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Package-goods direct marketing, once thought to be a panacea for building brand loyalty, hasn't quite lived up to its potential.

Tighter budgets, questionable economics, and a decline in couponing and other promotional spending have conspired to trim some companies' commitment, even as direct marketing soars in computer, travel and other businesses.

"I think it was a bubble," said George Wiedemann, president of Grey Direct Worldwide, New York, which counts no package-goods brands in its client roster. "There is tactical success around, but nobody's cracked the code to show linkage between direct activity and [market] share, so it's an impact problem."

But interest seems higher than ever, "particularly as companies invest in more sophisticated techniques like databases," said Robert Wientzen, president-ceo of Advanced Promotion Technologies, Pompano Beach, Fla., and formerly Procter & Gamble Co.'s top direct marketing executive.

"At the same time," he said, "there has not been the huge increase that people would've expected there to be in terms of actual campaigns being conducted."

Of course, product categories with highly targeted audiences-diapers, pet food, tobacco-continue to be the most aggressive users of direct marketing programs, often because mass media advertising proves wasteful or is legally restricted. Direct mail sampling is also the surest way to generate trial of new products.

Despite much discussion, investigation, testing and analysis, however, other package-goods products have been slower to embrace direct marketing.

Those that have are doing so cautiously, often in multibrand co-op programs. P&G, for example, last year rolled out "StraightScoop," targeting teen-age girls with quarterly newsletters, beauty tips and product samples for Always, Secret, Crest, Cover Girl, Clearasil and Pert Plus.

Similarly, Kraft General Foods has trotted out multibrand direct marketing programs like "We're Right for You," featuring fat-free and other diet foods.

The marketer's single-brand efforts tend to focus on products with hefty profit margins, like Crystal Light diet drink mixes and mail-order Gevalia coffees.

Direct marketing budgets are up at Kraft General Foods, said John Kuendig, director of direct marketing, but he declined to compare that increase to its ad spending hike.

And the marketer recently trimmed costs by turning over management of its huge database, estimated at 40 million households, to Donnelley Marketing, Oakbrook Terrace, Ill.

Preliminary figures for the first quarter show a 15% increase in activity from the same period last year, said John Cummings, whose Armonk, N.Y.-based consultancy tracks database marketing activity in the package-goods arena.

But even Mr. Cummings believes some marketers are scaling back their plans as they wrestle with unwieldy amounts of data.

Still, many companies are using direct marketing tactically, to support broader marketing programs.

Pepsi-Cola North America, for instance, this month sent letters promoting its new freshness dating label on Diet Pepsi. The mailing was sent to the database compiled from Pepsi's "Convert a Million" campaign, in which 1 million Diet Coke-drinking households were sent cases of Diet Pepsi.

And others are conducting programs at the retail level, relying on supermarkets' frequent-shopper databases.

Gary Levin coordinates Direct Marketing News.

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