Direct Mail: Mail continues to slide

Direct mail volumes are in steady decline as targeting improves and budgets are shifted online.

Two-and-a-half years ago direct mail volumes hit their peak, but have been in constant decline since. In the 12 months to June 2006, overall spend on direct mail was down 6% to £1.87bn, while volumes fell 7% to 3.4bn items, according to an exclusive study carried out for Marketing by Nielsen Media Research.

The research, compiled using a panel of 10,000 consumers who forward their direct mail to Nielsen each month, found that of all direct mail sent, three sectors - finance, mail order and charities - account for more than two-thirds, at a share of 30%, 27% and 11% respectively. These areas were not immune to cuts in spend, with finance and mail-order companies reducing their budgets by 9% and 7% respectively; the charity sector remained static.

From 1985 until 2003 direct mail experienced dramatic growth, from just under 1bn items sent to consumers each year to more than 4bn in 2003, according to the Direct Marketing Association (DMA).

This was fuelled predominantly by financial services companies' relentless offers of credit cards and loans. More recently, however, the political and economic climate surrounding credit has changed, with growing concerns about the levels of consumer debt.

The subsequent fall in financial mailings was compounded last year by changes to the Consumer Credit Act, which altered the way product features such as interest rates could be compared in promotional materials. This led some financial services companies to delay direct mail campaigns while their marketing and legal departments interpreted the changes to the regulations.

Capital One, a heavy user of direct mail in support of its credit-card offering, was one firm that cut its spend. In the 12 months to June 2005, it was the UK's biggest spender on direct mail, but it has since reduced its budget by 23%, to £30.5m or 68m items, which has seen it drop to third place.

Arjan Dijk, Capital One's senior marketing director, says that in addition to a change in the climate for credit risk, the company has reduced its volumes to place more emphasis on customer retention, which have increased from 1m to 4m over the past five years. In the 12 months to June 2005, the company spent 98% of its direct mail budget on acquisition; this has now fallen to 72%.

Similarly, MBNA, which has replaced Capital One as the UK's biggest spender of direct mail, having hiked its budget by 41%, has increased the proportion of spend it devotes to retention from 23% to 53%.

It is a shift in strategy that is being gradually mirrored across financial services, according to Thierry Saada, director of sector marketing at Royal Mail. 'Last year was one of consolidation for financial services,' he says. 'Having enjoyed a period of higher response rates, firms are now spending more time cross-selling and developing new customers and less on prospecting.'

This is not to say prospecting activity is no longer being carried out. It is, however, becoming increasingly targeted, as more companies buy in consumer data, combine the information in complex databases and extract the types of consumer most likely to respond.

'Within financial services, we are seeing more targeted direct mail, and consequently smaller-volume campaigns,' says Saada.

Betty Doyle, head of marketing at data company Acxiom, confirms the rise of targeting. 'Three years ago credit-card firms in particular were focused on acquisition. The sheer volumes of mailings were astronomical. This has now fallen. Even at companies such as MBNA, where the volumes are high, targeting is happening.'

For the time being, however, financial services brands in general remain focused predominantly on customer acquisition, with 58% of mailings being sent to prospects, although this is down from 62% the previous year. Mail order and charities are even more acquisition-focused, concentrating 64% and 73% of their mailshots respectively on potential customers or supporters.

Targeting is not the only factor driving down mail volumes. A shift toward online marketing, which is able to deliver more targeted and personalised messages at a lower cost, has also contributed. 'There is a huge correlation between the uptake of broadband and consumers dealing with financial services companies online,' says Dijk. 'When online becomes a preferred medium, marketers have to be smart about whether they use online or mail.'

Financial services is not the only sector to have experienced this online migration. Although direct mail accounts for £2.45bn of the £17bn direct marketing industry, and remained the second-biggest category after telemarketing at £3.9bn in 2005, according to the DMA, digital is the industry's fastest-growing channel. In 2005, its worth soared by 80% year on year to £1.5bn.

Tim Pottinger, database solutions manager at database management firm EuroDirect, agrees that the fall in mailing volumes can be attributed to the use of multiple channels, including digital platforms.

'I suspect that direct mail is being used more for prospecting, while digital media, such as emails, are being used for customer communications,' he says. 'Organisations are using more customer messages and diverse methods to deliver them. It is probably a good thing that direct mail volumes are reducing because it will become more effective.'

Mail order, which includes traditional big catalogue companies as well as newer upmarket fashion and lifestyle offerings, has effected a 7% drop in volumes, although consumers still had 746m catalogues pushed through their letter boxes in the year to June 2006. This reduction is epitomised by Freemans, which was the 20th-biggest spender on direct mail last year, but does not feature in the top 100 this year.

