Mail Dominance

The Direct Mail Information Services’ latest research shows the medium is going from strength to strength. A greater choice of response channels could ensure the trend continues, says David Reed

Direct mail works. For all the interest in e-commerce and new media, mailing campaign volumes continue to grow, and are likely to hit a record high this year. Given the entry cost of the medium, it is not a case of companies simply taking a punt. All the evidence suggests response rates remain robust, whatever the volume generated.

An average response rate of 11 per cent is the new benchmark. It’s a figure based on the most structured large-scale survey of direct mail campaigns ever undertaken. The Direct Mail Information Service commissioned telephone research from December 1998 to January 1999, which collected data on 1,291 campaigns. Some 502 were business-to-business, 640 consumer and 149 door-to-door.

It shows strong response rates are being achieved across a wide range of sectors, with few campaigns underperforming. In fact, there are signs of a campaign super league emerging, with almost one in ten achieving a 30 per cent-plus response. Consumer campaigns averaged 10.6 per cent, business 11.4 per cent and door-to-door 5.4 per cent.

Not surprisingly, more than seven out of ten marketers said they were satisfied with the results of their campaigns. This optimism needs to be treated with caution.

While 51 per cent claimed consumer campaigns had exceeded their response target, 24 per cent said they had not. An alarming 13 per cent – principally pharmaceutical companies – said they had not set a target.

There was more caution among business-to-business marketers. While 43 per cent said their campaign had exceeded its response rate target, 27 per cent said it had not. Some 17 per cent did not have a target. Insurance companies had the hardest time, with 83 per cent failing to reach their target. But there is a danger of setting the benchmark too high, assuming business mailings will perform well.

Cigarettes and pharmaceuticals appear to have a strong hold over consumers, which legislators fear and often try to curb. Based on the response rates achieved (see {storylink (“MW199912090095″,”Table 1”)}), marketers are winning the smoking battle, with the best response rates of any campaign. All five in this category pulled more than 30 per cent. Pharmaceuticals campaigns, while only permitted to promote over-the-counter remedies, tap into that other late 20th-century obsession: health.

Of the 640 consumer campaigns surveyed, 44 achieved a more than 30 per cent response. Twenty managed more than 50 per cent. Adjusting the average by removing these super-performers produces an overall response rate of 6.8 per cent.

Still a strong performance, this figure is in line with research by Marketing Week/DMIS in previous years using a different methodology, based on self-completion questionnaires.

The 1998 survey revealed an overall average of 4.4 per cent.

In preceding years, 1997 saw a response rate average of 6.9 per cent; 1996 averaged 6.7 per cent. In the 1999 survey, even the two largest direct mail categories performed well.

Financial services account for 87 of the consumer campaigns surveyed, and achieved an average response rate of 4.7 per cent. The 83 charity campaigns managed an average 9.5 per cent response rate. The third largest category – leisure and entertainment, with 59 campaigns, pulled almost exactly the average rate.

Business versus consumer

The average response rate for business-to-business direct mail is higher than for business-to-consumer: 11.4 per cent compared with 10.6 per cent (see {storylink (“MW199912090095″,”Table 2”)}). There were also proportionally more campaigns achieving response rates in excess of 30 per cent. These accounted for 39 of the sample, of which 18 achieved more than 50 per cent.

Removing these “outliers” from the sample provides an average closer to the norm. Without the best-performing campaigns, the overall average response rate is 9.1 per cent. Removing those which pulled more than 30 per cent produces an average of 7.1 per cent. Both figures are above the consumer campaign averages, which have been treated in the same way.

The best-performing category – marketing services – was represented by only five campaigns, but it is heartening to see practitioners reaping the rewards of their skill. The highest number of campaigns were for business services (52), office furniture, equipment and supplies (50), conferences and exhibitions (49) and industrial equipment (44). Half of these achieved above average response rates, with three performing better than the adjusted average.

