Clutter socks financial cos. in the mailbox

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Financial marketers are pouring more money than ever into direct mail-and getting worse results.

That revelation comes from none other than the Direct Marketing Association, which is reporting declining response rates for financial-service offers for the past three years. The slide, which defies better targeting models and improved technology, could spell trouble for financial institutions, which heaped a record $13.2 billion on direct last year-36% more than they spent on measured media.

There's a simple reason results are taking a hit: too many envelopes going through too many mail slots, leading consumers to chuck the blizzard of solicitations they receive. "We're just starting to see the effects of saturation," said David Kelly, VP of Sigma Analytics, a unit of database marketing agency Merkle, Lanham, Md.

Low response

The response rate for some recent lead-generating direct mail campaigns monitored by the DMA was just 1.43%, according to the association's 2005 Response Rate Report conducted earlier this year, down from 2.09% last year and 2.48% in 2003. For direct-order mail-which solicits or closes a sale-the response rate was even lower, 0.69% in 2005. That compares to 3.5% in 2004 and 1.15% in 2003.

Direct mail represents nearly 20% of financial services companies' direct marketing spending, according to the DMA.

The yearly comparisons aren't exact-for example, the DMA only this year started lumping insurance companies with other financial services marketers, and sampling groups change-but the downward decline is directionally accurate, said Ann Zeller, VP-information and special projects for the DMA. The trade group surveyed 23 lead-generating campaigns and 18 direct-order campaigns.

Consider, for example, credit cards. Marketers shipped out 5.23 billion credit-card offers in 2004, up nearly 1 billion from 2003, according to researcher Synovate-and saw the response rate drop to 0.4% from 0.6% in 2003. As recently as 1998, the response rate was as high as 1.2%.

Yet credit-card marketers sent out a record 1.4 billion offers in the first quarter-only to get a record low response rate of 0.4%, according to Synovate.

Clutter has become an issue because financial services marketers historically aimed wide and generated solid returns on investment even with low response rates, said Tom Collinger, associate professor of integrated marketing communications at Northwestern University's Medill School of Journalism. But the danger, he said, is that "pummeling" consumers with inappropriate offers risks "driving up the likelihood that [consumers] will always say no."

So what's a financial institution, which relies on direct to push its wares the same way package-goods marketers depend on TV, to do?

Target better and differentiate more, said Michael Sugzda, senior VP-client services director for Citibank at WPP Group's Wunderman, New York. "You have to make sure you're talking to the right kind of person."

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