Precision Marketing Is a Green Initiative
A growing number of retailers are engaging in well-publicized initiatives to reduce energy consumption, greenhouse gas emissions, and pollution. Target Corp., for example, announced that it now recycles hundreds of tons of plastic wrap and more than 300 million plastic hangers a year. Even mighty Wal-Mart recently jumped on the green bandwagon with plans to reduce solid waste by 25% over the next three years, with a long-term goal of creating zero waste.
That these and other eco-friendly initiatives, from green roofs to corn-based plastics, are finally being embraced by retail giants should be music to everyone’s ears (even if the reason for the initiatives may have as much to do with shareholder value as it does with any deep concern for the planet). So I recently began to wonder: Can an investment in improving customer data analytics to drive precision-marketing effectiveness be considered a green initiative? The answer is a resounding yes.
Consider: This year alone, marketers in the U.S. will have sent out more than 114 billion pieces of direct mail, including catalogs, credit-card solicitations, and coupon packets. This represents an increase of 15% from five years ago. The cost of producing and distributing all these marketing materials? Approximately $59.6 billion—more than five times Wal-Mart’s net income. And that’s up more than $4 billion from last year.
And yet, as every marketing professional knows, most of that mail is thrown out nearly as quickly as it arrives. In fact, according to the Direct Marketing Association (DMA), only 2.15% of mailed ads lead to a sale—or, for that matter, to any type of response from recipients. The Environmental Protection Agency reports that in a single year Americans dispose of more than 3.6 million tons of what can truly be labeled junk mail.
Beyond getting plowed into landfills, where it might take a millennium to decompose, the 97.85% of direct mail pieces that would seem to serve no other purpose than to keep marketing vendors and the U.S. Postal Service busy obviously have an enormous environmental impact. By some estimates, more than 100 million trees are needed to produce them. The paper pulp processing requires some 50 billion gallons of water. And then there’s the toxic ink and nonrenewable energy that goes into printing, sorting, and distribution.
On its Website, the DMA claims that “the direct mail community actively supports environmental protection in many ways, including those programs that promote recycling, tree replanting, solid waste management, and environmental education.” It’s a dubious claim, in my opinion, based on what I’ve seen, and it represents a somewhat feeble attempt to respond to the consumer rallying cry around environmental responsibility in light of the fact that more than half of all direct mail is tossed into the wastepaper basket without so much as even being opened.
To its credit, the United Kingdom DMA signed an agreement with the British government a couple of years ago on behalf of the direct mail industry in that country to commit to reducing the amount of waste that ends up in the landfill. The goal is to recover and recycle 55% of direct mail by 2009 and 70% by 2013. Interestingly, the government initiative also contains a “waste strategy” component that encourages marketers to use customer data integration and refined segmentation schemes to improve the targeting of promotional materials.
The rationale is that, lo and behold, precision marketing will lead to more- targeted, lower-volume offers—and less waste. In fact, a 10% reduction in direct mail volume will result in a savings of 542 million pieces of direct mail a year in the U.K., based on the current estimate of 5.4 billion pieces distributed annually.
According to a survey conducted earlier this year by British mailing services provider Corporate Mailing Matters, 60% of the U.K.’s top 1,000 marketers regard achieving the next round of government targets for the use of recycled materials in direct mail as a key priority for the next year.
Of equal importance, according to the survey, is the recent introduction of Royal Mail’s Pricing in Proportion initiative, which aims to align the size of a mailer with the value, or potential value, of a customer or a prospect. Of course, the idea of allocating marketing dollars according to customer value is a basic precept of precision marketing, and it relies on customer data integration, predictive modeling, and other analytics techniques.
It’s heartening that the U.K. direct mail industry is pushing precision marketing as an environmental imperative. The U.S. direct mail industry, which produces more than 20 times the amount of direct mail as the U.K.’s, should follow suit, and in an even more aggressive way. This year, coupon distribution increased 10%, to 323 billion coupons, even as redemption rates fell 6%. Maybe the answer isn’t to send out more coupons.
Jeff Zabin is coauthor of “Precision Marketing” (Wiley, 2004) and a director in the Precision Marketing Group at Fair Isaac. He blogs at www.paretorules.com and can be reached at [email protected].
Previous articles by Jeff Zabin:
A Nation of 300 Million Records
Cracking the Code on Next-Generation Code Promotions
Marketing Dashboards: The Visual Display of Marketing Data
Placing Sure Bets on Customer Knowledge
Jim Brickman Plays the Music of Precision Marketing
The Netflix Paradox: Are Loyal Customers Sinking Your Stock?
Making Sense of Super Bowl Spots in the Age of Precision Marketing
When It Comes to Contextual Marketing, Think Like Chip Davis
