There's been a lot of talk among direct marketing industry veterans about reinventing themselves in the digital age. And this, of course, is followed by a crowd of social media consultants with creative concoctions for how to prosper in times of change.
Buyers beware. Many of these prophetic promises are backed by online activity levels that don't translate to anything more than friends and followers. While many of these experts can get you results, they may not be the results you need. Social marketing strategies often lack a responsible plan for sustainable revenue growth, and it's difficult to apply meaningful success criteria without statistically valid conversion metrics.
So, before you take a wrecking ball to your traditional direct marketing campaign strategy, consider your champagne glass half full this New Year's Eve as you enter the decade of data diversity. What you already know about profitable direct mail and e-mail marketing can be applied to new digital media. Therefore, it may not be necessary to reinvent your marketing when all you need to do is evaluate some alternatives, test and diversify. Here are three things to consider as you refine your plans for the coming year:
Current Trends: Not Bad for Everyone
According to the Winterberry Group, direct mail is still the leader based on total estimated spending for 2009 of $43.7 billion, but obviously not the growth leader since it declined 16.8% from last year. Digital media is the only direct channel with an expected overall spending increase of 5% for 2009. This includes e-mail, search engine marketing, display advertising, and mobile marketing.
The most recent Direct Marketing Association Quarterly Business Review reported survey results from 149 marketers, agencies and suppliers who responded with their average change in revenue for the third quarter of 2009 versus the same period a year earlier. The total average (unweighted) decline in revenue was 6.1%. However, 19.5% of the respondents reported an average (unweighted) revenue increase of 23.8%, and 27.5% of the respondents did not report a revenue decrease.
The takeaway is that half of these organizations performed considerably well or at least held their ground during a period of low consumer confidence and high unemployment.
If you're able to find out what they have in common, then determine whether or not it can be replicated for your business.
Outlook: Marketing Services Providers
Some deep cost cuts were made in the first half of 2009, which delivered healthy bottom lines in the third quarter. Equity markets responded and stock prices increased accordingly. However, most top lines have not recovered and companies will be challenged to increase customer acquisition efforts in 2010. Loyal shareholders want quality earnings delivered from revenue growth, not just cost-cutting.
Could this mean a rebound from attrition from media buyers? If so, then there may be good news for marketing services providers including advertising agencies, service bureaus, list brokers and managers. However, only those with diversified data solutions will capture the growth and reallocation of the 2010 marketing budgets. Just look at traditional advertising measurements like reach and frequency, apply them to the Web, and you'll see why it's so important to have a strong presence online.
The Nielsen Co. published a ranking of the top 10 U.S. Web parent companies and search providers for Oct. 2009, which shows a unique audience of more than 156 million representing over 6.7 billion searches for Google alone. Considering there is life beyond Google, the total number of searches exceeded 10.2 billion, and that's just for October.
However, marketers still need tangible results and a favorable return-on-investment that can be replicated, but they do not need to pursue getting tagged on Facebook or tweeted from the "Tower of Babble." It's important to understand that while social media utilization is on the rise, the spending in this area is not. This is primarily due to lack of knowledge regarding positive versus negative brand implications and actual ROI.
Channel Competition: Countertrends and Complements
Don't just look at channel costs, but consider the competition within each of them. With a compelling value proposition for digital media and the ability to capture results in real-time, there is more competition in that space. What will the countertrend be to this? Direct mail is currently delivering good results for many marketers who have not cut back during the recession. Less competition in the mail means less clutter in the mailbox, and that can improve response. Be open-minded but careful of false assumptions when you analyze response rates. Going postal (media channel) may be delivering more online buyers (response channel) and revenue than you realize.
Lifetime Value: Intelligent Datacards
Consider the effectiveness of each new media channel as it relates to acquisition and retention. Direct mail is still a strong media channel for new customer acquisition, regardless of the response channel. You can't beat the data card information on quality response lists when it comes to determining variables to predict lifetime value. Many experienced list brokers have access to high-definition data cards that include frequency distributions for recency, frequency and monetary value (RFM) data. Doubling the response rate may result in half the income if you're not tuned in to the 'FM' metrics on the data card for lifetime value. This information is now updated directly from certified integration partners that host files for list rental fulfillment, so you know the counts are up-to-date and accurate.
There's nothing wrong with a conservative approach that leverages technology to optimize traditional channels while testing new channels with some apprehension—as long as it leads to future diversification based on the right success criteria. Traditional direct marketers are great at quantifying results and there is no better community to succeed in the decade for data diversity. While the leading indicators (equity market indices) are positive, the road to an economic recovery is expected to be long so there's no need to leap forward with unproven tactics. Just continue to test the waters, but don't expect it to rain just yet.
Chris DeMartine ([email protected]) is director of business development, NextMark.