To take the pulse of the industry, BtoB Senior Reporter Christopher Hosford contacted several direct marketing agency executives to solicit their views on agency and industry trends. Participating in separate Q&A's were Barry Kessel, CEO of RTC Relationship Marketing, a WPP Group company; Dasher Lowe, senior VP-group management director, Draftfcb; Jeff Cleary, managing director, Catalyst Direct; Steven Morvay, exec VP-managing director, SendTec Inc.; and Nader Ashway, president, Ashway Group.
BtoB: What major trends have you witnessed recently in the direct marketing space?
Barry Kessel: Across the board, we've seen a number of clients experiencing significant drops in revenue from catalogs and freestanding inserts. Increasingly, that kind of information that comes to customers and potential prospects shows that the company doesn't know anything about them. It's failing. You have to demonstrate you know something about the customer. Blind communications that are assumptive are performing much less well than even 18 months ago. That's the big shift to me.
Dasher Lowe: Another big trend is a lessening of the traditional, hard-hitting, call-the-800-number thing. We're not seeing a lot of that anymore. We still have clients that do that, but for others it's all about driving customers to a Web site in order to integrate them with the brand. We try not to get hung up on words like “relationship marketing,” “direct marketing,” “digital marketing.” Rather it's all about engaging with the customer and moving him through the purchase path.
Nader Ashway: I'm seeing an increased emphasis on extremely high creative and copywriting that is laser-accurate in the sense that you know your target. It's not just presenting the call to action. It's really about initiating the conversation with a sense of familiarity. This seems to contradict the fact that direct mail is generally associated with junk mail, but strangely it's one of the things that garners trust. Constant badgering actually creates a bond. The customer recognizes that the company is consistent and should be checked out. On the b-to-b side in particular, e-mail is very trusted.
Steven Morvay: One of the things that is affecting direct marketing more than anything else is the convergence of offline and online marketing. I'm a big believer in understanding that when people are exposed to offers offline, they usually go online for more information. We estimate it's as high as 65% who respond online to an offline campaign. The challenge is that we need to have the ability to measure the connection between offline and online to find out what we're really getting for our dollar. For instance, even with an offline piece prompting a customer to go to a landing page, he may have decided instead to use search. If all you're measuring is the main URL, you'll miss all those coming from search and it could look like an effort that is failing.
BtoB: So there's increasing convergence of direct marketing tools here?
Lowe: Yes, the Web has changed direct marketing completely. Instead of forcing customers into a response mechanism, we're now putting the response mechanism into how the customer naturally will act anyway. And we're seeing its impact on even inexpensive items and with small offers. You wouldn't think that someone would go to the Web to get a 50-cent discount on a $3 product, but people will do that. It's been a surprise to me and the rest of the industry.
Jeff Cleary: Think of the last b-to-b direct marketing campaign that had a BRC in it. That's not how people consume marketing messages and respond these days. The big trend is that people want to acquire information on their own terms, and the interactive side—the Web—really creates a robust environment for them to do that.
BtoB: And yet there remains plenty of room for so-called legacy approaches, I assume. What are you seeing?
Kessel: The problem is that the price of oil has increased the cost of everything, but mostly transportation. Yes, postage, obviously, has gone up and will likely continue to do so. And the cost of paper also has risen; but it's really about getting your materials out of the printing plant that's impacting things. Having said that, every medium is additive, and ink and paper won't go away. But because of digital, the way the two are working together constitutes a dramatic shift.
Lowe: Postage costs are a driving factor. If it weren't for digital technology being able to do personalized printing, I feel that direct mail would have taken an even bigger hit than it has because of postage costs. It can make sending direct mail to a really big group cost-prohibitive.
Cleary: Nevertheless, the traditional component is important once I know you and have a relationship with you. There are a variety of different ways to keep that dialogue going, and the upfront direct-mail piece that lands in your inbox—and that is visual, tactile and well-thought-out—that continues to be very big. Yes, marketers are getting smarter about it, with better targeting and higher relevancy. But when you get a dimensional piece on the desk, it's hard not to open and interact with it.
