Direct mail: Can mail ditch its junk tag?

Improved targeting, building awareness of opt-out initiatives and the uptake of recycling schemes could help repair the image of direct mail, writes Holly Acland.

The direct mail industry has had to develop a thick skin over the years. 'Shit that folds' and 'stamp-lickers' are two of the terms one major advertising agency used to describe its below-the-line counterpart.

Direct marketing has, however, seen some improvement in its status. With its emphasis on measurement and targeting, it has become one of the success stories of the past five years, enjoying consecutive spend increases while other sectors have floundered, according to the IPA.

At least, that was the case before the BBC show Brassed Off Britain came along. Just as direct mail's star was in the ascendant, the TV programme, which asked consumers to vote for the thing they find most irritating, brought it crashing back down to earth. Direct mail topped the table with 24% of the vote, closely followed by banks and call centres.

Although critics were quick to point to the programme's sensationalist agenda, its hypocrisy (the BBC itself is a major user of direct marketing), and the amount of consumer spend that results from direct mail (it generated £26.3bn of business in the UK last year), the damage was done.

So how can the negative image of the industry be improved? All media have to contend with companies making poor use of them and eroding their value, but it is a problem from which direct mail suffers acutely. It is no coincidence that banks were close to snatching the Brassed Off Britain title of biggest consumer irritant, trailing direct mail in the TV poll by just 0.6%. Financial services companies are by far the heaviest users of direct mail, making up eight of the top 10 biggest spenders in the sector.

MBNA heads the list with a staggering spend of more than £66m in 2003 - an 11% increase on 2002, according to Thomson Intermedia.

Unfortunately, the business model traditionally followed by financial services firms, particularly for credit cards, is based on volume, with scant regard for creativity or targeting. As a result, credit-card mailings from companies such as MBNA and Capital One dominate the doormat and are largely responsible for the prevalence of negative images of direct mail.

'Only a tiny number of business sectors are responsible for the problem.

In direct mail, it is overwhelmingly a problem of the financial services industry's making,' says Rory Sutherland, executive creative director of OgilvyOne. 'This is an important distinction to make. It would be a waste of time to bother, say, the car industry with addressing the problem.

I may be wrong, but I don't think many people feel burdened by the volume of irrelevant car mailings or travel information they are sent.'

As long as enough people respond to meet acquisition targets, though, the volume approach favoured by financial services firms' will continue, regardless of damage to the brand or direct marketing as a whole. While no company is likely to change its marketing strategy for altruistic reasons, however, commercial reasons are another matter, and this offers some reason for optimism.

An increase in consumer apathy to poorly targeted direct mail will result in response rates dropping to the point where it is no longer commercially viable. This will rid doormats of credit-card mailings emblazoned with indistinguishable balance-transfer offers.

'There is no doubt that response rates are falling and return on investment is getting tighter,' says Mark Roy, group managing director of data quality specialists The REaD Group. 'The volume mailers will get to a crossroads where they will be forced to make changes - either by stopping direct mail altogether or doing it better.'

Given the advantages of direct mail, including its accountability and the amount of information that can be conveyed, it is unlikely that credit-card mailers will turn their back on it wholesale.

However, there may be a change in approach resulting in a positive knock-on effect for its image, which in turn might lead to a greater focus on customer retention, rather than acquisition.

'There needs to be a shift in emphasis toward long-term revenue,' agrees Anne Gowan, marketing consultant and former director of direct marketing at the Telegraph Group. 'It is far more cost-effective and it is starting to happen.'

Future framework

Commercial imperatives should improve the health of direct mail. Ambitious recycling targets that have been set for the industry are one area certain to focus its mind. Last year the Direct Marketing Association (DMA) signed an agreement with the Department for Food, Environment and Rural Affairs (Defra) to recycle 30% of all direct mail and promotions material by the end of 2005, rising to 70% by 2013.

The industry also needs to increase awareness of the Mailing Preference Service (MPS) - a self-regulatory tool allowing consumers to opt out of receiving direct mail - and improve its targeting. This is a package of hard measures behind which the industry cannot hide.

As part of its response, the DMA teamed up with environmental group Planet Ark to launch a major business and consumer PR offensive last year to turn around consumer perceptions.

The result has been positive and impressive in scope - MPS registrations have risen by 650,000 since its start - and a second phase of the campaign will take place later this year. However, DMA chairman David Coupe warns that there is no quick fix for tackling the image of direct marketing. 'We need to be active on a number of fronts - the industry, the consumer, regulators and the government,' he says. 'There are lots of positive messages to get out there, but it will take a long period of sustained effort.'

