The two cents I'm talking about? The postal increase that went into effect on Jan. 8. Every time you or your company sends out a letter, it will cost around 2¢ more. To be precise, first class mail now costs an additional 2¢, and Standard A mail is 1.4¢ more expensive.
Why does this matter?
For years, the direct-mail business has been growing. In fact, direct mail grew almost 6% last year-to over 100 billion pieces mailed. In a world of declining TV viewership, falling newspaper circulation and waning radio and magazine effectiveness, direct mail has remained an attractive channel to deliver targeted messages with a reliable ROI. As such, marketers with real direct-marketing expertise have been able to expand their utilization of mail. However, this is now going to change.
Don't get me wrong: Direct mail will be a critical communications technique for years to come, but in 2006 we will start mailing less.
Why? Not only are postal rates going up, but paper costs are also rising approximately 8% in 2006. Further, the amount of critical communications in America's mailboxes is declining. For example, 50 million people now bank online, more financial statements are digitally transmitted every day, and even some wedding invitations and countless Christmas cards are being delivered by e-mail. As such, there is less reason to pay attention to your mailbox contents. The impact of these changing mailbox dynamics has already been felt. According to the Direct Marketing Association, the response rate to financial services mailings fell 46% this past year.
Not a channel
Suddenly another communications channel-just like TV, newspapers, magazines and radio-is a little less effective. This is a particularly vexing issue because direct mail has been such a dependable, results-driving channel.
So what should marketers do?
First, they must recognize that direct marketing isn't a channel-it isn't direct mail. Direct marketing is a communications methodology that's arguably the best solution in these turbulent times. Direct marketing's proven analytical and testing methods can be applied to a wide array of media beyond mail. As such, traditional marketers should actually seek the advice of progressive direct-marketing professionals more frequently.
As we all know, the traditional advertising business is in crisis. Consumers are rejecting intrusion advertising en mass. Over 70% of PVR users skip through commercials. Satellite radio has eight million customers. Over 100 million folks have signed up for the Do-Not-Call list. And spam is uniformly despised. Consumers are clearly telling us that they don't want to be subjected to irrelevant advertising messages when they're watching TV, listening to the radio, having dinner, reading their e-mails-or opening their regular mail. To compensate, many marketers are flirting with product placement, word of mouth and buzz marketing. Of course, they might want to spend more in these less-charted waters if their direct mail becomes less effective.
But while these "buzz" tactics are interesting, they are sometimes aggressively deployed without full utilization of strategies that can prove their effectiveness, like DRTV, keyword search, e-mail marketing, direct-response print and even direct mail.
Naturally, responsible marketers should experiment with new advertising techniques, and direct marketers should aggressively seek to quantify the effectiveness of these approaches. But the preponderance of marketing dollars should be deployed in proven, measurable ways.
Some marketers are adapting and effectively leveraging newer direct-marketing strategies to generate increased success. For example, a number of package-goods brands are turning to DRTV and getting the gross rating points they need for 30%-60% lower rates than their normal TV buys. At the same time, they are building direct relationships with their best customers-and helping to defend against the increased power of retailers. A prescription drug brand, meanwhile, is coordinating its keyword-search campaigns and public relations efforts, improving its search engine marketing effectiveness and providing critical information to progressive information seekers sooner. This technique is also highly effective because some aggressive information seekers then spread the word about the brand in chat rooms and blogs, further improving communications ROI.
And then there are the business-to-business marketers who have converted trade advertising dollars into e-mail/relationship-marketing campaigns and forged far more profitable relationships with their best customers and prospects-and dramatically improved their advertising ROI.
Lastly, a savvy financial-services client and a major airline are defying the declining direct-mail response rates by implementing more insightful, sophisticated segmentation and offer strategies.
The new marketing landscape is complicated. Yet one thing is clear: The future will belong to the most profitable marketers and companies-the ones who can figure out how to modify their strategies based on ever-changing marketplace dynamics. The dot-com crash reminded us that profitability is the ultimate business metric. Direct marketing remains the most accountable communications method-the only true statistically reliable advertising approach.
To secure the brightest of futures, direct marketers of the world need to become more rigorous in applying our time-tested techniques to a broader array of media. And traditional marketers should be turning to direct marketers more frequently to help them navigate the path to optimal ROI and profitability.
The postman still cometh, but today's world demands so much more from direct marketers and marketers overall.
That's my two cents.
Lawrence M. Kimmel ... is chairman and CEO of Grey Direct. Send him your comments at [email protected] com.
Or mail him a letter.