Traditional catalogues have been particularly badly hit as sources of easy credit have proliferated and eroded their unique selling point. The industry has also suffered at the hands of online pureplays and clicks-and-mortar retailers. Mail-order sales fell by £282m in 2005 to £7.9bn, according to Verdict Research.

One consultant who handles direct marketing for some of the UK's biggest mail-order companies defends the medium. He claims that the lower volumes reflect a transition from 1000-page catalogues, offering products to the C2D2 demographic on the 'never-never', to new-look lifestyle publications, comprising about 20 pages, which are aimed at ABs, who don't have the time to go out shopping.

He believes the hype surrounding online sales overlooks the contribution of paper catalogues. 'A catalogue offers four of five ways to buy: by phone, mail, fax, on the web and, in some cases, by visiting a store. I guarantee that if you send out 1m catalogues, it will boost your online sales.'

A lack of innovation on the web and failure to adopt sophisticated targeting techniques could explain why the charity sector's spend has remained static, at a time when most big-spending industries have cut back.

Scott Logie, managing director of database company Occam, which operates a list-swapping service for 120 charities, says the sector can be slower to react and is less likely to regularly revise its strategy. 'Some charities are not as sophisticated in targeting as the financial services firms because they cannot afford to be,' he says.

Clive Mollett, founder of charity consultancy 121 Fundraising, agrees that there is a lack of innovation. 'The level of sophistication in direct marketing varies widely. Many operations work on a shoestring with a handful of people on the team, so targeting and testing campaigns do not enter the equation,' he says. 'But others, such as Cancer Research UK and Oxfam, do it with a great level of sophistication, where the number of people on the case designing and executing their direct mail is awe-inspiring.'

However, the charity and mail-order sectors, which allocate 74% and 73% of their marketing budgets to direct mail, must be wary of an over-reliance on a medium that must fight harder to retain consumers' interest.

A more determined focus on innovation so that mail can better complement both digital and traditional advertising strategies, and continued improvements in targeting techniques, should go some way toward achieving this goal.

