Direct Mail Outlook: Marketers’ Direct Approach

Quad's digital press in Pewaukee, Wis., direct mail manufacturing facility.

It’s the proverbial elephant in the room: COVID-19. The current pandemic — which, rather than showing signs of loosening its grip, is ramping back up at an alarming pace, despite glimmers of a vaccine on the horizon — has dominated the thoughts, businesses, practices, and lives of everyone worldwide. COVID fatigue is real, but we can’t overlook the impact it has had on the printing industry, or how it will continue to influence the markets going forward into 2021.

Direct marketing, in particular, has seen some extreme ups and downs. Like most industries back in March when the lockdowns first started, many businesses halted all marketing campaigns across the board. But, as the year continued to move forward, those same businesses had to get creative to connect with consumers of all ages and demographics, and direct mail has been a big part of the solution.

Leo Raymond

According to Leo Raymond, managing director for Mailers Hub, there has been some return to mail during the past couple of months. “Volumes have picked up a little — it is still down, but not as horrible as it was [in February/March]. The important thing to note is that, unless a client has absolutely no place to send a customer, they need to consider the fact that there is less competition for eyeballs in the mailbox right now. If you’re selling a product that can be fulfilled, you may want to keep advertising.”

John Ashe

Volume began to recover in June, and has been slowly recovering into the fall, notes John Ashe, CEO of IWCO Direct. “Some sectors, like insurance, maintained or increased volume since March, while others, like credit cards, saw a steep decline. Since 2020 was a presidential year, we saw a spike in marketing mail volume driven by political mail in October, but that is expected to be temporary.”

Maureen Powers, president, RRD Direct Marketing Group, notes that for R.R. Donnelley & Sons, it was a very mixed response, with sectors such as hospitality and travel seeing significant declines, while others, such as grocery and streaming services, saw spikes in customer demand impacting the need for direct marketing services.

Maureen Powers

Headed into the fourth quarter, however, recovery seemed to be picking up across the board. “When you really think about direct mail and all the ways marketers use it,” she notes, “it’s really utilized across the full spectrum of the customer journey. Many use it for customer acquisition, which saw a decline in 2020, but there are still customers out there, and brands still need to connect with them.”

COVID-19 has been the greatest business excuse of all time,  contends Scott Harvey, senior VP of Marketing Solutions at Quad. “You either adapt and grow, or you die.” That said, he notes, “COVID-19 was an accelerant to trends we were already seeing in the marketplace. The migration from brick-and-mortar to online was already taking place, and was growing at a steady rate — the pandemic just accelerated it.

Scott Harvey

“As we look out into 2021 and beyond, we are seeing digital and social media fatigue from marketers — there are only so many demographic lists you can buy into,” Harvey continues, which is where a return to targeted direct mail comes into play.

The Pieces of the Puzzle

One of the challenges the pandemic brought to direct mail wasn’t just volumes, it was also about data. The customers are still out there, as Powers points out, but figuring out where they are, what they need, and how to best talk to them is the tricky part in a time when all of the old methods have essentially been wiped clean.

Bruce Mandell

“I haven’t seen changes in terms of creative or strategies except to really focus from a data standpoint,” Bruce Mandell, president of Data-Mail, says. “Who are you mailing to? How has COVID-19 impacted them? What are their finances, and what do FICO scores really mean at this point? Clients have different strategies on that — it took them the summer, they wanted to mail, but just couldn’t figure out that puzzle, how to unlock it.”

In particular, that shift from using FICO scores to determine the best candidates for various offers became increasingly difficult to use as the pandemic, and the recession it brought with it, have continued to grip the country.

“It is a change. The scores we relied on that were so important, and that determined what to mail and to whom [were less useful],” according to Mandell. “So, we had to come up with a new strategy. That’s where the focus is. And the companies that are best at that are the ones being most successful right now. Having said that, volumes have just exploded, which is really interesting.”

Data is something that Quad is taking seriously, as well. “Marketers today are extremely savvy with data,” Harvey notes. “In years prior, you might see them mailing to the fourth or fifth decile, but as [USPS postage] rates increase, they are now mailing to the top two to three deciles. You’re either going to get a return on the investment with those channels with sales, or you’re not. Predictive analytics is pretty good at predicting what response they’ll get on each of those deciles.”

