Direct marketing spending is on the rise for many in the industry, which is welcome news, but the real excitement is centered around good old-fashioned direct mail.
Despite indications that direct mail has taken a hit the past few years, including mail volume declines year over year cited by the U.S. Postal Service, the medium is experiencing a resurgence with marketers. This turnaround had been predicted by some in the industry. Mike Tuohy, VP-business-to-business at list manager Direct Media, told BtoB earlier this year that he expected a slight increase in mail volume this year, with "a big jump in 2005."
Michelle Feit, president of E-Post Direct, said: "In 2005, we are going to see a very, very big year. It's going to be significant growth."
Fifty-six percent of marketers report they intend to increase spending on direct mail this year, beating out search engine marketing, print advertising, e-mail and e-newsletters, according to a direct marketing trend survey published in late September by Kern Direct, a direct marketing advertising agency.
"I've seen that trend coming for the last six to nine months," said Russell Kern, founder and CEO of Kern Direct, the majority of whose client base is b-to-b. "The marketplace has been bombarded with online e-mail, and spam filters are getting increasingly aggressive and postal mail has quickly returned to its effectiveness," he said. "It's efficient and it delivers qualified leads."
Robert Coen, director of forecasting at ad agency Universal McCann, predicted direct mail spending will reach $51.5 billion this year, up from $48.4 billion last year.
To purchase the 2004 Direct Agencies List, click here
Many executives agree that direct mail is back in fashion.
"There has been a substantial increase in the desire for and budgeting of direct mail given the legislation surrounding telemarketing as well as e-mail," said George Gallate, CEO of Euro RSCG 4D, a direct agency.
Many marketers are growing particularly weary of the problems associated with e-mail. "It's the firewall and spam issues," said David Hughes, manager of database marketing at Canon USA. (See story, page 30.) "I think it has really overwhelmed a lot of people."
Hughes said direct mail is more engaging and offers broader creative possibilities. "With a mail piece, you have the opportunity to have them look at the image and draw them in and pique their curiosity," he said. "You can't do in subject lines what you can do with imaging and direct mail packages."
The key factor that could slow down direct mail's growth is a postal rate increase. Postal reform, which made significant progress last year because of the work of a presidential commission, has stalled in both chambers of Congress.
David Straus, counsel to American Business Media, said, "The crucial feature of the reform bills that would allow the Postal Service to stop over-paying for retiree costs by about $3 billion per year remains in limbo, and if it doesn't pass either as part of overall reform or on a stand-alone basis, the postal rate increase that will be filed early next year will be about five percentage points higher than it should be."
Search engine marketing growth curve
Search engine marketing has been on a growth curve as well, as marketers begin to recognize it can be a powerful direct response medium.
"The skills to manage or the resources to manage online search marketing, whether paid or natural, need to be part of the tool set for marketers in 2005 or 2006," Kern said.
Euro RSCG 4D's Gallate agreed. "The growing use of and the importance of search engine optimization and search engine marketing is where the smart money has been funneled in the b-to-b space," he said. "It's an important part of the current marketing mix, and it is getting very strong return on investment."
Another trend that continues to pick up speed is integrated marketing.
"When it comes to integrated efforts, we take a strategic approach that allows us to `dial up' certain aspects of an integrated campaign depending on what we're trying to achieve," said Michael Paradiso, VP-global media director at Computer Associates International. He said Computer Associates strives for that integration in each of its campaigns and that direct mail remains a core part of its efforts.
While integration has been a mantra for years, many marketers are just beginning to practice it effectively.
"Customers are trying to deliver that sales and marketing mindset to the multiple touch points," said Tom Gaither, VP at D&B Sales and Marketing Solutions, a unit of D&B.
Gallate said marketers' understanding of both the customer and the brand is crucial to building integrated campaigns. "The clever marketers and businesses understand how to use all media to build brand and relationships, and that's even more the case in the b-to-b space," he said.
As a result, database marketing is beginning to go beyond analysis and measurement to a more active mindset. "When you talk to people about database marketing, it sounds very analytical and reflective, and I think that's necessary but not sufficient for what I see our customers trying to accomplish," Gaither said. "The most important thing after you do analysis and reflection is to be able to take action on that."
Gaither said traditional database marketers are beginning to move front and center in driving information into business processes "where we can influence customer behavior and make the business more successful."
Forrester Research backs that up. "The scope of database marketing is expanding," said Forrester analyst Eric Schmitt. He said database marketers have indicated their influence and their budgets are rising. In a survey of 49 database marketing executives, 72% said database marketing is gaining influence relative to mass media advertising within their organizations; 59% said their overall database budget increased this year; and 63% expect another increase in 2005.
Schmitt said that as people spend more time with channels such as e-mail and the Web, "the potential to adapt and apply database marketing techniques such as segmentation, targeting, lifetime value analysis, and test and control measurement grows. This explains the increase in demand for customer analysis services."
Forrester's research shows the lack of enterprise strategy and coordination is the greatest challenge when it comes to database marketing. When asked about their pain points, Schmitt said, 59% of database marketers polled identified the lack of a coordinated, enterprise-level customer contact strategy as their No. 1 challenge.
Gaither agreed with that finding. "The information in most companies still exists in different silos that were built to manage specific functions like customer service or technical support or billing, and integrating that information together and enhancing it with the right descriptive information is still a big challenge," he said. "That's still the primary challenge for marketers."