Future TENSE
BETTER, FASTER and cheaper has long been the rallying cry that direct marketers trumpet when asked about the future. But opinions on how this will be achieved range from the opportunistic to the alarmist.
Information will continue to be a key component of DM, according to several forward-looking individuals DIRECT surveyed. Consumers’ ability to research products they want, and marketer’s ability to gather information on their customers, will continue to rise. DMers who don’t build efforts based on that knowledge will be left in the lurch.
The first area our prognosticators turned to was the balance between retail sales and direct marketing. DM was seen as increasingly dominating the sales experience, a prediction backed up by current news. In the same week Tim Litle, chairman of Lowell, MA-based OrderTrust LLP, said that “I think we have as many square feet of retail space as we are ever going to have,” Kinney Shoes, Toys ‘R’ Us and Sun Television and Appliance announced that they would close 700 retail outlets.
Several changes in DM contributed to this development. First, consumers are finding that their specific needs can be met online.
“The consumer wants it on his or her terms. Those companies that make it clear that this is how it will be will win. Choices limited to small, medium and large will not be around much longer. That’s giving the customer only three choices-yours,” says Jay Walker, chairman of NewSub Services in Stamford, CT.
“Consumers have gotten more in control,” says Litle. “They have a lot more resources to draw on than a salesclerk.”
Part of this results from better targeting by DMers. But as consumers become increasingly comfortable with personal data being collected, they will expect DM efforts to reflect their interests and behavior, rather than having their wants and needs incorrectly anticipated based on common traits.
“[Consumers will begin to say,] ‘Stop relying on information about me and start looking for information from me.’ There will be room for demographics in initial communications, but consumers will not put up with [marketers’] assuming things about them,” says B. Joseph Pine, co-founder of Strategic Horizons LLP, Cincinnati.
“There will be more taste-based segmentations and fewer ‘the population is aging so we will have more older-based products’ decisions,” agrees Steve Larsen, vice president of marketing and business development at Net Perceptions in Minneapolis. Larsen feels that the catalogs he receives will have custom-printed pages based on products he has purchased in the past, rather than on where he lives and how many children he has.
“Profiling [has been] based on limited demographic data. Now companies are trying to capture tremendous amounts of data. Most of this data sits on legacy systems-inventory, billing, shipping. Companies are saying to themselves, ‘Can I take that information and leverage marketing programs off it?'” says Steve Horne, vice president of database consulting services at Dun & Bradstreet, Murray Hill, NJ.
As the focus on prospecting shifts away from demographics, lists with behavioral information appended will become more valuable. One segment waiting to be mined is the time-poor, for whom price is not a significant factor. “The discount sector doesn’t have as much future in the direct marketing segment as in other segments. There is a large minority whose time is worth more than anything,” says Walker.
Currently, there are very few lists with a time-poor select. But it can be inferred from transactional data.
“The time-poor are people who use services where time was clearly a factor. Anybody ordering from Lands’ End after 8 p.m. or on the weekend, or using an ATM after 8 p.m., is time-poor,” says Walker.
Demographics will still have a role in the future. A generation is growing up surrounded by catalogs, DRTV and online shopping. “Younger people may not need to ‘kick the tires,'” says Steve Cone, president of customer marketing at Boston’s Fidelity Investments. “You may see a dramatic change 10 years out.”
But many feel mass marketing approaches will be limited.
“I don’t think there is a mass market. I think it’s more targeted. I think it’s becoming more one-to one,” says Litle.
Pine believes that direct marketing’s ability to provide customized products will preclude mass-marketing approaches. “You will engage people by making it just for them. If you reduce my sacrifice, I will come back to you. In apparel, for example, there is lots of sacrifice. In order to get pants long enough for my legs, my waist is always too big.”
Cone comes closest to believing in mass marketing in the future-after a fashion. Using technology, “you can provide terrific service to everybody. You will still measure your best consumers vs. those not as good, but it will be cheaper to service all people.”
One aspect of the future that all agreed on was that DM will move toward an electronic structure, relying on the Web for a number of chiefly economic reasons. Customer service will become increasingly important as marketers try to differentiate themselves, and through the Web it will be cheaper.
“If a customer contacts a call center for order tracing, that call costs the marketer $2. If [the call is made] over the Web it is much less expensive. I think consumers are going to get more comfortable dealing with customer service issues over the Web. There is also more of an opportunity to upsell. Dell has said that consumers purchase [significantly more] when they buy over the Internet,” says Litle.
“Companies will be spending most of their [advertising] dollars getting customers to call them or reach them through the Web,” says Cone. “There will still be direct mail, but most will say ‘Call us up’ or ‘Come to our site.’ Use of automated inbound telemarketing systems will increase.”
The Web also offers opportunities to test and refine messages economically. “I can experiment on what segments are relating to what products,” notes Larsen. “I can choose a segment to market to between 8 a.m. and 10 a.m. I can create a few campaigns by noon, launch them by 1 p.m., and by 4 p.m. have an understanding of which ones are working and fine-tune them. Once I have my segment and know what offer is working with what segment, I can import that to an e-mail or catalog mail campaign.”
In some cases human labor costs may be eliminated entirely, especially in the business-to-business sectors. For standard supplies, an automatic ordering process based on anticipated use patterns could be established.
“You could have six vendors auto-quote a bid, with a service to ensure that the companies bidding were viable,” says Horne.
The lowest-bidding company would automatically capture the order, process it and send it out. “You have closed the loop without having to have human interaction. Why does a human being have to purchase brooms or lug nuts or windshield wipers?” asks Horne.
On the back end, according to Litle, the supply chain is going to get shorter. “The number of physical moves between the order being taken and being shipped is going to get cut down a lot. A cataloger might have the order shipped directly from the manufacturer. There will be less inventory carried at catalog warehouses and more shipping by partners or through drop centers.”
Most surveyed saw privacy concerns as being resolved by 2010. “There is too much visibility,” says Walker. “Either consumers will figure out how to enforce it on their own, or the government will regulate it, or there will be strong self-regulation. Meantime, I expect we will have at least one or two more privacy disasters that will spur action.”
Cone does not see a full-blown privacy disaster as inevitable. “The more people use technology the more private the transaction. Is it more private to obtain a mortgage on the Web, or by using speech technology on the phone, or to sit down with someone with five years of financial data? A system doesn’t pass on rumors, take stuff home, show it to its neighbors. Any technology can be abused, and that will happen, but in my experience technology overwhelmingly enhances privacy.”
Others see consumers becoming more aware of the value of their information, and negotiating benefits in exchange for releasing information. “I [could] call Ticketmaster to see a blues act,” says Steve Larsen. “The operator says there is a $4.75 service charge, but if I will allow them to send me updates on blues acts, and share my name, they will waive the transaction fee. That is, at the most micro-level, how somebody might trade information.”