DATA FILE - TOP DIRECT MAIL SPENDERS, 1-100

Rank Advertiser Spend Volume Reten- Acquis-
06 05 (pounds) (mailings) tion ition
(%) (%)
1 3 MBNA Europe 44,549,307 99,001,457 53.04 46.96
2 2 Lloyds TSB 41,053,417 91,233,070 60.54 39.46
3 1 Capital One 30,540,999 67,870,912 28.36 71.64
4 5 Direct Wines 29,266,703 56,883,704 65.05 34.95
5 4 Saga Services 26,417,177 47,965,741 55.48 44.52
6 9 NTL 26,372,601 47,378,979 14.66 85.34
7 7 BSkyB 23,174,042 46,047,039 27.76 72.24
8 6 Redcats 21,816,883 42,151,733 43.46 56.54
9 8 Liverpool
Victoria 21,319,653 35,189,541 45.65 54.35
10 11 Halifax 20,720,514 34,432,121 31.44 68.56
11 13 Book People 18,761,217 32,269,337 85.57 14.43
12 18 Damart 18,731,014 30,733,071 70.12 29.88
13 22 BT 16,902,634 30,456,772 36.91 63.09
14 17 JD Williams
& Co 14,965,634 30,212,364 74.07 25.93
15 10 Norwich Union
Direct 14,819,742 26,966,905 34.62 65.38
16 26 American Express
Europe 13,704,977 25,888,025 74.06 25.94
17 21 Saga Holidays 13,659,383 25,967,388 48.99 51.01
18 12 Reader's Digest 13,403,017 25,700,673 49.08 50.92
19 30 Response Direct
Publishing 13,045,977 12,529,459 0.00 100.00
20 15 Loans.co.uk 12,134,772 24,496,881 50.67 49.33
21 33 Shop Direct 12,065,985 24,138,898 47.97 52.03
22 45 Beaconsfield
Footwear 11,955,751 22,864,317 23.69 76.31
23 19 First Direct 11,685,007 21,851,567 36.24 63.76
24 46 Barclaycard
Services 11,649,168 21,585,020 62.53 37.47
25 80 Mint
(RBS Advanta) 11,023,291 21,028,707 37.36 62.64
26 - Unilever 10,903,784 19,461,675 32.21 67.79
27 14 Littlewoods 10,879,523 19,432,807 38.33 61.67
28 38 NatWest 9,712,902 19,284,033 75.11 24.89
29 48 Rias 9,462,440 18,360,780 27.45 72.55
30 36 Cancer Research
UK 9,177,277 18,068,210 28.29 71.71
31 31 Healthy Direct 9,125,304 17,548,026 27.00 73.00
32 65 Homeserve GB 8,744,375 17,056,771 96.52 3.48
33 23 DFS 8,407,937 17,043,293 0.00 100.00
34 85 Tesco 8,335,902 16,757,684 95.86 4.14
35 88 Alliance &
Leicester 8,130,403 16,458,446 59.57 40.43
36 32 Churchill
Insurance 7,873,061 15,864,597 14.17 85.83
37 73 Bradford
Exchange 7,768,081 15,728,549 22.02 77.98
38 61 La Redoute 7,683,110 14,905,045 53.55 46.45
39 50 Esure 7,675,240 14,860,402 3.83 96.17
40 54 Barclays Bank 7,669,209 14,788,429 37.56 62.44
41 25 Matalan 7,516,335 14,571,895 44.76 55.24
42 78 Chums 7,436,756 14,199,200 13.95 86.05
43 24 British Gas 7,425,492 14,182,129 42.47 57.53
44 79 AXA Sun Life
Direct 7,417,184 13,785,978 59.34 40.66
45 90 RAC 7,409,841 13,888,169 12.28 87.72
46 34 Thompson &
Morgan 7,360,444 12,828,204 8.07 91.93
47 35 Healthy Living 7,345,287 12,782,868 43.82 56.18
48 81 Westminster
Collection 7,274,675 12,673,866 30.49 69.51
49 - HSBC 6,707,096 12,570,026 15.27 84.73
50 55 National Savings
& Investments 6,557,073 12,392,342 69.94 30.06
51 57 Goldshield
Pharmaceuticals 6,412,407 11,995,182 73.63 26.37
52 59 Nationwide 6,389,444 11,930,133 27.03 72.97
53 42 Debenhams 6,278,016 11,753,108 55.35 44.65
54 69 PDSA 6,256,978 11,751,302 46.18 53.82
55 58 Sainsbury's 6,129,940 11,742,167 91.13 8.87
56 - Vernons Games 6,051,925 11,733,743 0.90 99.10
57 - House of Bath 6,017,788 11,706,877 57.20 42.80
58 - Healthspan
Direct 5,980,740 11,699,386 9.86 90.14
59 52 Nature's Range 5,948,597 11,591,689 0.63 99.37
60 98 Direct Line 5,942,842 11,419,128 25.33 74.67
61 - Wheeler Higgins 5,916,748 11,587,159 6.83 93.17
62 44 Kaleidoscope 5,846,801 11,566,260 33.27 66.73
63 68 IFAW 5,789,856 11,474,010 31.41 68.59
64 87 Compton &
Woodhouse 5,748,035 11,354,630 18.44 81.56
65 - GE Capital 5,703,077 10,957,163 7.05 92.95
66 - Masterfoods 5,671,236 10,882,740 52.28 47.72
67 70 Tower Health 5,645,656 10,702,681 3.29 96.71
68 49 Telegraph
Newspapers 5,641,399 10,668,844 44.15 55.85
69 - Age Concern
(England) 5,500,798 10,492,971 35.32 64.68
70 - Boots 5,454,703 10,659,945 87.34 12.66
71 83 Everest 5,380,494 10,448,842 16.03 83.97
72 - Dream Direct 5,318,740 10,382,638 72.02 27.98
73 28 Egg 5,288,784 10,344,032 25.58 74.42
74 - The Co-operative
Bank 5,267,879 10,301,758 77.21 22.79
75 53 Domestic &
General 5,206,786 10,202,325 99.41 0.59
76 37 Grattan 5,185,454 10,152,176 43.22 56.78
77 94 Unicef 5,178,822 9,923,791 9.22 90.78
78 - Hastings Direct 5,163,151 9,755,677 7.06 92.94
79 66 Bose 5,074,414 9,634,593 5.10 94.90
80 40 Telewest
Communications 4,961,003 9,579,153 34.99 65.01
81 - Dogs Trust 4,935,316 9,574,709 10.29 89.71
82 - The National
Trust 4,934,860 9,543,430 23.65 76.35
83 29 Morgan Stanley 4,930,596 9,439,901 9.23 90.77
84 41 Consumers'
Association 4,918,368 9,430,639 30.77 69.23
85 76 RNLI 4,868,271 9,417,291 15.02 84.98
86 - Hotel Chocolat 4,832,753 9,371,187 42.46 57.54
87 - Esher 4,806,911 9,364,741 2.73 97.27
88 47 Flying Flowers 4,802,480 9,205,589 31.68 68.32
89 - Dollond &
Aitchison 4,756,577 9,087,232 85.78 14.22
90 - Ocado 4,691,302 8,591,885 1.03 98.97
91 75 Powergen 4,682,866 9,086,865 43.28 56.72
92 - Nightingales 4,674,673 9,020,318 0.00 100.00
93 84 Marks &
Spencer Money 4,635,602 8,978,006 97.09 2.91
94 - Vernons Pools 4,587,819 8,656,515 0.58 99.42
95 - Bulldog
Communications 4,580,672 8,618,349 0.68 99.32
96 - The Salvation
Army 4,570,515 8,615,165 18.66 81.34
97 59 JND 4,541,610 8,594,472 36.80 63.20
98 82 Rodale Health
Books 4,495,024 8,514,598 1.71 98.29
99 43 The Royal
British Legion 4,494,894 8,508,657 18.90 81.10
100 - Diabetes UK 4,480,752 8,363,821 54.38 45.62


