Does direct marketing damage brands? Can brands afford to have a one-to-one dialogue with their customers? A few years ago, these questions were fervently debated. As recently as the UK Direct Convention in September, some below-the-line marketers still felt the need to defend their discipline’s role in selling food and drink.
Yet, across the sector, brands are using direct marketing and have been doing so for some time. From Brooke Bond’s D Collection to the Flora information line, from Tango’s DRTV commercials to the Heinz At Home mailing programme, direct marketing is as much a part of food and drink marketing as the end gondola, extra-fill free promotion or TV awareness campaign.
One reason why there is still prejudice against it may be the very discreet approach that most packaged goods manufacturers have taken. Direct mail has been used as a secret weapon. It allows consumers of rival brands to be targeted with price promotions to encourage them to switch their allegiances. It means that few marketers are aware of direct marketing’s success stories.
Evidence that direct mail is being increasingly used, and that it is effective, either tactically or in sustaining loyalty, can be found in new research conducted by the Direct Mail Information Service (DMIS). The DMIS found that 37 per cent of consumers had been mailed by a packaged goods manufacturer, 25 per cent by an alcoholic drinks maker, 24 per cent by a soft drinks company and seven per cent by a confectionery brand.
Response rates varied by category, from an overall average of 62 per to a high of 88 per cent for packaged goods, 60 per cent for confectionery products, 48 per cent for alcoholic drinks and 42 per cent for soft drinks.
Most significantly, direct mailings change consumers’ attitudes to brands. While 80 per cent of respondents said they would have considered buying a brand before being mailed, this increased to 98 per cent after mailing. And 93 per cent of these said they would buy those products again.
Heinz, probably the most high-profile manufacturer to have adopted direct marketing, is well aware of that. Its decision to use direct marketing was based on a simple realisation. “We have 360 products in our range. Supporting such a diverse portfolio in above-the-line is impossible,” says Robert Bailey, director of sales and marketing.
By creating a database based on responses to promotions, sponsored lifestyle questionnaires and rented lists, Heinz built a file of 4.6 million households. The importance of these households to Heinz is that, while they represent 23 per cent of the population, they account for 48 per cent of profits.
Each one now receives the four-times-a-year At Home mailpack, which has been further segmented to reflect their loyalty and frequency of purchase. The campaign combines product and nutritional information with coupons designed to achieve product trials. Bailey says the impact has been significant: “In the 17-week period after a mailing, we see significant increases in brand shares. Not just one or two per cent, but, in some categories, as much as five or six per cent. A one per cent rise in all categories equates to 6m extra profit.”
Being able to measure advertising effectiveness is a key benefit to food and drink marketers.
The effectiveness of advertising has long been puzzled over because sales often do not increase and nor do awareness levels. This is partly due to the saturation of messages, particularly with TV campaigns, which sometimes require a ratcheted-up technique in order to have maximum impact; fast marketing, for example,which marries local exposure with sampling.
On the other hand, direct marketing is still the exception, whether in terms of DRTV ads or direct mail. In the DMIS survey, 52 per cent of consumers said they were only mailed every two to six months.
Adrian Baker, business development director at Aspen Direct, says: “Whereas major repositioning and brand launch objectives will tend to emphasise the need for advertising, brand extension, cross sales, increased frequency and geographic or retail support can all be most effectively developed through direct marketing.”
But he adds that the tactical value of direct mail should not be overlooked. Aspen Direct has been running a campaign aimed at achieving trials for a food brand. Although the results of this are still being evaluated, he says: “Sales, as measured against expected volumes for specified retail outlets, went up and, crucially, have held up. So this is not just a one-off, discount-based promotion. But the real evaluation is to calculate the longer-term effect of the campaign and the incremental value and enhanced relationship against the costs associated with it.”
Some practical issues have hindered the penetration of direct marketing in this sector. The first is that effective direct marketing requires a database. Until now, few packaged goods manufacturers have had any need for a file of their customers as they have sold to wholesalers and retailers rather than end-users.
The second problem is cost. “We struggle with the budget argument,” says Caroline Kimber, director of direct marketing at CACI. “Clients are used to spending huge amounts on advertising but when it comes to direct mail, although they can do it for the cost of a couple of News At Ten slots, it is a big culture change because they are struggling to see the benefit.”
She says there is ample data available, much of it derived from sponsoring lifestyle surveys, “but they see that as a defensive strategy to stop competitors getting their hands on it; not a lot have used it”. But as retailers build their own customer databases, manufacturers have woken up to the threat to the relationship between brands and consumers.
Retailers have two bites at the cherry: through in-store and point-of-sale contact with customers and through direct communications. But brands have to rely on their share of that in-store contact, which is expensive and hard-won, and on their own marketing efforts. Direct marketing might yield real benefits here, even if it is only used to distribute coupons.
According to DMIS, 54 per cent of consumers had claimed a benefit offered by a retailers’ loyalty scheme. However, 82 per cent had used a coupon or token sent to them by a food and drinks company. Some manufacturers have begun to extend this type of promotional exercise via merchandising into a loyalty scheme.
Britvic Soft Drinks operates a scheme through MRM Promotional Services aimed at universities and colleges with brands such as Pepsi, 7-Up, Tango, Robinsons and Ballygowan. Points are awarded based on purchases and can be redeemed against branded goods such as T-shirts and umbrellas or equipment such as glass-washing machines and vandal-proof payphones. If the outlets stock the brands, students will drink them. And if they drink them at college, they may well drink them for the rest of their life.
Mick Byrne, head of planning at O&M Direct, accepts the value of direct marketing in this role, but says: “There is still a lot of expectation that direct marketing only means sales promotion. It comes as a shock to clients that you can do other things. Also, it is not cheap.”
Byrne says that judging direct marketing solely in terms of its impact on sales is dangerous because the cost for a single brand is likely to be higher than the incremental revenues achieved. “For fmcg, its real role is building a database. The return is in name and addresses, not necessarily through sending out vouchers. You have to rethink what you are trying to do. It is not for individual brands, it has got to be across a portfolio and from a customer perspective,” says Byrne.
For food and drink companies to reach such an advanced stage will take time, especially if, as Kimber claims, it requires a change in their marketing culture. In the meantime, direct marketing techniques are being used by an increasing range of brands. It starts a dialogue with consumers without having to ditch existing techniques.
HHCL’s Martini campaign is a good example because it gathers names and addresses, which may or may not be used, while still giving the brand a TV presence.
For other brands, however, more pressing issues mean direct communications are still some way off.
Southern Comfort, for example, would find it difficult to use direct marketing when its target audience’s usage pattern still needs to be established. Account director Ian Milner, at IMP, says, “advertising is vital before consumers go into a bar, particularly for a brand like Southern Comfort, which is on the edge of their repertoire and is not on their shopping list to stock at home.”
On-trade sales promotions have proven to be highly successful at achieving trials – the agency’s campaign won the Institute of Sales Promotion Grand Prix award this year – and merchandising has been widely used. But, so far, the brand has not gone direct. “Ultimately, I would like to think direct mail would have a role to play as a way of maintaining lifetime value. But it would have to be a corporate initiative rather than from the brand, because you can’t expect consumers to drink Southern Comfort throughout their whole life,” says Milner.
It is this paradox – that a database can track consumers for life, whereas the lifetime of the product use may be quite short – which makes it hard to justify the investment in direct marketing. However, with so many companies holding portfolios of brands that meet different needs across every stage of someone’s life, companies are realising that there is a way forward. Given the positive consumer reaction to direct marketing, the only real resistance might be in brand marketers’ attitudes towards below the line.