Hello, Old Friend

Posted on February 1, 2007 by Chief Marketer Staff

Looking for the Next Big Thing?

Here’s something you might not have thought of.

Direct mail.

Yes, old-fashioned snail mail.

It is the only targeted medium that hasn’t been almost regulated out of existence. And despite rising postal costs, it can still deliver a sizable return on investment.

Just ask Dannon. It did a mailing last summer for its new yogurt, Activia.

Three million direct mail pieces were sent to known yogurt buyers. They included cents-off coupons and detailed information about the product.

The result? A 78% jump in sales for the 14 retailers that took part in the promotion. All the stores had to do was provide data on yogurt purchasers, as identified by frequent shopper cards.

Not that direct mail was the only medium used. The mailing was co-branded with retailers, and tied to 30,000 in-store sampling demonstrations, FSIs and TV spots.

“The general advertising is going to drive trial, but the direct marketing role is to invest heavily in targets that are going to generate the highest return,” says Jason Katz, executive vice president of Catapult Connect, which conducted the direct mail campaign for Dannon.

Then there’s General Motors. The automaker will mail 5 million pieces this spring to recent GM car buyers as part of its Owner Appreciation Days program.

The goal? To get those customers back into dealerships on a regular basis during the average 36 months they own the vehicle.

One incentive is service. The program features a free oil change and a vehicle inspection. Another is a sweepstakes. Customers are invited to showrooms to match a number on the piece to one on a display for the chance at a new car.

The letter, which stresses the customer’s value to GM, is personalized. And the prizes are customized so that a Buick owner might win — a new Buick.

Once in the showroom, customers are invited to take a test drive. And the dealers are ready for them. They receive kits featuring P-O-P displays and other materials. And all creative is integrated with that of the mail campaign.

Does it work?

In 2005, the first year of the program, the mailings drew a 7% response rate. Nearly 400,000 customers visited dealerships for oil changes, ultimately resulting in 40,000 vehicle sales, says Cathy Lang, chief marketing officer at Aspen Marketing, which handles the campaign.

“It now has become a critical lynchpin of GM’s marketing strategy on an annual basis,” she says.

Return on Investment

One benefit of direct mail is that it is targeted. As Lang says, it is “still the strongest enabler in eliciting consumer response.”

It also is highly measurable, no small thing in a time when marketers are under pressure to prove that their spending is paying off.

The average response rate is 2.18%, with house lists generally outperforming prospecting files, according to a study by the Direct Marketing Association. But some mailers do better than that. Packaged goods firms top the DMA’s list with 7.13% and manufacturers are second with 5.79%.

“You get more knowledge every time you mail so you can find out if you’re meeting your objectives, as opposed to dropping ads and having no idea if you’re getting a response or not,” says Lois Geller, president of Mason and Geller Direct Marketing. “Ads are really for image building. Direct mail is to get orders and make sales. It’s the workhorse of the media.”

But direct mail does pose challenges. For one thing, mailers are about to be hit with a 9% postal rate hike. (See separate story.) And campaigns can take months to develop and execute.

“It’s expensive versus other media on a cost-per-person reach,” Katz says. “All the more reason to be very targeted and only invest in segments of consumers that are going to generate a high return.”

And you have to make an immediate impression.

“The key is, 98% of Americans still do one thing every day and that’s go to their mail box,” Lang says. “We also know that 86% of Americans will sort their mail over the garbage. So we get about three or four seconds to make sure that piece of mail gets a second look and opened.”

But don’t believe stories that say direct mail is declining. It was chosen as the top spending priority by 41.9% of the marketers surveyed for PROMO’s 2006 Industry Trends Report (PROMO, April 2006). E-mail was cited by 31%.

And the DMA predicts that total U.S. spending on the medium will hit $52.9 billion this year and $67.2 billion in 2011. The average annual growth rate is 4.9%.

And of the money spent this year, $32.8 billion will go to mail targeting consumers.

