Digital Marketing - Data into Dollars

Variable-data printing has been championed by some as the future of the graphic arts industry, and derided by others with charges of being a white elephant. Even though it is a distinct market subset with unique characteristics, variable-data printing's standing has shared the fortunes and misfortunes of the broader digital printing market and technology.

To borrow Alan Greenspan's signature phrase, it is fair to say there has been some irrational exuberance in forecasts for digital printing as a whole. As is typically the case, though, the true story is somewhere in the middle. With a dose of marketing savvy and client research, profitable applications can be developed.

The mix of opportunity and challenges in variable-data printing was precisely what led Michael Nelson and Joel Hoefle to found Digital Marketing in 1994. With its emphasis on marketing expertise and services, the management team believes "agency" is a better label for the Minneapolis firm, but it does have in-house color and black-and-white digital printing capabilities.

"What has always made us different from other agencies is that we are not focused on brokering media time or print production. We take responsibility for the entire program," Nelson says.

The company helps its clients develop and execute personalized/ customized marketing programs through the use of direct mail and Internet-based vehicles. Digital Marketing can handle the entire process, from building business rules and doing database development to providing design/creative services, print production, e-mail marketing, Web-based response vehicles, document distribution, response tracking/reporting and inventory management.

The co-founders discovered they had converging business goals and complementary expertise when they first met in Minneapolis. Hoefle had recently moved to the area, after leaving a large, Washington, DC-based communications company. While there, he had been involved in producing one-to-one marketing and small-run projects for associations using one of the first networked Xerox DocuTechs ever installed, says the now-executive vice president of Digital Marketing.

At the time, Nelson had been doing direct marketing on the agency side of the business for about 20 years. His work had evolved to the point where he was trying to produce more targeted content, but still using conventional printing technology. This primarily involved doing black plate changes to create different versions of marketing materials. "I was somewhat frustrated at the state of the industry," recalls Nelson, Digital Marketing's president.

When Hoefle shared his experience with doing variable-data printing on DocuTechs, Nelson says the co-founders immediately saw the potential in applying the technology to marketing applications. From the beginning, they've stayed away from doing short-run production of static documents, or commodity printing work, which was the more typical application for early adopters in the printing industry.

The two then joined forces to launch Digital Marketing and pursued American Express Financial Advisors (formerly IDS), which is also based in Minneapolis, as their first major account. "We got together in the summer and by October we had the American Express newsletter account," Hoefle says.

Digital Marketing ended up creating and producing a segmented newsletter program for the financial services company. The program was customized for the field agents and featured multiple versions of the newsletter with content tailored for different market segments (based on geographic, demographic, lifestyle and product usage information). Variable text and graphics were pulled into a standard document template using software developed by Digital Marketing programmers.

"We knew we were going to have to start in the back office," Nelson explains. "Anyone could go out and buy a DocuTech, but the workflow and processes become very complex when you are doing sophisticated, variable-data applications. We began by developing the software to manage databases and content. That was the real challenge."

Variable Experiences
Since Hoefle had experience doing variable work on a DocuTech and Nelson understood desktop publishing programs, they decided to develop their own solution for merging database content into documents created in standard DTP applications. Initially, they were limited to black-and-white work, producing print-ready files internally and then sending files to a local DocuTech house for printing.

"We held off installing our own digital presses as long as we could," Hoefle notes. "For a while we even shared facilities with a printer that had DocuTechs. In the end, we found we had to have control over operation of the equipment for workflow reasons."

Digital Marketing's typical clients are Fortune 1,000 companies that have a distributed sales force. What these organizations are looking for is a way to gather customer intelligence from their sales forces and, in turn, use it in customized marketing programs that are directed by their field representatives, Hoefle says.

One of the custom software solutions developed by the company, Digital VIP, specifically addresses that issue. The Internet-based application enables users to manage their mailing lists and create customized mailers through a browser interface and dedicated Websites.

In this scenario, Digital Marketing works with the parent client to create customized templates that reflect individual salespeople or offices. Members of the field organization then can log onto private Websites to select the elements of the program they wish to use in a mailing campaign, interactively add variable content options and define the mailing list. They can preview the results on-screen.

A Colorful Tale
The company's road to adding color printing capabilities and in-house production had a couple twists and turns. In 1995, Digital Marketing became part of the Miner Group, a large printing company. The partners thought having access to the resources and existing customer base of a conventional printer would help them grow their digital services company much faster.

Soon after, the Miner Group purchased two Indigo digital color presses—an e-Print and Omnius—and installed them at one of its flexo facilities. Digital Marketing provided the front-end personnel and technology.

The digital agency continued to operate largely autonomously. In 1997, the separation became more distinct as Digital Marketing took over the e-Print and brought it on-site. The firm also acquired the assets of Digital Impressions, which had been the four-color, on-demand division of Deluxe Corp. Included in the deal was that company's human capital, primarily its sales/marketing and production staffs.