BtoB: It sounds like all parts of the puzzle can be made to work together. How is that developing?
Kessel: Most people who get a catalog these days will go online afterward. Ink on paper is a tremendous driver of Web hits. So is DRTV, although the call to action is changing. It used to be a toll-free number, but now it's a URL. That all speaks to how people multitask these days. Very often people are watching TV with a computer on their lap.
Lowe: A lot of people are struggling make integration work, though. It's easier when you're dealing with an integrated agency to create a true integrated program from the outset so that direct marketing doesn't play a standalone role. It used to be that direct agencies were always separate from general agencies, or were part of their own department, so campaigns weren't seamless. Today, the goal is that the customer does not know whether it's a direct spot with a call to action or an awareness spot.
Cleary: The biggest area of direct- marketing integration for b-to-b companies these days is with event marketing. Because so many companies are going to marketing events, they're directing us to reach out in advance, to invite customers and prospects and to capture information about them. Direct marketing is tightly tied into event marketing, whether it's pre-event, during the event or postevent for follow-up. The key thing with integration here is that the lines are blurred, yes, but in the end you're not very concerned about how you got the customer, just that you got them.
Kessel: What's more difficult to understand given all this integration, however, are the dynamics between the channels. A great example is a mortgage lender that did a lot of DRTV; their business came from that and search. To cut costs, they cut their DRTV budget in half and all of a sudden found that on the search side they weren't converting as well; it went down 50%. As it turned out, the DRTV was giving them credibility and familiarity. Without it, familiarity was lessened and, therefore, so were search click-throughs.
Lowe: It's all about the customers' opt-in. You have to capture their information so you can establish a dialogue, and with b-to-b that's critical. That opens up the door for further dialogue through e-mail. That won't replace regular mail 100%, but there are times to mail and times not to. It's most effective to have a number of touch points.
We've done testing with one client that wanted to drop direct mail entirely. Our test was on direct mail versus e-mail, both alone and together, and we found we had a more than 30% sales lift when e-mail was combined with direct mail. Yes, online can be effective solo, but that's where people get hung up. When combined with offline, it can be more effective. The fact is when you're just selling the offer, somebody will always one-up you. That's where companies have gotten smarter.
BtoB: It would seem that direct marketing is having a greater-than-ever impact on the sales department and vice versa.
Lowe: Yes. With direct marketing, people raise their hands; but now you have to figure out how to convert that into sales. I'm seeing a lot of trigger-based marketing integrating with the sales force. There are still clients that want one-step purchases, but for most it's all about creating a relationship. Even with a one-step purchase, a richer relationship can bring in cross- and up-selling.
Cleary: We came across this a while ago. Instead of just doing a lead-gen marketing program with more prospect mining, we asked sales about the people who responded last year but didn't buy. It turned out those people were the best prospects in the coming year, which developed into a further nurturing campaign. You have to understand where people are in the cycle.
The best use of direct is tied closely to the way a company sells. You can leverage this interaction with a more tailored experience, such as a personalized URL (PURL), which literally is designed to mitigate the fact that you can't have a salesperson respond to everyone.
Ashway: And since the direct marketer increasingly is embedded with the client, it's more important than ever that they're on the same page. It's the message that's largely going to drive this type of response, not the rate. I think there is a more acute focus these days on direct-marketing creative, because it has to move the customer to a different place. You can't hide behind catchy slogans that any 5 year old might respond to. Rather, the message must demonstrate value succinctly and with expertise. But of course, it also has to move the customer to do something. Direct marketing is all about needing the customer to do something today, whether it's going to a Web site, requesting a catalog or calling sales.
BtoB: What trends are you seeing with the classic offer that's tied with a purchase?
Cleary: We see two types of offers, and it's no surprise that a lot of b-to-b marketers aren't really good at either one. First is the engagement offer, which is designed to get the customer involved in a dialogue, to find out quickly if he's qualified. We'll do that on a fairly liberal basis, and it has a response rate of from the low single digits into the teens. It's primarily about getting people to talk to us. We had some fun with this with one client, talking about how the client's service wasn't plain vanilla; we sent a coupon for a free scoop of Ben & Jerry's.