And consumers are responding with their dollars. The DMA estimates that direct mail will generate $661.3 billion in sales this year and $846.9 billion in 2011.

“Marketers have found that a multi-channel approach really works,” says Anne Frankel, senior research manager for the DMA. “So some kind of direct mail contact, especially in combination with an earlier contact, proves to be a winning combination.”

Yet another firm that does well with mail is Nickelodeon. It gets a response rate ranging from 5% to 10% on mailings to its house list for live events.

For example, the cable network recently began a lengthy mail campaign for its Go, Diego, Go Live!, a theatrical tour for kids ages three to six. The troupe will travel to 50 markets across America kicking off in Louisville, KY, Feb. 1. Local mailings are planned for each market.

The pieces are oversized postcards, and they target fans deemed most likely to buy tickets: subscribers to Nick Jr. magazine and known theater-goers, based on data provided by local theaters. The recipients, 2,500 to 40,000 per mailing, are located within a certain radius of the venues. The offer? Discounts or the opportunity to buy tickets before they go on sale to the general public.

“Direct mail is very important because it’s always one of the first things out there and could sell up to 12% of the tickets,” says Stewart Rosenstein, vice president of Nickelodeon Theatricals. “It always more than pays for itself multiple times, and that’s what we look at.”

The campaign is tied to in-market broadcast and radio promotions. And it also supports a new partnership with State Farm, which in January was named the exclusive insurance sponsor and the official co-title sponsor of Go, Diego, Go Live! Tour.

The deal calls for all mailings to be co-branded. The postcards carry a “Presented by State Farm” logo on the front. For State Farm, the mail piece plays a supporting role, tying to other promotions.

State Farm’s logo will also appear in all tour venues and in co-branded TV spots that began airing in January. And the brands will both be featured in a public service announcement promoting State Farm’s National Child Safety Day.

The Workhorse of Marketing

Need more reasons to try it? Direct mail can also be used for:

Defensive Communications — When a firm discovers that a rival is launching a competitive product, a mailing to the heaviest buyers can help stave off erosion. Include a coupon or special offer to add value.

“Consumers would see the competitive national promotion, but also say: ‘Hey, I’m getting special communications because the brand appreciates me,’ and that builds loyalty and retention,” says Katz of Catapult Connect.
Reactivation — When consumers bounce back and forth between brands and ultimately switch to a competitor because of a new launch or pricing promotion, it’s time to circle the wagons. Dig into that inactive database and use direct mail to reengage past customers and entice them back with an incentive.

AT&T has been doing this ever since the telecom industry was deregulated and opened up to competition with local phone services. It sends hundreds of thousands of mail pieces every day, attempting to win back old customers. These packages, created in hundreds of different versions, reach past customers with copy aimed to get them to switch back to AT&T. Different messaging is based on region, product offerings, when the customer first left, pricing models, 11 different languages and other variables.

“That’s the beauty of direct mail,” Aspen Marketing’s Lang says. “These people all left AT&T for different reasons and I can message each of them in a very one-to-one way.”
Trial — As with Dannon’s Activia campaign, direct mail can get samples and coupons into consumers’ hands.
Driving Traffic — Mail can get them in store.

FedEx Kinkos began using direct mail last fall to invite people to football-themed promotions in key markets. Most were grand-opening events, while others generated traffic to existing stores. The firm is ramping up those mailings this year as it plans an aggressive expansion to open hundreds of stores over the next 12 to 18 months.

Each event is supported by 4,000 to 6,000 mail pieces based on local Zip codes.

Last month, events took place in the greater Miami area tied to FedEx Kinkos Super Bowl sponsorship. In-store, National Football League players were on hand to sign autographs and give away premiums. In-store materials and radio spots created with Jimmy Johnson, the former Miami Dolphins coach, supported the promotion.

