Tuesday, November 2, 2010

Is Advertising Mail Dying or Are New Uses Replacing Old?

This week Direct Marketing News presented two contradictory headlines on the same day. Are advertisers "Abandoning the mail" or is it true that "direct mail gains new potency as online marketing evolves?"  After reading both articles, what is a person to believe?

David Hay, VP of marketing at Plow & Hearth, which has catalog, bricks-and-mortar retail and Internet sales arms. They began reducing its marketing dependence on USPS three years ago, after significant rate increases. The move was also driven by customers migrating to online retail.  In the interview, Direct Marketing News published, he stated: “We are reappraising our reliance on catalogs as our main marketing vehicle, and we are developing a multi-year plan to reduce our spending on catalogs in relation to other media. We see catalogs as still having relevance to our business, but being a smaller part of the mix than they are now. There are instances where catalogs will continue to be effective, but that proportion is growing smaller and smaller and every day, and that's a big driver for our move. But we have no active plans to phase them out.”

Taking the opposing position is Andy Cutler, Chief strategy officer, Mercury121.  He notes that the rush to "the Web has had a significant effect on direct mail: volumes have dropped dramatically over the last decade. This has been painful for those of us on the service side of the business − not to mention for the US  Postal Service − but it has created an opportunity for our clients. Because each mail piece is not competing with as many other pieces in the mailbox, response rates are climbing. At the same time, e-mail response rates are declining due to overuse."

To illustrate, he provides an example of one of his retail clients that compared the performance of direct mail, e-mail and in-store promotions. The study showed that direct mail was the best performer with response rates up 150% vs. the previous year with no significant changes in strategy.  In this example direct mail outperformed the cheaper in-store and on line options.

While the two headlines that prompted this post suggest two distinct scenarios for advertising mail, the strategies that Plow & Hearth and Mercury 121's client's are now pursuing in their use of mail are most likely quite similar.   Mail will be used where it is most effective.   Mass distribution of full-line catalogs to a company's full customer base may no longer make sense.   However, targeting advertising and "mini-catalogs directing customers to buy on the web will remain with improved ROI's as the limited clutter in the mailbox allows an advertisement to stand out and create web-based sales.

A recent article in Advertising Age, highlighted this point.  While electronic alternatives, may be free or nearly so, the clutter in the e-mail box causes most to be deleted or shunted to the dreaded (for advertisers) junk-mail box.   Even worse are banner ads which compete with the content that recipients came to a website in the first place.     The issue of on-line clutter and the limited efficacy of on-line advertisements explains why most of the $4 billion spent on political advertisements this fall was spent on broadcast and mail advertisements, with mail dominating spending in "political markets" where broadcast media could not target effectively the particular market.

In terms of a long term strategy, the Postal Service, and for that matter, all companies in the mail supply chain, need to track the value of mail as well as the value of competing advertising media in order to fully understand the ROI's advertisers expect.  It is this value of mail, and not any measure based on economic theory that should determine both the prices that printers and the Postal Service can charge and the costs of operations necessary to ensure profitable operations.  Without this information, these companies (and regulators when they are involved) are operating blindly.  When suppliers are blind, companies like Plow and Hearth will speed their effort to find alternatives to mail.   Opening up the pricing eyes to the importance of sender ROI  could slow and possibly even reverse this trend.


Marty Thomas said...

Another good way to give your response rates a boost is to use personal urls. An example of a Personal URL would be: yoursite.com/Jim.Smith and when "Jim" visits his personal url, the website will usually be customized to him. It also allows the marketer to track who is responding. Learn more at: http://purlem.com.

Anonymous said...

I work in a small rural Post Office and have noticed a significant reduction in catalog mailings. Catalogs are significantly smaller as well. I understand the importance of this type of mail to the USPS. However, I question its effectiveness. Even with the decrease in volume, our PO Box customers are leaving significantly more of it in our recycle bins.