Tip Sheet/Direct Mail April/May 2009

THE MAGNIFICENT SEVEN

When marketers design a direct mail campaign, two extremes beckon: that of the scientist, who sets up rigorous multivariate testing campaigns and uses costly mail efficiency consultants, and that of the schlemiel, who practices the “stuff the envelope, lick the stamp” school of marketing.

There’s a happy medium between scientist and schlemiel. The seven tips below give marketers a start toward more efficient campaigns without being overbearing.

1. LET INTELLIGENCE INFLUENCE LIST CHOICE: A prospect mailing starts with knowing your own best customers first, says Rick Brough, director of consulting services at Transcontinental Database Marketing. Are they concentrated in a few ZIP codes? Do they all have multiple children? Do they have money, are outdoors-inclined and live near large bodies of water? A high correlation of any of these opens up new list possibilities.

2. TARGET UNDERSERVED MARKETS: According to Direct Marketing Association research, nearly one-quarter of all marketers neglect the Hispanic market. Solicitations both in-language and in-culture (Cubans should be approached differently from, say, Puerto Ricans) are great ways of generating orders and creating brand loyalty.

3. TAKE ADVANTAGE OF POSTAL DISCOUNTS: An up-front investment in pre-sorting activity and a postal consultant who can comment on package design and co-mailing possibilities may yield substantial per-piece postage discounts, per Crystal Uppercue, a marketing manager at EU Services. They may also get pieces into the mail stream — and therefore into prospects’ hands — faster.

4. USE HOUSE FILES: Mailers should maintain lists of inactive customers, requesters who never made a purchase, gift buyers and gift recipients, according to Michelle Houston, a vice president at catalog consultancy Lenser. Run chunks of these names through an address updating service and mail special reactivation-themed offers to them.

5. TEST, TEST, TEST: This is Marketing 101. Most marketers fail Marketing 101. Every mailing should include test cells that explore new creative approaches, new package components, new formats — double postcards vs. packages, for instance — or new offers. And if soliciting a house list, remember to reserve a sample that won’t receive a promotion at all for control-analysis purposes.

6. DON’T MAIL IN A VACUUM: Direct mail efforts should be part of an integrated campaign, one with multiple elements that reflect either a similar feel or similar offers. And a mail campaign, especially to established contacts, can be part of a multi-channel, multi-effort strategy, one in which the timing and order of each effort is moved to provide maximum ROI.

7. ANY MAILING, EVEN A FAILED MAILING, YIELDS LESSONS FOR A MARKETER: What lists or creative efforts pulled best? What messages generated the most up-front orders, and which ones yielded the best pay-up rates? (These might not be the same.) Analyze, adjust, and re-mail.

Helpful Hints
A NEW ACCOUNT

Bank Mailing Promotes Anti-Fraud Product

This quarter, Huntington Bank is hoping for at least a 2% response rate to a direct mail campaign promoting a fraud detection product suite for small businesses.

In the past, this product was typically sold through bankers, notes Jenny Whipple, vice president of business and commercial marketing at Columbus, OH-based Huntington. “But we wanted to try raising the awareness level and reach maybe a smaller business than we sometimes reach with the appointment approach.”

An 80,000-piece mailing went out to business customers with annual revenues of $10 million or less. The campaign marketed a $39.99-a-month software suite that’s intended to help protect businesses from payment fraud involving both paper checks and electronic transactions, says Whipple.

“Keep in mind that since these are banking customers, they’re somewhat used to getting correspondence from their banks via mail, and it’s something they would likely open,” says Lucy Moran, account director at Engauge, the bank’s agency.

The mailings directed recipients to go online to receive more information. From there they could request that a bank representative call them to learn more.

The selling cycle for this product suite is one to three months, on average, says Whipple, noting that businesses usually take longer to respond to direct mail offers than consumers. — LARRY RIGGS

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DID YOU KNOW?