Rank Advertiser Spend Direct mail as
06 05 05-06 % of total
% chng marketing
budget
1 3 MBNA Europe 40.63 93.62
2 2 Lloyds TSB 9.80 69.46
3 1 Capital One -22.88 62.36
4 5 Direct Wines 0.01 95.67
5 4 Saga Services -13.97 80.71
6 9 NTL 20.39 78.35
7 7 BSkyB 6.47 19.36
8 6 Redcats -6.12 93.94
9 8 Liverpool
Victoria -8.09 84.75
10 11 Halifax -6.41 54.80
11 13 Book People 13.45 98.70
12 18 Damart 30.76 95.82
13 22 BT 33.36 18.41
14 17 JD Williams
& Co 3.12 41.91
15 10 Norwich Union
Direct -31.83 40.92
16 26 American Express
Europe 24.86 51.29
17 21 Saga Holidays 4.06 75.69
18 12 Reader's Digest -20.48 89.82
19 30 Response Direct
Publishing 22.61 99.70
20 15 Loans.co.uk -28.67 85.36
21 33 Shop Direct 29.46 63.56
22 45 Beaconsfield
Footwear 48.97 96.29
23 19 First Direct -13.91 69.51
24 46 Barclaycard
Services 39.52 59.49
25 80 Mint
(RBS Advanta) 85.87 61.02
26 - Unilever 42.11 5.54
27 14 Littlewoods -33.74 88.94
28 38 NatWest 8.73 34.63
29 48 Rias 19.09 82.27
30 36 Cancer Research
UK -2.25 53.15
31 31 Healthy Direct -6.14 95.28
32 65 Homeserve GB 34.73 100.00
33 23 DFS -31.23 8.14
34 85 Tesco 43.64 12.12
35 88 Alliance &
Leicester 45.64 36.97
36 32 Churchill
Insurance 52.85 35.40
37 73 Bradford
Exchange 26.60 51.66
38 61 La Redoute 12.60 81.27
39 50 Esure 0.29 23.08
40 54 Barclays Bank 8.95 20.78
41 25 Matalan -32.28 37.13
42 78 Chums 25.24 75.47
43 24 British Gas -34.39 19.10
44 79 AXA Sun Life
Direct 25.26 49.52
45 90 RAC 66.23 28.30
46 34 Thompson &
Morgan -22.43 98.65
47 35 Healthy Living -22.32 95.49
48 81 Westminster
Collection 21.99 76.51
49 - HSBC 149.75 19.38
50 55 National Savings
& Investments -9.20 31.71
51 57 Goldshield
Pharmaceuticals -10.86 95.71
52 59 Nationwide 29.99 24.69
53 42 Debenhams -26.70 23.79
54 69 PDSA -0.21 69.82
55 58 Sainsbury's -11.55 11.26
56 - Vernons Games 124.28 99.98
57 - House of Bath 24.40 88.92
58 - Healthspan
Direct 63.11 85.96
59 52 Nature's Range -20.67 100.00
60 98 Direct Line 20.28 15.21
61 - Wheeler Higgins 28.87 99.59
62 44 Kaleidoscope -31.92 77.61
63 68 IFAW -9.30 94.36
64 87 Compton &
Woodhouse 2.35 41.87
65 - GE Capital 161.81 96.21
66 - Masterfoods 116.42 8.18
67 70 Tower Health -9.30 99.78
68 49 Telegraph
Newspapers -26.82 44.78
69 - Age Concern
(England) 3.76 90.42
70 - Boots 33.74 12.18
71 83 Everest -7.29 94.50
72 - Dream Direct 19.69 81.14
73 28 Egg -47.70 26.29
74 - The Co-operative
Bank 73.15 82.06
75 53 Domestic &
General -30.07 99.95
76 37 Grattan -44.16 93.30
77 94 Unicef -2.50 89.34
78 - Hastings Direct 54.79 54.93
79 66 Bose -21.46 41.09
80 40 Telewest
Communications -48.38 30.91
81 - Dogs Trust 5.32 63.52
82 - The National
Trust 46.56 84.87
83 29 Morgan Stanley -50.92 49.78
84 41 Consumers'
Association -43.81 61.38
85 76 RNLI -19.72 89.94
86 - Hotel Chocolat 25.89 96.40
87 - Esher 20.98 79.97
88 47 Flying Flowers -8.68 88.26
89 - Dollond &
Aitchison 23.39 59.65
90 - Ocado 53.17 72.89
91 75 Powergen -22.36 34.53
92 - Nightingales 77.48 100.00
93 84 Marks &
Spencer Money -19.83 83.33
94 - Vernons Pools 99.78 98.88
95 - Bulldog
Communications 47.18 28.23
96 - The Salvation
Army 20.25 98.57
97 59 JND -34.53 100.00
98 82 Rodale Health
Books -23.15 99.24
99 43 The Royal
British Legion -48.13 81.01
100 - Diabetes UK 58.22 89.35