“It’s a way of helping us reach out to a targeted group of people that we know have used the product before to impact traffic,” says Chris Caldwell, vice president of Velocity Sports & Entertainment Marketing, who handles the campaigns for FedEx Kinkos.
Saying Thanks — Sometimes, a simple thank you is all that’s needed.

The trouble with “thank you” efforts is that it can be tough to determine the ROI. Monitoring how long customers keep a service or continue to buy a product are some indicators of its success.

“Doing the surprise and delight messaging really goes a long way in retaining those customers,” Lang says.

How to Beat the Postal Service

Tips for getting the best possible rate

There’s one thing you should know if you’re planning to try direct mail.

It’s about to get more expensive.

The U.S. Postal Service has requested an average 9% rate hike for Standard Mail, the mail class used by most direct mailers. And that’s only one of the 4,400 different rate changes that could take effect in May.

In addition, the USPS wants to introduce pricing based on the shape of the mail piece and address quality.

But there are ways to minimize the damage. Here are some tips from Pitney Bowes:

Plan the Mailing Piece — Capitalize on rate changes by using the proper mail piece. For example, as proposed, the second ounce of a first-class letter will be less expensive than the first ounce. Mailers who combine information from two different mailings into a single piece can save money.
Pay Attention to Shape — Lower costs for processing smaller envelopes will give mailers a strong financial incentive to switch from flat (9×12-inch) envelopes to standard No. 10 envelopes. Folding and inserting machines to capitalize on this incentive make sense under the proposed rules. Parcels fall under shaped-based pricing rules and can create opportunities for savings.
Capitalize on Discounts — Presorting mail can result in double-digit percentage discounts. If keeping the task in-house, there are a number of excellent software programs that can do the job.
Cleanse Addresses — The USPS spends about $2 billion a year handling undeliverable mail. It will become more stringent on discounts if mailers don’t maintain address accuracy. New rules regarding address quality take effect this summer.
— Patricia Odell

A Sure-Fire Envelope Opener

PCH drives response by featuring sweepstakes

How do you get people to open your envelope?Offer them a chance to win a relevant prize.

Publishers Clearing House has been doing that for years. It drives a 50%+ response among its enthusiasts by playing up the chance to win millions on its envelopes.

And when PCH adds one-week TV flights to the mix twice a year, overall response rates can be as high as 45%, says Todd Sloane, senior vice president, creative for PCH.

Direct mail sweeps continues to be the primary driver of the stampsheet mailer’s business, delivering more than 70% of its sales. Most of the revenue comes from merchandise offered via the mailings, the rest from magazine subscriptions.

“The thrill of the sweeps is to get people to open the mail and to respond,” Sloane says. “And the job of direct mail is to ultimately sell that product.”

Sweeps can also drive direct mail recipients to your Web site. All you do is include a game piece or code that the consumer has to match online.

Once on your site, the shopper can find more detailed information about a product a service. And you can collect data for future marketing, says Matthew Kates, vice president of strategy for ePrize.

“If you see a chance to win something and a prize that is relevant, it catches their interest,” he adds.
— Patricia Odell

Who Reads Mail

Survey shows that women like it more than men

Women like direct mail.

According to a new survey from Vertis Communications, 85% of all females ages 25 to 44 read marketing pieces sent by mail. In contrast, only 69% of men look at them.

And women like personalization more than men by a wide margin.

What gets mailing pieces opened? Exclusive deals and coupons.

Almost three-fourths of all recipients responded to “buy one, get one free” offers last year.

In addition, 63% reacted to percentage discounts on merchandise, up from 54% in 2005, the study found.

Mail is also becoming more popular with Hispanics. Last year, 54% responded to direct mail, compared with 38% in 2003.

“The percentage of Hispanics planning to relocate, get married, have a baby, or buy a new home is significantly higher than non-Hispanics,” says Scott Marden, director, marketing research for Vertis Communications. “Because of their propensity to experience these important life-events, their direct mail readership continues to rise while the non-Hispanic population’s direct mail readership remains steady.”
— Patricia Odell