Increased competition needed to kick-start DM

The direct mail industry has not been blessed with the best of news of late. Advertising Association commissioned data from market intelligence service Warc found 2011 growth notably below the rest of the advertising industry and a like-for-like forecast of declines in 2012.

Russell Parsons

Amid the relief that the advertising industry’s growth, at 2.7%, outperformed economic growth and, at 3.8%, will continue to do so in 2012 was news that DM spend increased by just 1% in 2011 and, on a like-for-like basis, is tipped to fall by the same amount this year.

That last figure should be particularly worrying in an a year when, inspired by the Olympics and the Diamond Jubilee, the overall ad market is expected to grow by 3.8% and all channels but press are forecast to rise.

It could be argued that the opportunities London 2012 and the Jubilee present above the line media such as television, outdoor and press are not available to direct mailers. Coca-Cola, McDonald’s et al are not historically major users of the channel.

This, however, does betray some of the more fundamental issues that DM in its oldest form, advertising mail, is faced with. Rising prices, borne from the recent decision to allow one of DM’s biggest stakeholders Royal Mail to set its own prices for bulk mail services, is one of the biggest issues that direct marketers face in a world that is often hostile to “junk”.

As much as Royal Mail has sought to offset the impact of already planned DM price increases with its Advertising Mail initiative offering discounts on some services, companies still face increased costs.

And with licence for Royal Mail to increase prices further, there are diminishing incentives to turn to or turn back to physical DM.

One development, however, that could offer a shard of light to the possibly gloomy sector, comes this very day.

TNT Post has launched a trial in West London today (16 April) that will allow it to cover the “last mile” of delivery, previously the exclusive domain of the Royal Mail.

It is thought that the postal operator is planning to roll out similar services for business customers across the country. Until now, TNT has only delivered bulk mail for big brands such as Barclays and Tesco but a nationwide “final mile” service would open the door for it to compete across the board on advertising mail.

It is not that it would necessarily offer a better or more comprehensive service but the prospect of a break to the Royal Mail’s monopoly offers the prospect that prices could be dragged down.

DM needs a kick-start, increased competition might offer it just that.

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