To help customers take better advantage of data — and get better rates, bringing down the cost per piece on more personalized, targeted mail that gets those better returns — Quad launched a new program called the Quad Direct Marketing Exchange. The idea, Harvey says, is to co-mingle mail from different customers earlier in the production process, allowing the pieces to be drop-shipped to locations closer to the end-point without the USPS needing to be as involved in the sorting process which, in turn, brings down the costs to mail for everyone in the program.

“We had the mindset of why are we waiting until after production to mingle the pieces? We’re taking that upstream to the beginning of the production.” Mail pieces are being co-mingled before print, he explains, so they come off the press ready to be sent directly to the carrier facilities, rather than needing to go through the main sorting hubs.

“Out of the gate, we’re seeing anywhere from a penny, to a penny and a half savings [per piece], on average,” Harvey notes. “We anticipate by Q3 2021, that savings will be three to three and a half cents on pieces produced in this solution, which includes postage. To think we can bring around a 10% savings on the total cost — that’s huge for a marketer still trying to leverage the mailbox.”

For Powers, one of the more exciting trends she’s watching is a whole new set of marketers who are discovering direct mail, and realizing how powerful of a medium it can be. Many of these marketers, she points out, “started online with direct-to-consumer businesses. They engage with customers online, but they are now seeing direct mail as an opportunity to engage physically.”

They are exploring the benefits of leveraging a more multichannel approach, rather than solely relying on the digital platforms they have used thus far — and direct mail is a major component of those strategies, she notes.

“There will always be clients who are confident and depend on direct mail to engage, because that’s an opportunity for them to interact with prospects or retain customers,” Powers says. “Those are tried-and-true methods, and the direct mail channel is going to be there for them. But I also think there are clients asking, ‘how will new customer behaviors impact our strategy, and what areas should we be exploring?’ They’re going to look to other partners — RRD is one of them — to really help them navigate this landscape. How do they change their marketing so direct mail becomes a support piece to the overall integration? We are prepared to have those conversations.”

While COVID-19 is rightfully dominating the conversation right now, it’s not the only trend marketers need to be paying attention to when it comes to direct mail. Another major one that has gained attention this past year is postage rates, and the possibility of postal reform.

“For direct mail marketers, the pandemic has driven an intense focus on the financial health of the Postal Service, especially as it related to its ability to deliver election mail,” Ashe says. “This focus has highlighted the need for Congress to review and enhance the USPS business model. We are optimistic this focus will provide the ‘jump start’ needed to drive passage of comprehensive postal reform in 2021.”

He notes that Rep. Carolyn Maloney, chair of the House Oversight and Government Committee, and Rep. Gerry Connelly, chair of the Government Operations Subcommittee, have been very focused on postal issues. “Even if Republicans hold control of the Senate, leadership of the Homeland Security and Governmental Affairs Committee will change as the current chair, Sen. Ron Johnson, is term limited. Sen. Johnson has not been a supporter of postal reform, but his likely successor, Sen. Rob Portman, is thought to be more open to moving postal legislation forward. We remain cautiously optimistic that 2021 will be the year this much needed legislation is finally passed.”

Raymond notes there are actually a few basic ways that Congress could impact the Postal Service in 2021 and beyond. The first, he says, is direct aid. “There have been four or five pandemic relief bills, and there has not been one with direct financial contributions to the USPS. The only piece was in the first bill, and it was a loan authority, subject to conditions agreed upon by the Treasury — but no cash.”

The second piece Congress could choose to address in 2021, Raymond continues, is the retiree pre-funding obligation that goes back to 2006, when the USPS was ordered to put $55.8 billion into the pension fund over the course of several years. “No one else has to do that. At the time it was 7-8% of their revenue, now it is more — they haven’t paid it in a few years because there is no money. But the obligation is still there.” Several bills to waive the obligation have been proposed, but they have never gone anywhere, he says, so it is unlikely that situation will be resolved in the next year.

But it’s not all bad news, as Mandell points out. While politics impacts the Postal Service at a high level, the people on the ground getting things done are proving that mail delivery is still a strong service — and it isn’t going anywhere. “The USPS has done a fantastic job [throughout the pandemic],” he says.

As we move into a new year, many of the same challenges will persist, but there is light at the end of this proverbial tunnel. Direct mail is, and will remain, a strong tool in the marketing arsenal for many brands. And, for the PSPs who provide this service, it will continue to be a bright spot in the portfolio as new technologies and creative new approaches continue to keep the medium relevant and profitable for everyone.