"Within a month or two, we were a fully functional black-and-white and color digital printing production shop," Hoefle says. The company has since upgraded to an Indigo TurboStream and added a Xerox DocuColor 70 web press for digital color production. It uses a DocuTech 6180 and a 6135 for black-and-white work. The presses are backed up by in-house finishing capabilities, to also address the aforementioned workflow control issues. Total staffing currently stands at 51 employees.

"We've been a marketing and development partner with Xerox for the last four years," Hoefle notes. "Since we've primarily focused on the DocuTech family for black-and-white production, the DocuColor 70 was the natural choice for expanding our color capabilities. The Indigo, in addition to being a cut-sheet device, provides the option of using a lot of unique stocks that are more readily available."

Over time, it became clear to the partners that its business arrangement with the Miner Group wasn't the right fit, they say. In 1999, they spun the company back out as an independent operation, with the backing of investors.

"We needed to call on marketing people, not print buyers," Nelson explains. "Printers typically have relationships with the procurement departments in large companies, and we needed to get into the marketing side of those companies."

Also, the duo learned early on that customized marketing programs demanded a higher level of selling and service than traditional direct marketing. Potential customers often are very "data apologetic," Nelson says. They confess to not having meaningful customer intelligence, or sometimes even good mailing lists.

Because of this lack of internal resources, clients pushed Digital Marketing to offer a turnkey service, Nelson adds. If a client does have internal resources or an existing relationship with another creative agency, Digital Marketing simply provides design guidelines and dovetails its services accordingly.

"Businesses have become more cognizant that customer intelligence is their real asset," says Nelson. "One of the reasons our business has been growing rapidly of late is because the customer relationship management (CRM) concept has been getting so much notoriety. However, even companies that are capturing a lot of data typically still don't know how to convert it into dollars. We have the ability to turn raw data into customized communications that sell."

In selling its own services, Digital Marketing has adopted a team approach. According to Hoefle, the company's successful salespeople have come from the ranks of traditional printers, DocuTech shops and agencies. They do the phone work and handle the initial meetings, while setting up for the team-selling approach if a prospect pans out, he says. That means bringing together the right combination of marketing and production talent to craft a customized program for the client.

Through the use of communications technology—e-mail, teleconferencing and Web-based interaction—Digital Marketing is able to do work on a national basis. Nelson says that the company's approach is to look at the market in terms of potential applications, which can cut across a number of vertical markets, rather than targeting specific market segments or SIC codes. "We have identified four or five key applications, such as direct mail, newsletters and invoices with messaging," he explains.

Subtlety Sells
Not all customization techniques need to be highly complex to have a significant impact on the response, the marketing pros claim. Simply avoiding the look-and-feel of mass communication is an asset, Nelson says. One technique Digital Marketing has developed is digitally printing envelopes with the appearance of hand-scripted addressing.

"You need to look at the overall package, starting with whether the piece should be a self-mailer or sent in an envelope," Hoefle says. "Post office statistics indicate that as much as 50 percent of business-to-consumer mail is thrown out without ever being opened. If the program uses an envelope, the first objective should be to break through the clutter. In the end, this may be more essential than having dynamic text and pictures on the inside."

Assuming the material does get read, customization must be applied wisely to have the desired effect, Hoefle and Nelson caution.

"You don't want to come off as being too Big Brother-ish," Hoefle says. "You don't want recipients to realize that you know how much money they make, or that they have a dog. The piece might just happen to have an image of an affluent couple with a cocker spaniel, so it's an emotional trigger for that recipient."

"You want the piece to be personally relevant, but not overly personal," Nelson adds.

That's just one more example of the marketing savvy required to succeed in the variable-data printing arena. Opportunities are there to be had, but turning data into dollars is not without its challenges.

A Case Study

Digital Marketing recently created a customized marketing program for Radisson Hotels and Resorts. The program, called Radisson ROI Direct, uses the Digital VIP Web-based system for managing campaigns and mailing lists.

Management of individual Radisson properties can log onto their own Websites to execute campaigns built from pre-approved materials. Components can include letters, postcards, self-mailers and e-mail messages. Radisson's corporate marketing team established the overall look and feel of the templates for these materials, which also are pre-populated with customized content based on the property descriptions, amenities lists, photos and mailing lists submitted by participants.

Using Digital VIP, property managers can select the type of business they would like to affect, the audience they want to reach and the incentives they want to offer to encourage response. In some cases, they also can overwrite copy or choose different images from the ones recommended by the corporate marketing team. Twice a month, submitted Radisson orders are pulled and run as one job for cost savings.

Radisson ROI Direct was unveiled at the organization's national sales and marketing conference in October 2000. Response to the program was very positive. In the first year, Radisson expects property participation to reach between 25 percent and 40 percent of all its North American properties.