The direct marketing industry is undergoing a shift towards permission-based methods. This trend is likely to be accelerated by October’s introduction of the European Union Directive on Data Privacy & Electronic Communications, which will introduce restrictions on e-mail marketing. It is predicted that this move will be followed by regulations covering SMS and mail marketing in the near future. And it may happen sooner than expected, if the industry does not take a more responsible attitude towards its campaigns.
The Permission Index 2003, a survey of direct marketers carried out by The Preference Service, looks at current working practices in the direct marketing industry and the effect that the new legislation will have on future campaigns.
The research shows that 77 per cent of respondents have internal databases, of which 25 per cent are collected through client transactions and 23 per cent from direct-response ads. Although 41 per cent say that their mailings are distributed in order to cross-sell to existing clients, greater volumes of mailings are distributed for customer retention or to gain new customers.
Some 25 per cent of respondents judge the effectiveness of a campaign by the response rates generated, a traditional benchmark in direct marketing campaigns. However, 34 per cent are taking this method one step further and are analysing success according to the cost per response, which gives further insight into return on investment and cost-effectiveness.
Direct mail is the medium of choice for half the respondents, although 11 per cent prefer e-mail marketing and seven per cent choose the internet. However, this distribution may change as EU regulations ensuring that consumers cannot be targeted unless they give consent are introduced.
The research suggests that direct marketers believe the introduction of compulsory EU e-mail “opt-in” legislation will boost consumer confidence in direct marketing. This will be helped by the fact that a decrease in unsolicited e-mails will reduce the cost of internet access both for users and service providers. Indeed, 85 per cent of those questioned agree that the legislation is likely to improve confidence; 81 per cent say it will make the direct marketing industry more credible in the eyes of the public and marketers in general; and 90 per cent believe that it will help the industry become more targeted.
However, on the downside, 73 per cent of respondents feel that the regulations are confusing and that direct marketers will become more likely to use permission data through other routes such as “snail mail” or SMS. There is also concern among 42 per cent of respondents that it will become harder to acquire new business leads.
All the same, it is likely that the enforcement of the opt-in rules for e-mail communication will mean that lists of consenting consumers will begin to emerge from data providers. As long as this e-mail data is accurate and targeted, it will help to address marketers’ concerns and make it easier to obtain new leads.
Unsolicited SMS marketing was deemed the biggest threat to the direct marketing industry by 58 per cent of respondents. If the medium continues to be abused in the way it has been over recent years, consumer confidence in the industry is sure to suffer. The use of this medium should therefore be approached with consideration for mobile phone users.
But the industry is aware that this factor extends to all areas of direct marketing and 52 per cent of respondents agree that if untargeted communication continues at its current level, SMS, e-mail and traditional lifestyle lists will be removed from commercial use in the next five years.
This suggests that permission-based direct marketing is the only way forward if the industry is to remain successful, effective and credible. The good news is that evidence of its wide-ranging use is already emerging. About 73 per cent of respondents already use an opt-in option in online communication, while 60 per cent do so for offline communication. Most respondents also say that they use some kind of suppression file for their mailings, such as the Bereavement Register (TBR), the Gone Away Suppression file (GAS) and the National Change Of Address file (NCOA).
However, some sectors of the industry remain unconvinced by the need to use opt-in data for offline communication. Of those that are not already using it, 37 per cent say that they have no plans to start using permission-based direct marketing and 25 per cent remain indifferent to its benefits, despite positive opinions elsewhere in the research.
This indifference towards opt-in data could be attributed to a lack of knowledge about its benefits and, crucially, its ease of use. The industry needs to pull together and unite in showing a willingness to meet consumer needs and to show that it is aware of consumer concerns.
The spread of best-practice throughout the industry will mean more effective campaigns, higher response rates and, importantly, will help to prevent the removal of certain lists, or the introduction and enforcement of even tighter regulations. If the industry wants to continue regulating itself, it may have to take the issue more seriously and start adopting such practices now.