Post and boxes

Pretty much everything you know about marketing came out of a box of soap powder. The classic marketing techniques were created by Procter & Gamble and Unilever. Sponsored television programmes, TV commercials, free in-pack merchandise, on-pack vouchers and the four “P”s (product, price, position and promotion) began with packaged goods.

But one thing detergent marketers did not invent is direct marketing (DM). Instead, mail order companies and charities, followed more recently by financial services providers, developed the DM techniques that are now widely practiced. And as other brands continue to switch spend from above- to below-the-line activity, packaged goods have remained largely aloof.

Windmill Partnership marketing director Suzanne Nagle says that this state of affairs is down to mindset: “DM is about dealing with consumers as individuals, not as a mass, which is the classic packaged goods approach.”

But there is scope for change and some packaged goods manufacturers that have in the past built their brands through advertising have been looking anew at DM. Media fragmentation, combined with greater variation in consumption, now means that talking one-to-one can theoretically give a better account of brand values than broadcasting messages.

But DM needs to change if it is to be used to build brand value. DM’s real strength is in one-off impacts, getting a sale for complex products. Most DM campaigns deliver a good return on investment, but rarely add to overall brand health and are too far removed from point of sale.

FCBi managing director and executive creative director Dan Douglass says: “Packaged goods is more prone to impulse purchase, with shorter consideration times: consumers are more easily persuaded at point of purchase.”

No room for DM?

In the past, packaged goods have used brand advertising to provide quality and value messages and sales promotions at the point of purchase to exploit these. This has tended to leave little space for DM. But Douglas says, “it’s about time people challenged the status quo.”

One hurdle facing packaged goods companies is the high entry cost of DM, in a sector where “you have to sell hundreds of thousands of products at a low margin,” says Draft London head of planning Karen Enver.

One solution has been to adopt an “umbrella brand” approach, presenting a range of packaged goods products in a single category. Heinz’s pioneering DM work in the early Nineties promoted ketchup and beans alongside soup and Weight Watchers ready meals.

Another way to reconcile the higher cost per impact of DM to packaged goods’ low margins is to segment the customer base by value. It is widely recognised that small groups can account for the majority of sales and profit. More than 90 per cent of Guinness, for instance, is consumed by just 1.4 per cent of households, according to Garth Hallberg’s Differential Marketing.

Tullo Marshall Warren (TMW) handles DM for Guinness and Flora Pro-Activ. “Packaged goods came late to DM,” says client services director Richard Marshall. He adds that many early adopters made the mistake of trying to do “sales promotion in the post”, with one-off tactical campaigns intended to achieve an immediate sales rise.

“DM is best used to maintain relationships with high-value, high-frequency customers. At the same time, you do need to entice new users who over time can become loyal customers,” says Marshall.

TMW’s work for Guinness plays on the brand’s heritage without simply aping the ads. Marshall says: “It not only encourages people to enjoy the product, but we try to reinforce the brand values, ensuring the communications not only affect behaviour, but also build the brand.”

Get in touch, stay in touch

One of the critical issues for packaged goods brands when considering DM is frequency. With advertising, messages are delivered regularly and consistently over time. Below the line, the convention is for single communications, perhaps with a limited follow-up. But some of the most successful packaged goods work has been high frequency. “If you know someone spends &£50 a year on your product, you can afford to invest in multiple communications,” says Heather McKinlay, Zalpha partner at WWAV Rapp Collins Scotland.

Her agency has created award-winning work for The Macallan and Drambuie. “We communicate up to four times a year, although there is an emphasis on the first couple of communications, which have a very strong impact,” says McKinlay.

The classic marketing techniques packaged goods brand managers have been taught do not equip them to plan and implement DM. In many cases, this has held back greater DM investment by the sector. If you are tasked to build a brand and see the problem only in terms of conventional techniques, you are unlikely to look further afield.

Yet Marshall says a growing number of brand managers recognise that what DM offers is precisely in line with what classic marketing used to provide. “Brand managers are focused on customers and their needs. There is tremendous emphasis on gaining insight in order to develop better targeted and more meaningful campaigns,” he says.

Databases are increasingly seen as a prime resource to deliver these insights. In recent years, both Unilever and P&G have been quietly building their customer databases. In some categories, such as petfoods, leading players have been putting their data to use in DM campaigns for a long time, with ideas such as birthday cards for dogs.

Packaged goods companies that wish to adopt DM from scratch, however, face a vicious circle. As Nagle says: “If you don’t have a database, you can’t do DM. If you don’t do DM, you can’t build a database.”

The way out is to use “hand-raising” campaigns, persuading current customers to provide personal data in return for something useful, entertaining, or of perceived value. This is how Flora Pro-Activ built its database at launch and how Stella Artois runs its website. If you give consumers a reason to register, you can maintain a dialogue, build a brand and boost sales.

The shift in marketing strategy by some packaged goods brands comes down to where contact is made. Instead of relying on point-of-purchase brand awareness to trigger a purchase, a growing number of brands are trying to get into the home and influence choice before it is exercised. If DM can indeed lead to bigger baskets, it will be time to rewrite the textbooks.

The DM Show

Running from October 26 to 28 at London’s Earls Court 1, the DM Show highlights the latest initiatives to help those planning direct marketing campaigns. The event brings together all aspects of DM, offering expert knowledge as well as showcasing new products and services, with case studies to illustrate their effectiveness. Over 150 companies are on hand to offer advice in all specialist DM areas, from customer management to telemarketing. At this year’s show:

Data Strategy Zone Solutions for data-driven campaigns with free advice from experts;

Google University Google executives share expertise and answer questions about website management;

Creative Directors Forum Top creatives talk through award-winning campaigns.

For more information, visit www.dmshow.co.uk