1 5 Keys to Direct Mail Success in 2014 Despite rate increases and USPS uncertainty, marketers have tremendous opportunities in mail
2 Direct mail is one of the most profitable channels marketers have at their disposal. Eighty percent of direct marketers plan to use direct mail in 2014, according to Target Marketing s 2014 Media Usage Forecast, and it rates as one of the highest ROI channels for both acquisition and retention. Direct mail accounts for more than half of the USPS s total mail volume (87 million pieces in 2012, 54% of the total mailstream). According to DMA s 2012 Response Rate Report, direct mail has a higher response rate than digital by far as much as 30 to 40 times better than and it has the lowest cost-per-lead of any measured channel. Even as digital marketing channels have evolved and become a bigger part of the marketing mix, direct mail remains a cornerstone strategy for many marketers from Main Street to Wall Street, the small business to the Fortune 500. All of that success is built on the pillar of a stable, affordable United States Postal Service. What challenges are the USPS and mailers facing in 2014? What opportunities do they present? What will be the keys to mailing successfully through the next 12 months and beyond? Read on to find out. USPS 2014: Challenges and Opportunities In the past few years, direct mail marketing has had pricing stability, explains Jody Berenblatt, senior advisor at GrayHair Advisors. Before the 2006 Postal Accountability and Enhancement Act (PAEA), postal rate stability was not certain and depending on what happens with legislation under discussion in Congress, we are at risk with living in a world of rate uncertainty as a possible new norm in the future. This is the challenge facing mailers who have seen direct mail become a standout channel against the tide of digital communications today. Since the passage of PAEA, the Post Office has become a good, efficient partner in delivering the mail, but there are external factors impinging on the USPS, spawning constant rumors of service and pricing disruption. The Postal Service is our most important partner, says Paul Ercolino, president of New York-based mail monitoring service US Monitor. The changes taking place now are well-positioning direct mail as reliable, sustainable communication as marketers integrate channels to reach, motivate and build relationships with individual customers. Mail has unique targeting attributes and is highly uncluttered compared to other channels. That s why leading brands and the brands that challenge them keep mail in the mix. That being said, it s vital that all brands pay close attention to how the USPS changes are unfolding. Then, what are the top concerns of mailers? 1 First and foremost, it s the exigency postage increase, says Berenblatt. It is obvious what we need in Washington is postal reform, not postage increases. The 6% increase in postage in 2014 could easily lead to double-digit decreases in mail.
3 Brian Kurtz is executive vice president of Boardroom Inc., a business newsletter publisher that relies heavily on direct mail. Kurtz was named Direct Marketer of the Year by Target Marketing in 2007; in part for Boardroom s success with direct mail and his work teaching new direct marketers to use the channel better. He also sees reasons to be worried: I m concerned that what I am teaching that direct mail is the perfect complement to all kinds of online advertising will become less and less desirable as the USPS prices the mail the way it does. Telling a new generation of marketers that nothing scales like direct mail will fall on deaf ears if they can t afford it. The prevailing feeling among direct mail insiders is that price increases don t address the real issues facing the USPS issues such as a legal requirement to far prefund its pension program and the inability to adjust services to account for changing market conditions without congressional interference. The outcome of postal reform legislation is clearly the most important issue, says Hamilton Davison, president and executive director of the American Catalog Mailers Association (ACMA). Changes made (or not) in Congress will largely define the postage rate structures for the next decade, the USPS expense levels and capital investments, and the scope of services provided. The Keys to Direct Mail Success in 2014 While there are challenges facing the USPS and marketers who use it, none of those issues makes direct mail any less effective as a marketing channel. But there are several steps you should take to keep your campaigns running smoothly in 2014 and beyond: 1. Get Creative and Keep Mailing With a greater-than-inflation increase in postal costs, 2014 is the year to examine your direct mail costs and see what can be trimmed from the package costs so you can stay in the mail, says Berenblatt. The basics are still critical: What list rentals are working, and what can be tested? What offers 2
4 are working, and what can be tested? And the creative, continuous testing of new creative direct mail packages is an important tool for success. Creative becomes more important as postage rises. If you can create a package that drives higher response or lifts the lifetime value of existing customers, it can make up for a postage increase. Applying creativity in the opposite way, through efficiency you can find creative ways to cut mailing cost through format or paper changes, yet maintain the response and ROI you need to drive your business. Never be a cheapskate with our creative/copy, is a motto Kurtz counts among his secrets to success. World-class copy breeds world-class direct mail. He also exhorts marketers to: Always be open to new formats; Test like crazy, but try to only make tests that have the potential for more than a 30% lift; and Research lists like it s the most important thing, because it is. 2. Trim Costs, But Trim Smart Not all mailers will be able to make the numbers work on increased efficiency alone. According to Davison, a majority of catalog mailers will make some sort of decrease in their catalog circulation as a direct result of the exigency postage increase. Many of those changes were committed to even before the exigency rate increase went into effect. The ability to mitigate postage rate increases with changes in paper, print or co-mail cost offsets is pretty slim for catalogers, says Davison, because many already did those things in response to the 2007 rate hike. At some point, it must come from mail volume. One way to trim smarter is to use better modeling on lists to make sure you re mailing to the best prospects. This way, you aren t choking off any one point of your mailing cycle, but instead mailing smarter at all points. The proliferation of cooperative databases, which makes ordering lists more efficient, enables more modeling to a wider universe, says Kurtz. According to him, Boardroom is 100% committed to true regression modeling when it comes to mailing our house database investing in the database building, the updating and all of the statistical modeling you need to get the best results. Regression modeling is a database marketing tactic that looks at your best customers and uses statistical modeling to find similar customers on external lists. If your modeling is good, these should be prime targets for your prospecting and acquisition efforts, and focusing on them will reduce wasted spending on off-target prospects. 3
