at least for 55% of our readers. But there is a slight shift in where the dollars are going.

Of those sending e-mail to prospects, 81% said they will increase spending for the channel in 2001; 78% will spend more on customer e-mail. In contrast, 55% of all non-catalog direct mailers will spend additional money on mail next year, while 6% anticipate spending less. And 35% of all catalogers surveyed plan to increase their spending on the channel in 2001, while 6% will decrease it.

Why the higher growth rates for e-mail? For one thing, e-mail is cheaper than snail mail. And these increases may be tied to the decrease in retention spending. “From a CRM standpoint, the focus has disproportionately moved to e-marketing,” says Richard Metzner, president of Brierley & Partners, a CRM consultancy in Dallas. “That could be part of what that data is saying.”

Not that traditional acquisition media are going away. Most direct response TV and radio advertisers will spend more. But one-fourth of all card pack users plan to cut back next year.

Mailing Lists Most firms with house lists intend to mail more to them in 2001. Of the 88% that mail to their own files (down from 91% in 1999), 62% plan an increase.

Response rates to house lists were slightly disappointing this year. While the respondents had forecast an average rate of 10.4%, what they actually received was 10.1%. The response for outside mailing lists averaged 6.8%, an increase from 5.8% in 1999.

Despite that improvement and the boost in acquisition budgets, most firms won’t increase their use of outside lists in 2001. Last year, 58% said they planned to rent more, but that number dropped to 43% this year.

More than three-fourths mail to outside lists, but consumer-oriented companies are more likely to do so than business-to-business firms.

Lifetime Value Some observers may be disappointed in how DMers use their house files. Only one-third of respondents calculate lifetime value of customers, compared with 43% last year. Most of the drop-off came from B-to-B respondents.

Pundits might also question opt-in practices, although there is some improvement: 54% offer an opt-in or opt-out provision to their customers, up from 46% last year; 28% of all respondents offer opt-in for their e-mail and opt-out for their mailing lists, up from 20% last year. But many firms provide only one of those options: 12% offer opt-in on e-mail and 14% on mailing lists.

And just who are our respondents? On average, B-to-B companies reported that just under one-third of their total revenue came from DM in 2000. The average was 61% for consumer marketers and 45% for firms that do business in both arenas. On average, B-to-B firms devote 36% of their budgets to DM, while mixed-focus and consumer firms allocated 39% and 58%, respectively.

DMA Membership In another finding, only 34% of those surveyed belong to the Direct Marketing Association. Consumer marketers are most likely to be members.

What makes a DMA member? Apparently, it has nothing to do with how much of the ad budget is devoted to direct marketing. But it may be related to revenue levels. Among companies with less than $10 million in revenue, just over 20% were members. That jumped to over two out of five for firms that exceeded $10 million. Another determinant was whether a respondent has a Web site. Among those that do, 36% are DMA members, compared with 22% among firms that have no site.

The clearest difference was based on size of a respondent’s database. Over half of firms with 100,000 records in their databases are DMA members, compared with 14% of firms with less. Of course, the larger databases likely belong to consumer marketers, which also showed a higher propensity to belong.