I had lunch earlier this week with a old and tenured friend, who runs a personalized mail business. As with many, if not most or all, direct mail production companies, his business is suffering some.
He asked me to peer into the future and tell me what I thought was going to happen to the industry. I won’t claim that my insights are better or more predictably accurate than anyone elses, but here they are:
First, I think the efficacy of direct marketing is being publicly proven — again. For example, as I posted earlier. The DRTV business is growing in this economic downturn, because of the reduced price of network TV advertising. General advertising agencies don’t have budgets from their clients to “over pay” for television time, so DRTV is proving how much stuff you can really sell over TV, rather than just advertise it.
Second, while retail sales are flat or down, ecommerce and mail-order sales are flat or increasing (this according to US Dept of Labor statistics). Retailers continue to commit increasing resources to their ecommerce initiatives. Chicos FAS even “replaced” their CEO because he had not devoted sufficient resources to their “direct” business, which was growing faster than any other segment.
Third, internet based retail stores are great “buying” channels, but poor “shopping” channels. Even with ubiquitous broadband access, you cannot flip thru a web site the way you can flip thru a catalog. Interestingly, the big catalog companies, such as LLBean and Lands End and others, continue to drive business to their web site by mailing catalogs. And their web sites are continuing to grow as the point of origin for more and more of their total order volume.
Fourth, electronic-mail does not replace paper-mail (at least, not yet). By all reports I’ve heard, response to email marketing is 10-20% of response to paper-mail marketing. That means if you get 2% response to a catalog, you’ll get 0.2% response to an email effort — at best.
And even if the email marketing effort is statistically more profitable, the gross sales and net income remains dramatically lower than traditional direct marketing efforts. So, all of these merchants who are trying to save money by shifting declining resources to electronic marketing will likely find they will have to return to a more balanced budgetary strategy.
The more difficult question is when will this rebalancing occur — almost impossible to predict.
So, here’s the question I think we need to be contemplating more:
How can we integrate the web as a response channel to paper-based direct marketing efforts, in order to document their efficacy?
And in my opinion, this integration should be more than back-matching orders to mailing files, or forcing customers to enter “source codes” from their catalog.
Let’s have a little creativity in response tracking