This suggests business marketers have a good understanding of their market – in terms of who to target and what kind of offers to make. In this sector, more two-stage campaigns are being conducted. Two-thirds of the mailings invited recipients to request more information, creating an average enquiry rate of 10.1 per cent.

Sales leads

It is likely such mailings are being used to warm up prospects and feed leads to the salesforce. Consumer mailings tend to have to work harder, often in a single stage, with only a third inviting people to request information.

Business mailings can invite an order without payment, since the company will be invoiced after delivery, overcoming a subconscious hurdle. Mailings offering this response option managed an average 11.8 per cent response rate.

In the high-pressured world of business, it is clear people do not get out of the office enough. Being offered the chance to do so, even for business purposes, is clearly attractive. Mailings which invited the target audience to attend an event managed an average response rate of 22.6 per cent, with one campaign achieving more than 50 per cent.

There is also evidence of consumer products being targeted at individuals at their place of business. Thirteen campaigns for gardening and do-it-yourself were sent to business addresses. Although a small volume – on average 2,883 items – these achieved exceptionally high response rates. While too small a sample to prove a trend, the results seem to validate the consumer-at-business approach.

A lot of coverage has been given to the rise of customer relationship management, the argument being that nurturing existing customers and cross-selling products to them is more profitable than pursuing growth through customer acquisition. With consumer campaigns, response rates appear to support this view, but this is less clear-cut with business-to-business (see {storylink (“MW199912090095″,”Table 3”)}).

Targeting people from the existing customer database dominated: 79 per cent of consumer campaigns and 67 per cent of business-to-business drives.

Business-to-business marketers are more likely than consumer to look externally, with 23 per cent using rented lists compared with 20 per cent. Previous enquirers and prospects are also more important in business. Twenty per cent of business marketers use them, compared with 14 per cent in consumer campaigns.

In some sectors, customer marketing appears to have taken over direct mail, with all of the campaigns reported by credit card companies, banks and building societies and luxury goods companies only mailing names on their customer database.

Analysis tools

In the leisure and entertainment sectors, 89 per cent used customer databases, with 88 per cent of travel and 86 per cent of mail-order companies relying on customer data. This may be the result of sophisticated analyses which have identified lapsed, dormant or potentially defecting customers.

Response rates in the consumer sector validate relying on customer data, since they were more than 50 per cent higher than mailings to prospects and enquirers, and three times the rate achieved from rented lists. A substantial proportion of these campaigns had high response rates. Nine per cent achieved more than 30 per cent; four per cent more than a 50 per cent response.

Customer mailings still perform better than any other.

There is a willingness in the business sector to consider offers sent by companies, although the impact of being a customer is still evident, with 12 out of 28 campaigns achieving a more than 50 per cent response, the rest pulling more than 30 per cent.

Offering as many response channels as possible seems obvious. After all, no marketer wants to think a possible customer has been frustrated by not being able to reply in their preferred manner. In consumer marketing, most campaigns offered all four channels – mail, phone, fax and e-mail – but 109 offered post only and 68 per cent phone only. In business campaigns, 55 offered post-only response; 35 phone only. By examining response rates for campaigns with a single response channel, it is possible to isolate the effect of each (see {storylink (“MW199912090095″,”Table 4”)}).

There is a clear divergence between consumer and business preferences. Higher response rates were achieved in consumer campaigns offering post only than with post combined with other channels. The biggest uplift in response came from offering fax-back, with a response rate for fax-only campaigns of 19.5 per cent, rising to 20.5 per cent when combined with post. Fax-only campaigns are rare – only three were recorded. E-mail does not appear to have the same ability as fax.

Business by phone

Business responders are more likely to reach for the phone than any other channel. But postal response remains the second strongest option. Surprisingly, fax-only was the weakest, although a relatively large number of campaigns (22) offered this option.

Just two campaigns were brave enough to risk e-mail-only response, but results appear to have vindicated them. The combination of fax and e-mail achieved the best average response rate, with the five campaigns surveyed achieving 35.5 per cent between them. But when it comes to results, any response is better than none, no matter how it is received.

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