DIRECT MAIL SURVIVES & THRIVES SMART COMPANIES USE A MARKETING MIX TO MAXIMIZE REPONSE. By Pam Droog TOM HEITMAN, president; SCOTT CALAME, senior vice president and creative director, Summit Marketing Contrary to doomsayers’ prophecies that the Internet, postal rates, anthrax and the economy would decimate direct mail, the industry is strong and here to stay. “Direct mail continues to grow,” says George Snyder, senior partner at Direct Impact, Inc. “The big advantage of direct mail over general advertising is its ability to target. Direct mail can zero in on whom you want to talk to and might buy your product or service.” Figures from the Direct Marketing Association indicate projected dollars spent on direct response advertising in 2002 was $193 billion. As for industry sales, the total was expected to surpass $2 trillion for the first time. These numbers include direct mail plus telemarketing, e-mail marketing, direct response TV and radio, “anything that requires a response,” says Susan Christensen, managing partner at Direct Impact. She adds industry growth is expected to compound 8.3 percent annually over the next five years. “A lot of the increases in sales are coming from new users of direct and interactive marketing,” she says. That doesn’t mean there’s been a jump in junk mail, says Scott Calame, senior vice president and creative director at Summit Marketing. “The reality, in fact, is the opposite. Clients are actually mailing to fewer people but more selectively and with higher profitability,” he says. “That translates into cost savings and less junk mail per person,” (though it’s only junk mail if you’re not interested in it, he notes). MARK VOGEL executive vice president, Osborn & Barr Communications The fact is marketers are more “database-smart” than ever before, says Mark Vogel, executive vice president at Osborn & Barr Communications. “We’re not just dealing with zip-code sorts. We’re profiling markets in sub-segments, and in doing so, delivering tighter, more well-defined messages,” he says. “Even in my own mailbox, lately I’ve noticed the direct mail is more customized, more detailed, more in-depth in the marketing message sent to me, as opposed to a general message without much content. And that’s the proper use for direct mail today.” THREE FACTORS Direct mail is part of the whole direct marketing mix that’s used to solicit a direct order, generate a lead or drive store traffic. Specifically, Calame explains, companies use direct mail to build relationships. “Direct mail allows a business to have an ongoing, lifetime dialog with customers,” he says. “We stay in touch, send relevant offers, cross-sell other products and services. Ideally, Vogel says, that dialogue doesn’t become a monologue. “Smart marketers allow consumers easy ways to respond, not necessarily with just a purchase,” he says. To move consumers to action, marketers rely on three factors, explains Tom Heitman, president of Summit Marketing. First is to develop a list of potential customers. “If you’re talking to the wrong people, you won’t sell anything,” Heitman says. “So we use everything from vertical lists to predictive models to segment and sub-segment the market until we have a one-on-one relationship with a customer.” The next factor is the offer. Heitman says, “You have to give a compelling reason for someone to call or fill out a form or go to a web site. Getting someone’s attention, getting him to read or listen to your offer, to understand it and respond is a tall order if you think about it.” Finally, creative counts. The message must outline the offer and speak to the customer in relevant terms. In fact, technology allows a specific message to be delivered to a specific individual. “We can customize mail based on what we know about a customer,” says Jan Devine, partner at Direct Impact. “We can write, ‘Dear Jan, we hope you like the jeans you recently bought from us. Please come in soon and see the new boots we just got that would look great with your jeans!’ It’s a great tool for customer retention.” DIRECT IMPACT, INC. (Left to right): Jane Devine, partner; George Snyder, senior partner; Susan Christensen, managing partner The bottom line is, direct mail is “a real science, not a subjective artistic endeavor,” Calame says. INTERNET IMPACT “When TV arrived on the scene, everyone said that’s the end of radio, but in the end radio found its niche,” Heitman says. “It’s the same thing with the Internet and direct mail. E-mail has found its niche in providing relevant communications to customers, while direct mail is still the vehicle for customer acquisition, retention and direct sales.” Five years ago, the Internet accounted for two percent of U.S. catalog companies’ total sales. Last year, it was 19 percent. And in three years, the Direct Marketing Association predicts one-third of total catalog sales will come via the Internet. “Just a few years ago, marketers were predicting the day of the catalog was over, because you could get that information online,” Snyder says. “They didn’t consider that people like to look at catalogs where and when it’s convenient for them. They don’t especially like to boot up and wait for the pages to appear.” Also, he notes, “Another flaw in the strategy is if you don’t drive people to the website with some kind of marketing, they won’t find it. Direct mail finds customers versus Internet sites that have to be found.” Calame elaborates, “Far from having the Internet replace direct mail, the two work very well together. Both are direct marketing mediums, and both are personal and interactive,” he says. “Our clients use direct mail to drive customers to their web sites, and follow up a web site visit or a purchase with direct mail.” In other words, “multi-channel marketing is the name of the game,” Christensen says. “Certainly Internet sales are part of the mix, one of many ways to find customers.” Adds Snyder, “The successful companies use direct mail, a web site, a store, a catalog, the telephone. You have to let people buy from you the way they want to.” SNAIL MAIL “Every time the cost of a postage stamp goes up, people say that’s the end of direct mail. But it hasn’t happened yet,” Snyder says. “The price of everything goes up but people love to focus on a few cents for a stamp.” Of course, a half-cent increase makes a huge difference when you’re mailing 50 million pieces, Christensen notes. “An industry-leading nonprofit recently did a mailing that size. They’ve had tremendous cost increases in the last five years but they’re still mailing. They and others are just doing it smarter.” For example, Calame says Summit Marketing has developed some proprietary systems that maximize postal discounts for clients. “We can approximate delivery times of first-class mail using third-class rates, so our clients’ message can be in home as quickly as first-class,” he says. “It has to do with how we sort, which postal facilities we deliver to. Ultimately you can get many more discounts by introducing the mail into the mail stream closer to its destination.” LOOKING AHEAD “We’re seeing consumers essentially raising their hands and telling marketers what information they want to consume, through what they’re willing to provide on the Internet and elsewhere,” Vogel says. “I really don’t understand how a successful marketer can perform without using that information to segment the market and select where and how to deliver a message.” The choice of media boils down to return on investment, Heitman says. “When it comes down to it, we are number crunchers. We know all the costs, what we put out there, what comes back. If you do it right it should all be foolproof.” Or close to it. “There are a lot of moving parts in this business,” Heitman adds. To make better choices, direct marketers use sophisticated simulation and optimization models. “That helps us find the right combination of customer, offers and creative along with expense to market and cost of goods,” he says. “Once we understand what combinations work best, then we allocate marketing dollars to those things. So for us, the future is to continue to refine the right allocations of dollars and continue to predict behavior.” Despite technological advances and sophisticated strategies, the direct marketing industry is not likely to see the quadruple growth it experienced in the 1960s and ’70s, Snyder says. “But when you see it’s a trillion dollar industry, that so many companies rely on mail to bring in revenues, you know it’s not going away.” Pam Droog is a frequent contributor to St. Louis Commerce Magazine.

February 2003 - - - - - - - - - - - - - - - - - - Cover Story, JOE HASTEN, vice chairman of corporate banking, U.S. Bancorp Making the Call - - - - - - - - - - - - - - - - - - www.stlrcga.org - - - - - - - - - - - - - - - - - - www.technologygateway.org - - - - - - - - - - - - - - - - - - Great Scott! ANDY PUZDER president & CEO, CKE Restaurants, Inc./ Hardee’s Food Systems, Inc.