Small But Perfectly Formed

Gone are the bad old days of junk mail.” That statement by Bill Portlock, planning director at WWAV Rapp Collins, is echoed across the below-the-line industry. But it sometimes seems at odds with the facts, especially those showing that direct mail volumes continue to soar.

According to the latest figures from the Direct Mail Information Service (DMIS), in the second quarter of 1995 687 million items were sent, up 6.5 per cent year-on-year. This is against the highest figure recorded for a year of 2.7 billion items in 1994.

At the same time, direct marketing professionals claim mailings are becoming more precise and targeted. A contradiction? Not according to the industry, which claims that while more campaigns are being carried out, they are not as large as previously, while marketers refine their selection of targets.

The aim now is not just to hit the right kind of person with a mailed offer, but also to try to make it relevant to their life. The consequence is that “consumers take it on board as part of the overall marketing mix. There is even evidence that consumers expect to receive mail – receiving none at all is worrying”, says Portlock.

Research certainly supports the view that consumers do not feel overmailed. Nearly seven out of ten items are opened and read, despite the fact that volumes sent to consumers have more than doubled in ten years and that only 13 per cent of mailings are requested, according to DMIS.

If the effectiveness of direct mail really is being sustained in this way, then it is because companies have invested in new technology and techniques. “Mail order companies and large financial service outfits are leading the industry forward in new methods of targeting customer retention and recruitment campaigns,” says Peter Bell, sales and marketing manager at CDMS Marketing Services.

He points to techniques such as credit scorecards, statistical modelling, and neural networks as “major breakthroughs in improving revenue attributable to direct mail campaigns, albeit at significant outlay”.

It is certainly a notable feature of direct mail that the way mailing lists are compiled has changed considerably. Historically, targets would either have been culled from an in-house customer or prospect file or drawn from a rented list. With a little work to deduplicate records, that would have been that.

These days, targeting and profiling are key. For one thing, “lifestyle databases have revolutionised cold mailing”, according to Portlock. “We have always been able to get to people we know lots about; now we can get to lots of people we know lots about.” The reach of lifestyle databases, compiled from self-completed questionnaires included in product packaging or mailed to consumers at home, is now at around one in two households.

That provides a powerful source of prospects either directly, by selecting them according to what they have declared their interests and purchase intentions to be, or by inference, through profiling groups and using postcodes to select look-alikes from the Electoral Register.

Response rates are the key measure, and there is currently much discussion about the slow decline in response being achieved from lists. This shouldn’t happen if selections from lifestyle data are made properly, claims Sean Flanagan, sales director of ICD Marketing Services. He points to a motoring client which ordered data from his company for a spring launch.

From the range of selections made, the best performance was ten per cent in a mailing to a cell of current 4×4 drivers, followed by five per cent from those saying their next car purchase would be an estate. Those planning to buy a 4×4 and those planning to purchase a hatchback generated a 4.5 per cent response, with four per cent generated from profiled names.

Says Flanagan: “People do not realise the volume of specific data we have available and its multi-dimension element. There are so many ways of looking at it, each field feels as if it is a database in its own right.”

He points out that combinations of geography and lifestyle, such as squash players in the South-east, are just as possible as multiple cross-tabulations of interests, like golf players holding a Mastercard who fly to New York on business, without reducing the available count to unusable levels.

Other clients are trying to achieve similar effectiveness by building their own lifestyle data on existing customers. One such is Tropical Places, the 13m turnover exotic destinations holiday company.

“Our most interesting work centres around establishing an efficient method of capturing preference data – lifestyle information, if you like – on bookers and enquirers, and constantly feeding that back into the database so that customer groups can be sent truly-targeted messages,” says Jennette McDonald, Tropical Places marketing manager.

Working with The Database Group, the travel company has moved from a simple questionnaire with incentive sent to customers, to a more streamlined survey, specifically designed to yield valuable marketing data which can be efficiently processed.

“At the moment, we know a great deal about roughly 20 per cent of the people on our database. Our aim, through constant dissemination of the questionnaire, is to expand that level of knowledge to around 50 per cent of our contacts,” says McDonald.

As the quality of data has improved so has the attention to removing poor quality and irrelevant information. So-called “negative targeting” or suppression is now a critical process in building a mailing list before it is used.

But removing only those who cannot generate a response, because they have moved or died, is not as easy as it may seem. The Direct Marketing Association currently has a working party looking into the notorious problem of “goneaways” which are simply items of mail returned to sender by individuals who didn’t want that offer, rather than those who really have moved.

Among those offering their own negative targeting systems, The Computing Group claims that its Gone Away Suppression file (GAS) is highly accurate because, “it is based on real movers, not ‘postal’ movers”, according to business development manager Jonathan Rayfield.

While unwilling to reveal how the data avoids the pitfalls of “postal” goneaways, he notes that using a suppression file is now a crucial, but partial, element in the targeting process. “Because of the cost and the slowly reducing response from direct mail, there is a clear focus on the cost-benefits. That is why there is a requirement for screening and whittling away of mailing files. But you can’t do that exclusively by screening or selection of prospects by lifestyle characteristics or by psychographics – you need a mix of them all,” says Rayfield.

As he notes, cost-effectiveness is all. A mailing has to pay its way and, “when a beautifully-designed mailpack fails to draw a significant response, you get a sceptical client, unwilling to invest in the vital aspects of response analysis and testing”, according to Bell.

“Once the benefits of this methodology percolate down into the industry, with computing costs continuing their downward trend, I can foresee the two per cent response rate rule-of-thumb being replaced with something much more acceptable.”

Technology is helping to make mailing jobs easier. Typical of the new generation of profiling systems is one just launched by Lovell Vass Boddey, using NDL International lifestyle data, which allows for fast comparisons of over 140 variables in a graphical format. Developing creative briefs and media plans is made much quicker.

Sam Rider, head of business and community fundraising at Shelter, has used the system. She says it played an important role in auditing Shelter’s offer to potential marketing partners.

By profiling its donor base, Shelter has been able to identify groups which are also customers of third-party partners. One result was an Echo/HMV compilation CD called Home Truths, which was put together to appeal to the strong 15 to 25-year-old Shelter supporter group who are interested in music.

In early October, the charity is also using the profiling system to send out a mailpack to companies which will encourage their employees to fundraise at Christmas. Technology which allows greater targeting now also makes it possible to create mailpacks – and products – for each specific segment.

“Using basic database information, a direct mail leaflet for a new car insurance product can be produced based on gender, with special policies for female drivers, for example, which are not offered to the males on the list,” says Ian Hughes, marketing director at The Mail Marketing Group.

In fact, it may no longer be relevant to send out a paper-based communication. Technicolour claims that its VideoMail – a five to 30-minute video cassette which can be produced and mailed cheaply – can create response up to six times greater than for direct mail. Research carried out by Gerber showed recall was improved by 50 per cent, buying by 72 per cent, and that 94 per cent of recipients viewed the cassette within four days.

One result of all these developments is that it is becoming harder to choose which approach to take with direct mail. This was shown in research by DMIS which revealed a pool of companies interested in the medium, but resisting using it.

When asked in qualitative surveys why they were holding back, lack of experience and a skills gap emerged as primary concerns, especially in the retail, leisure, fmcg and consumer goods sectors.

The signs are that direct mail will gain a wider acceptance, but which route clients will take is still unclear.

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