Reasons to be cheerful

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Mike Welsh, CEO of Publicis Dialog, sees plenty to cheer in 2011.

So we’re almost at the end of another difficult year for the direct marketing industry. The recession dividend we normally experience didn’t really happen this time; particularly in offline.

Every agency, regardless of discipline, now preaches the gospel of conversation and engagement. And every piece of activity from every brand seeks to generate some kind of response. The big ad agencies are winning direct categories both at home and internationally. Direct marketing appears to be coming increasingly irrelevant. Or at least, the traditional definition appears so.

So why would anyone think about a career in direct marketing? What are the reasons to be optimistic about the future?

Brands are putting more energy into retaining and developing relationships with their existing customers. It’s more profitable to so do – it’s seven times more expensive to acquire a new customer than retain an existing one.

To that point, it will be fascinating to watch how Sky’s business (and therefore marketing) strategy changes now they have achieved the 10,000,000 subscriber target James Murdoch set in 2004. My bet is that it will change fundamentally. I can only hazard a guess how much the last 100,000 subscribers cost to acquire, but I bet it was a lot.

In order to continue to drive the share price up, my instincts tell me that Sky will be looking at growing revenue, product holding and profit from their current customers. That will require heavy-duty data and analytics expertise, no question. It also means that Sky magazine becomes even more important to the business.

But overall it marks a shift away from a pure numbers game to customer relationship marketing. But not just banging out mailings, emails and statement stuffers. It’ll be about the way the brand behaves and communicates.

There are some parallels with the mobile industry that are worth noting. Handset penetration in the UK has been over 100% for a while. So the networks have been in the business of nicking subscribers off each other.

That in turn has meant that their brand advertising comms explicitly communicate retention messages – O2 – we treat our customers better, Orange Wednesdays etc. And as more markets mature, shareholder value will be driven by how successfully brands retain their most profitable customers. So it’s not a marketing issue, it’s a business issue. And that’s where we come in. But not necessarily in Direct agencies or customer marketing departments.

Every agency and every marketing director needs people who know about this stuff. There’s plenty to be optimistic about for us all, and new opportunities are going to come from new and unexpected places. And that’s got to be good for salary inflation.

Merry Christmas and a peaceful New Year to you all.

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