The DMA may have its work cut out to meet Defra's recycling targets, but it is clients and agencies that have the biggest role to play. 'The drive to improve should be inspired by the practitioners,' says Jane Asscher, managing partner at agency 23red. 'We need to develop distinctive creative based on a brand idea, invest in recruiting, build our own customer database, recognise channel of choice and improve personalisation by identifying where the individual is in their relationship with the brand and tailoring the message and creative.'

Best practice

Few could disagree with the fact that direct mail, when used well, can be one of the most powerful ways of communicating with the consumer. The very fact that it is intrusive and requires interaction offers a level of engagement not possible with other media. As Neil Fox, director of planning at TDA, says: 'Direct mail uses a channel originally reserved for personal correspondence and makes it commercial.'

And far from seeing a reduction in client interest in direct marketing, most report the opposite. 'Because of the amount of badly targeted, unengaging direct mail, there is a huge opportunity to use it well,' explains Fiona Scott, managing director at Craik Jones Watson Mitchell Voelkel. 'High-quality creative work, underpinned by consumer insight gets results,' she adds, pointing to her agency's work for Land Rover, which consistently pulls response rates more than 10 times the industry average.

There are countless examples of financial services direct marketing that breaks the mould too. Rather than creating one umbrella proposition, Goldfish has worked with its agency DP&A to identify different segments, to which it sends different messages. Barclays is also taking a more sophisticated approach to targeting. The bank has been working with predictive modelling company KXEN on anticipating the products and services that match the consumers' needs. As a result, its mailing volumes have dropped by up to 70% and response rates have risen three-fold.

It is probably over-ambitious to consign the term 'junk mail' to history.

Yet as examples such as these become more commonplace, the future of direct mail is perhaps not as bleak as Brassed Off Britain viewers might believe.

TIM SCHIFFERS - COMMERCIAL DIRECTOR, BCA (BOOK CLUB ASSOCIATES)

Direct mail is a far more positive medium than many think. Some of its tainted reputation stems from companies not marketing within the agreed terms of reference of the industry. In reality, there is a lot of effective self-regulation. The Direct Marketing Association, as the governing and quality-assurance body of the industry, has defined a strict code of practice to which all its members have to adhere. Other organisations, such as the Mailing Preference Service, allow consumers to opt out from direct mail, giving them greater control than with other media.

Sending everything to everyone also counts against direct mail. In comparison with other offline media, such as press, TV or radio, direct mail can be more targeted. It can also transport more detailed information about a product or service, enabling better purchasing decisions.

Obviously each business is responsible for using direct mail sensibly, sending the most relevant information about the most relevant product or service to the most relevant audience. This can be ensured via de-duping lists, sophisticated data analysis and model-building. Consumers can also help to improve relevance by providing preference and interest information.

Applied correctly, direct mail is the most efficient and effective medium available.

NICK SMITH - DIRECTOR OF MARKETING AND STRATEGY, BRITISH GAS

The image of direct mail as junk mail is a direct result of the approach adopted by many companies over the past 20 years. However, from the consumer's perspective it is still the least intrusive direct communication channel and hence easiest to ignore when the message isn't relevant.

Increased relevancy will be the key both to commercial success and improving direct mail's image permanently. But until recently, organisations have struggled to manage high volumes of data effectively, to decipher this into customer insight and to translate that insight into relevant messages and propositions.

When direct mail is managed effectively, it can present a significant opportunity not only to drive direct acquisition, customer value management and retention, but also to provide customers with a positive and meaningful relationship.

Direct mail must be planned alongside field sales and call-centre activity as part of an integrated customer contact strategy. This will deliver the right offer, at the right time, to the right customer, through the right channel, contributing to the positive overall branded customer experience rather than simply producing irritating junk mail.

CONSUMER ATTITUDES

- 16% of people believe direct mail provides useful information, but 28% find it intrusive.

- 66% of people object to direct mail, compared with 81% who object to telesales. However, mail featuring special offers is welcomed by just over half. Mail containing competitions is welcomed by 28%.

- The greatest benefit of buying as a result of direct mail is convenience (60%), followed by value for money (44%) and availability (30%).

- Two-thirds of those who receive direct mail throw it in the bin (36%) or do not wish to receive any more (29%).

- Negativity toward direct mail has resulted in people perceiving the problem of 'junk mail' to be worse than it is. Just over 40% claim to receive seven or more pieces of DM a week. This is more than double the actual amount.

Source: Direct Mail Information Service 2004/MORI.

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