Don’t let price arrest DM’s progress

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The IPA’s quarterly temperature taking of the marketing industry underlined what direct marketing’s cheerleaders had been saying for some time: DM is flourishing in these straitened times. Its success, however, could come under threat if a series of portentous warnings about the impact of proposed changes to the regulation of mail services are to be believed.

The pressure to manage costs has led to a shift away from investment in traditional media campaigns towards direct and digital channels, Bellwether found.

Direct marketing and sales promotion spend increased by 0.6% as investment in internet advertising and search rose 13.4% and 14.9% respectively.
Conversely, spending on traditional media such as TV, press and radio dropped 0.2%.

This is no short-term trend. Previous quarters painted a similar picture as consumer facing brands looked to direct marketing for short-term volume increases to offset weakening consumer confidence.

This is a fillip for DM and should be used to stake a claim for its future use. Direct marketers, however, face difficulties that could stunt its recent growth.

Last week, saw new postal services regulator Ofcom publish non-confidential responses to its consultation on the future regulation of the Royal Mail.

To recap, out of a host of proposals, one prompted universal ire among those that have an interest in the future success of direct mail.

The price controls Ofcom proposed, that have restricted Royal Mail from setting higher charges for delivering bulk advertising mail, should be removed in return for the promises of improved efficiencies on the part of the postal operator.

Removal of the controls would deter those taking advantage of the cost effectiveness of mail from returning to it in the future, detractors argue, while those in favour (Royal Mail) say that it is necessary to allow the orgnaisation to increase revenue and stay afloat.

The plans were immediately denounced by interested parties such as the Direct Marketing Association, entirely predictably.

However, direct mailers themselves are now publically warning about the cost of removing restrictions. Nationwide Building Society, as one of the UK’s biggest financial services firms and by definition, therefore, one of the biggest direct mailers, said in its response that recent and future plans would only hasten “acceleration of projects to communicate with customers through other channels”.

I wager that Nationwide is not alone in its industry or among those that use advertising mail extensively.

Ofcom needs to heed such warnings before rubber stamping proposals. Royal Mail should not be able to price hike the channel out of marketers’ minds. It is through modernisation and efficiency improvements that Royal Mail will succeed and only then can it justify price increases.

If this does not prove to be the case, then the improvements observed by Bellwether may prove to be a blip.

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