At first glance, retail partnership programs appear an ideal way for direct marketers to penetrate the world of packaged goods. The programs, in which advertising costs are either shared with or borne entirely by packaged goods companies, match manufacturers’ and retailers’ advertising needs in an effort to build stronger customer relationships.
Since DM tracking service DBM/Scan began reporting results in 1995, 143 packaged goods companies have used retail partnership programs. Direct mail has made up 36% of these efforts.
During the 12 months ended June 30, 101 of the 143 companies employed partnering. These 101 companies used 375 individual programs, only 17% of which included direct mail. By contrast, the 12 months ended June 30, 1998, saw only 132 partnering efforts – but 53% of them featured direct mail.
The number of programs using direct mail actually declined by 6%, from 67 in the 1998 survey to 63 in the year just ended. Use of freestanding inserts rose from 20 efforts to 126, while retailer/in-store programs jumped from 17 to 85. DBM/Scan tracked 99 magazine advertising programs in the 12-month period just reviewed, as opposed to none in the previous year, and “other” types of promotions rose from 29 uses to 40, a 38% gain.
Perhaps the latest retail partnering entrants are not comfortable with direct mail. During the last 12 months tracked by DBM/Scan, 66 new companies started programs, adding to the 77 previously tracked.
DBM/Scan primarily reports on observed behavior. But John Cummings – president of Armonk, NY-based John Cummings & Partners, which administers DBM/Scan – has some theories on why direct mail use may be off. One is the increased participation of national chains in partnering programs. Drug retailers may prefer product- and image-based advertising that touts prices; food retailers, which tend to focus on local markets, may rely on targeted messages and tracking programs.
“For the first three or four years [of tracking partnership programs], packaged goods companies tailored direct marketing packages with the retailer’s name on it,” says Cummings. “But as they went back to the retailers, the retailers would say, `Why can’t you just let us run [an advertorial] feature or an FSI?'”
Simple ego may play a part in retailers choosing non-direct channels. “I think there is great inherent appeal for a retailer in being in a national magazine,” says Cummings. “The idea is that they could run a 12-page ad in a major national magazine and have their name on every page, with the manufacturer presumably paying the media costs.”
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