• 86% of executives say B-to-B ads in a down economy helps keep advertisers top-of-mind in their purchase decisions, according to a Yankelovich/Harris study.
• Another 86% say the advertising makes the executives feel more positive about that company’s commitment to its products.
• Brands that spend for ads in recessions earn higher than average sales growth for three years after a downturn, finds McGraw-Hill Research.
• Direct mail volume fell an average 12.1% in 2008 in the verticals tracked by Mintel Comperemedia. Mortgage mailings led with a 38.8% drop, followed by a 21.8% fall in credit card mailings, 16.6% fewer tech offers and 9.4% less from auto vendors.

Survey Says,
THE ENVELOPE, PLEASE

It’s the essentials, stupid: The mailer categories that increased their direct mail budgets last year, as per the Direct Marketing Association’s 2009 Response Rate Report — healthcare (up 37%) and insurance (up 56%) — played to consumers’ instinct to circle the wagons and focus on basic household needs during recessionary times.

Similarly, massive 36% cutbacks in education mailings are also a function of the times: Who has money to invest in advanced degrees, especially in one- and no-income families? And the sharp declines in transportation and travel direct mail (59% of mailers dropping expenditures) probably reflect the summer ’08 spike in consumer fuel prices.

The trend to watch for in 2009 is how the mailer categories that kept their spending steady, neither grabbing audience share nor going into defensive mode during 2008, react. Communications and packaged goods firms led this pack.

Smart money says if the economy doesn’t experience a significant turnaround during 2009, there will be fewer fence-sitters in next year’s report.

NONPROFIT? BIG MAILER!

Percentage of marketing budgets used for non-catalog direct mail

Source: The Direct Marketing Association’s 2009 Response Rate

OPPORTUNITY SLIPS THROUGH THE SLOT

For mailers who can take a loss, this is a great time, and a less-cluttered channel, to build market share. For service providers who need volume just to keep the lights on, this might be a good time to explore cost- or risk-sharing ventures. And as Gen Y ages up, marketers who know how to engage them (and not just pitch to them) may choose mail for its novelty value.

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THE INCREDIBLE SHRINKING MAILBOX

Direct mail’s role as a mass-marketing response driver has all but vanished during the past decade, according to a study from consulting firm Winterberry Group. But opportunities still exist for leveraging data in pursuit of better targeting, and for integrating mail with other channels.

First, the bad news. Winterberry cites the collapse of several brands within the mortgage and lending, retail banking and credit card segments as taking several billion pieces out of the mail stream. Additionally, a May 2008 postage hike saw rates increase by an average of 2.9%.

According to Winterberry, spending on direct mail in the United States declined approximately 3% during 2008, from $58.4 billion to $56.7 billion, with spending this year forecast at $51.8 billion, a level not seen since 2005.

Direct mail volumes declined even more precipitously than spending, as mailers sought to use more precise targeting methodologies, production efficiencies and other value-focused initiatives in an attempt to cut costs and preserve the returns of their mail programs.

What are the chances for volume bounceback? Given the continuing economic recession, not great. Here’s why: First, while direct mail volumes traditionally bounce back after a period of economic stagnation, the magnitude and timing of the current recession are expected to affect the direct mail channel in a long-term, systemic way, effectively ending the prevalence of untargeted, high-volume campaigns.

Second, the accelerating shift from “mass” to “targeted” direct mail programs has been enabled by an increasingly powerful array of marketing automation technologies, many of which are making their way into the tool sets of marketers both large and small.

Finally, independent of the effects of the recession, rising postage rates, declining volumes, an increasingly complex array of postal regulations and other threats to delivery efficiency may compromise the viability of the Postal Service as the principal mail delivery channel.

What are marketers doing to keep themselves in the mail? According to respondents to the Winterberry survey, 45% turned to less expensive paper and raw materials as a means of offsetting budget pressures, while 39% percent opted to use smaller or cheaper formats. These findings mirror what service providers have been seeing.

Will overall economic recovery lead to direct mail’s resurgence? Winterberry feels the current declines, rather than being cyclical, are systemic: They reflect a profound shift in channel use, rather than normal fluctuations based on the economy’s health. Winterberry predicts that mail volumes will drop by another 10%-15% in 2009.
— RICHARD H. LEVEY

Got a direct mail tip to share? Contact Larry Riggs at [email protected]