Source: Nielsen Media Research
Note: figures are for 12 months to June 2006



DATA FILE - DIRECT MAIL SPEND BY SECTOR

Sector Spend Volume Reten- Acqui- Spend % of
(pounds) (mailings) tion sition 05-06 total
% % % chng mktng
budget
1 Finance 569,217,035 1,264,362,085 41.50 58.50 -9.10 35.92
2 Mail order 496,079,239 746,008,610 35.51 64.49 -7.44 72.85
3 Charities 213,971,196 498,620,637 26.52 73.48 -0.28 73.77
4 Entertainment
& media 127,914,192 200,179,580 19.97 80.03 -4.00 10.89
5 Travel &
transport 94,767,919 153,846,955 15.35 84.65 -0.50 17.33
6 Retail 66,127,928 112,483,209 60.31 39.69 -7.82 35.53
7 Motoring 59,079,926 69,287,522 23.76 76.24 -2.71 6.35
8 Pharmaceutical 48,760,502 61,635,416 26.72 73.28 -4.67 14.39
9 Telecoms 47,012,267 84,229,203 39.44 60.56 -12.36 7.05
10 Household
equipment 26,584,679 45,758,667 16.49 83.51 -17.50 6.67
11 Utilities 22,383,077 39,477,288 51.16 48.84 -27.59 8.19
12 Food 15,499,894 19,946,826 34.61 65.39 17.59 2.40
13 Drink 14,776,713 15,278,671 59.74 40.26 -16.31 3.84
14 Cosmetics &
toiletries 10,760,305 15,445,184 48.37 51.63 -39.03 1.84
15 Household
stores 8,263,334 9,676,927 52.46 47.54 18.47 3.29
16 Leisure
equipment 7,951,460 13,398,872 21.70 78.30 -23.86 1.91
17 Clothing &
accessories 7,909,356 13,974,885 63.92 36.08 67.17 3.47
18 Computers 7,610,453 13,542,733 41.95 58.05 -6.53 1.92
19 Supermarket &
grocery chains 7,435,080 24,131,596 55.62 44.38 -24.42 1.04
20 Online retail 6,101,207 13,558,238 34.36 65.64 2.75 12.55
21 Gardening &
agriculture 4,368,790 8,196,826 23.87 76.13 -16.62 10.55
22 Social &
political
organisations 2,168,178 5,162,329 46.97 53.03 -75.63 2.27
23 Household
appliances 2,121,633 3,761,756 27.61 72.39 -41.70 3.06
24 Property 1,913,739 3,162,396 1.44 98.56 5.77 2.29
25 Government
departments 865,039 2,059,617 2.00 98.00 -57.00 42.13
26 Miscellaneous/
other 367,836 694,030 0.00 100.00 4347.84 4.31
27 Office equip.
& supplies 103,061 179,134 31.40 68.60 611.16 1.06
Total 1,870,114,038 3,438,059,193 n/a n/a n/a n/a

Source: Nielsen Media Research
Note: figures are for 12 months to June 2006

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