Later, when you have the customer further down the line, you can use a business-related offer, perhaps more case studies and the like, designed to move a person through the sales process. And if we have a highly identified audience, we'll actually use purchase offers, offering for example a discount or value-add incremental service for a limited time. But you can offer this only with someone you have a high degree of knowledge about but who hasn't made a purchase yet.
Morvay: I make a distinction between direct marketing, where you're communicating directly to your customers, just talking to them, and direct response which is built to get that response. They call for different approaches.
BtoB: What's next for direct marketing? What's on the horizon?
Kessel: Everyone is waiting for the addressable TV box, to provide marketers with information on which TV shows people are watching. When it's a reality, it would be possible, for example, to have a dialogue directly through the set-top box, with you getting one message and your neighbor getting another.
Lowe: I agree that things are definitely getting more targeted. Instead of mailing to all pros-pects, we'll just mail to prime ones or to customers, to integrate mailings with e-dialogue.
Another big trend is DRTV. It's exploded, but not with a traditional call to action. Clients are looking at direct response differently, as a way to build a brand and drive response at the same time. In response, creative is getting more honest with the customer. We still have calls to action, but we're just not throwing a tagline on them. As [Draftfcb Chairman-CEO] Howard Draft said years ago, “Some believe it's about the brand and some think it's about results. We agree.”
Ashway: I agree about DRTV and video. Unfortunately, the labor involved is still significant, and it's not fast or packageable enough. For instance, you can't generally e-mail it. You have to drive people to a Web site. That's where you dump your video. But the trend has to be looked at as a direct-marketing tool.
Cleary: The future will come down to what you know about your audience. Marketers will continue to get smarter and more effective, and will drive better creative execution. But rest assured, the direction we will follow is how people look at and consume our marketing messages.
BtoB: Speaking of knowing your audience, studies have shown that the greatest number of hires within the marketing suite is for analytics professionals. That sounds like a premium is being placed on understanding databases?
Lowe: It's huge. Our customer intelligence group here lives and dies with both targeting and results analytics. It's all about who our prime prospects are, who to spend more money on, who's worth sending direct mail to versus online and analyzing what's driving trends.
Cleary: Analytics has certainly become a bigger driver and a foundational component of campaigns. But on the b-to-b side it's an evolutionary process. These companies often start with public sources and lists, and then get back quickly to nurturing. So what we're seeing is a growth in the strategy around how to acquire information from these people, to make the next marketing efforts more intelligent and consistent.
Morvay: Technology is key, yes, but again it's integrated. For example, we have proprietary technology that measures how people who are seeing a commercial on TV respond to it online. The value today in growing business has a lot to do with technology, especially as databases move to a very sophisticated level.
In addition, a key feature of technology today is modeling—determining what people will do in the future based on their previous actions. Direct marketers can take the characteristics of those people whose actions we know, determine their other characteristics and match them with other people who look like them. Doing this, you can predict with a high degree of confidence people's propensity to buy.
Ashway: Technology also is providing sales with key information. Knowing that, say, 500 direct e-mail newsletters were opened might be useful in itself, but because it's all database-driven, the list gets repurposed in the process to give you more information. For example, now we can get the time of day the e-mail was opened, which gives us immediacy, an indicator of interest. If it's been left in the inbox for a day or two, that's another indicator. Then you can measure the links they clicked, and follow their path to a Web site. If a disproportionate number of viewers click on a link, you know you've hit a hot spot for the topic.
BtoB: That, of course, raises a question about privacy. What privacy concerns do you see industrywide?
Kessel: As long as we're permission-based, we're fine. If we get too assumptive and close to people, I think we'll run into problems. The customer is in control these days, and we have to be completely transparent. I'm reminded of a wonderful quote by [Wunderman founder and direct-marketing legend] Lester Wunderman: “Don't pretend you know me when all you know is something about me.”
And here's another quote I like: “Customers are hunting us today more than we're hunting them. Today it's the deer who have the rifles.” M