5 3. Collaborate With Digital The biggest change in direct mail is collaboration with the digital marketing side of the house, says Berenblatt. Yet, this may be the best way to optimize both your mail and online direct marketing. One way to collaborate is to shift prospecting online and use direct mail to pull those leads further into your sales funnel. I think lots of folks will need to do more lead generation online, says Kurtz, and hope to use direct mail on the back end rather than the front end of many campaigns. Another way is to coordinate multichannel messaging. The consumer experiences both digital and traditional hard copy direct mail marketing, Berenblatt explains. Companies that speak to their customers and prospects with that in mind coordinate the messaging and the timing of hard copy and digital communication to be properly positioned to succeed in the short-term and long-term future. For example, when you know when that mail s going to be in-home, you can coordinate with other marketing activities, like , says Ercolino. Say you re sending out a postcard for a sale that s coming up for the weekend for your department store. When you know that mail is going to arrive, you can target a secondary offer in that says, Look for your postcard in the mail, and get an additional 20% off when you click here! So you have a multichannel marketing effort by triggering the or triggering a phone call off of that actual in-home delivery. 4
6 Mailers need to prioritize this collaboration, because online marketers are coming into their space every day. There is an interest/fascination among online marketers in this new medium called direct mail, says Kurtz, but they don t understand it. However, when they do, watch out! Especially on the back end of higher-priced offerings, where the lifetime value of a customer is higher. 4. Track Your Mail Delivery and Performance When mail is more expensive, it s more important that every piece you pay for gets where you send it, when you expect it to get there. Winter 2014 has been one of the most disruptive in years. Snow has paralyzed cities from Atlanta to Portland, and every one of those had an impact on mail delivery either on the trucks moving mail across the country through storms, or on carriers trying to deliver to the door through snow, sleet and freezing rain. And that s only one variety of weather disaster than can impact your mailing. Hurricanes in New Jersey, tornadoes in Oklahoma, flooding along the Mississippi. Add to those risks the chance that human error, changing USPS service or even terrorism can slow your mail, and you begin to appreciate what a harrowing journey that carefully printed, folded and addressed mail piece is about to embark on. I think in a lot of cases, late delivery is just as bad as non-delivery, says Ercolino. We have a lot of retail clients who send mail targeted around an in-home window to promote the news of a limited-time sale. Obviously, if that mail piece arrives after the sale ends, you re losing those sales. There are essentially two ways to track your mail delivery performance. The first is the USPS Intelligent Mail Barcode (IMb), which you can include on your mailings to help qualify for the highest levels of automation discounts and track mail pieces as they move through the delivery system. The second is to use a mail-seeding service to record if and when your mail is delivered to each delivery area. IMb offers a good projection of when your mail will be in-home, says Ercolino. It s a high-accuracy projection, but the seed is the actual confirmation that the mail got to its recipients. Seeding gives you, the final mile and the actual in-homes dates mail was delivered from the individual sectional center facilities (SCFs), so you have a tidy report from start to finish. 5 US Monitor actually combines these two kinds of tracking into one report. We have strategic decoy locations set up all over the country in all the SCFs where we actually have the seeds to report on the in-home delivery of the mail. And we incorporate the IMb data we get from the first scan/last scan so we can determine where the piece is during its journey in the postal mail stream. That s why we call it Mailstream Intelligence we re getting information directly from the IMb, producing reports in real time, and then tying in the actual in-home delivery to the projected in-home scan date from IMb.
7 We want to get as many catalogs into measurement in the postal system as possible so USPS can manage us more effectively, and mailers better understand postal cost drivers, says Davison. With all of the pressure on both marketers and the Postal Service, driving efficiencies through leaner processing and delivery is required. Full-Service IMb is the primary way improvements can be realized As marketers, we need to figure out how to use these new capabilities to remove costs and improve response rates. We cannot afford to take a step backwards right now. 5. Get Involved With the USPS With all of the things you can do to make your mailings more profitable and efficient, it s easy to see how a little change at the USPS can lead to a big change in the math of your direct mail campaigns. The best way to make sure the USPS continues to serve you well is to get involved and make sure your concerns are addressed in the ongoing PRC debates. It is impossible for all but the very largest mailers to affect the Postal Service directly, says Davison. It must be done through coalitions and partnerships. This is why it is so important to become involved with any group actively managing postal affairs. Our fragmented industry does not have a good track record of participation across every company. Right now, politicians and unions expect more of the same lethargy from DM businesses. It s high time for us to stand up and fight for what we need for success in the future. Mailers must respond similarly and be aggressive in advocating for their needs with the USPS, the PRC and their congressional representatives, says Berenblatt. It is most important to remind the USPS that business mailers are their customers. Mailers must challenge the monopolistic culture when they are confronted with it. In order for the USPS to be successful, it needs to meet the needs of its business customers, she continues. Many at the postal service realize this and are adjusting to a more customer-centric view. About US Monitor Since 1973, US MONITOR has built a strong reputation as the nation s most reliable and effective mail monitoring service by bringing together state-ofthe-art technology and old-fashioned attention to detail. We have monitored hundreds of millions of pieces of mail for thousands of customers who choose US Monitor for our leadership, integrity and experience. Let us be partners in your direct marketing campaigns! 6