Direct Mail Outlook: Still Best Marketing Value

During the recent unpleasantness known as the 2012 presidential campaign, President Obama made reference—during his final debate with Mitt Romney—to the fact that the U.S. military has fewer horses and bayonets than it did in the early part of the 20th century. The president was trying to portray his opponent as being out of touch, not in tune with today's realities.

While the zinger scored points, some conservatives were quick to point out that the Marines still use bayonets and that horses were employed during Middle East operations. Political theater aside, there is something to be said for popular opinion regarding trends. We often jump to conclusions that, in the final analysis, might have seemed logical, but didn't quite square up with reality.

Direct mail would not score a passing grade in the school of popular belief: Mature marketing channel, some would say, popular with the 50-and-over set, but eschewed by the generation of digital device toters. And besides, Mr. ZIP and the U.S. Postal Service are but another $5 billion nonpayment closer to extinction. No one cares about "junk mail" anymore, right?

In reality, that dog won't bark…or that bayonet won't poke.

Direct mail is still considered the marketing channel of choice by a vast number of marketers across verticals ranging from telecom and utilities to nonprofit, publishing and financial services. According to the Direct Marketing Association's “2012 Response Rate Report,” the rates for letter-sized direct mail (3.4 percent) were 30 times higher than those for email (0.12 percent). The belief that direct mail is dead or dying will have to be suspended for the time being.

This isn't your grandfather's marketing channel, either. "Market research continues to point to the resilience of direct mail and its high credibility among Millennials and Gen-Xers," notes John Coyle, group president, sales, for Chicago-based RR Donnelley. "The research runs counter to assumptions made about these age groups who, you would think, live only on the Web and on their smart phones. It turns out that hard copy, because of its credibility and distinctiveness, still prevails as a viable commercial medium."

That's not to say 2012 was not a challenging campaign. Some softness in the financial markets—i.e., credit and insurance—impacted direct mail volume universally, Coyle notes. It defrayed some of the momentum enjoyed in 2011.

RR Donnelley stepped up its efforts to ensure clients get maximum value with the installation of its new variable color imaging technology, ProteusJet Multiweb. The technology provides full page, 100 percent customization, eliminating the need for print versioning, plate changes and the small postal strings which, at low densities, add much cost. Coyle believes the ProteusJet technology additions have delivered relevancy enablers, too, which have translated into a higher response rate at a lower cost per response.

"Clients have readily adopted the use of variable digital imagery to enhance consumer appeal," he notes. "This has led to a shift in the creative departments of our largest clients, which now write, design and create art for numerous individual socio-demographic segments. They draw on our imaging flexibility to implement sophisticated business rules that pull in the required copy, offer and graphics.

"Once executed, the final mass-produced mail piece really does deliver a message designed for one reader at a time. The ultimate dividend of our R&D and capital investments has been the expansion of production capacity to manage end-of-year surges of marketing mail volume."

Mail Enthusiasm

The uncertainty surrounding the USPS and its financial woes has done little to temper the enthusiasm of clients or to alter their mailing patterns, according to Coyle. The evolution that continues to take place is the multi-channel integration, with campaigns featuring e-mail teasers and followed up with post-mailing electronic reminders. Both e-mail and direct mail contacts often ultimately drive consumers to a PURL, where a transaction is often closed.

Coyle adds that RR Donnelley is preparing clients to take advantage of the new promotional programs offered by USPS in 2013 that leverage social media, Internet technology and geo-targeting. He commends the Postal Service for its willingness to experiment with marketing programs more typically associated with commercial enterprises.

While the prospects of a healthy 2013 are largely married to a healthy economy and consumer confidence, RR Donnelley is ensuring it is doing everything it can to ensure success for its clientele. Technology is a huge part of the equation, contends Coyle.

"With the best responders as targets, we make our ProteusJet MultiWeb technology available to deliver compelling messages and offers," he says. "We support these mailings with Internet media and smart phone technology to deliver a full sales experience to the consumer. Augmented Reality is another technology we are introducing to the product mix. We believe it will bring further life and interactivity to the printed page. This, in turn, will motivate readers to envision products and services, which will boost responses."

Jim Andersen, CEO of Chanhassen, MN-based IWCO Direct, points at volatility in the marketplace as being the greatest challenge that confronted his firm in 2012. Like Coyle, Andersen notes that the financial services sector was particularly impacted; changing regulatory and compliance requirements for credit card and other financial marketing likely played a role in reduced mail volume. That decrease, which was also felt by the insurance sector, prompted IWCO Direct to reset its operating platform. This allowed the printer to reduce its cost structure by more than $8 million.

"In 2012, we also focused on transitioning the assets acquired from DGI Services in December 2011 to our existing locations in Minnesota and Pennsylvania," Andersen says. "This asset acquisition, along with the expansion of our Chanhassen mailing operations, advanced IWCO Direct's capital investment plan to better meet market needs for more complex campaigns focused on the right message, at the right time, to the right person, through the right channel."

As is the case with RR Donnelley, IWCO Direct's client base has not been shaken by any of the uncertainty surrounding the USPS and its financial hardships. IWCO Direct clients, Andersen notes, are sophisticated marketers who understand that direct mail is an essential part of their cross-channel marketing mix, and trust in USPS' commitment to maintaining service performance.

"They, like IWCO Direct, are closely monitoring the Postal Service's financial situation and working with Congressional representatives to ensure that Congress takes the necessary actions in a timely manner to provide the Postal Service the support and flexibility it needs to thrive in the 21st Century," Andersen adds.

In addition to a healthy economy, Andersen believes the fortunes for 2013 also rest on the resolution of regulatory issues, such as passing postal reform legislation and protecting marketers' access to, and appropriate use of, consumer information. "IWCO Direct will organically grow market share with enhanced value-added services and a renewed focus on vertical markets," he states.

It has certainly been a noteworthy year for Sussex, WI-based Quad/Graphics, which announced multimillion-dollar investments and expanded capabilities and capacity in its Effingham, IL, and Pewaukee, WI, facilities. The moves focus on delivering higher response rates and greater return for customers, notes Steve Jaeger, president of QuadDirect.

"We engineered a new direct mail press line with a modular approach that optimizes direct mail format flexibility and efficiencies," he says. "The press line is equipped with in-line inkjet, inspection, sorting and mailing technologies. Customers are able to get a wider range of page size and page count flexibility. Varnishes and spot colors, UV coating, high-speed label application, and advanced inkjet addressing and personalization are additional features that give direct marketers even more options in creative design and format execution.

"At the end of the press line, patent-pending mail sorters automatically sort mail to achieve maximum postal savings and improve speed-to-market. That kind of flexibility built into a highly efficient system has been a hit with customers who want greater format and feature flexibility in their direct mail programs."

Quad/Graphics also continues to develop its commingling and related mailing optimization technologies throughout its direct mail platform. One goal was to give customers higher levels of versioning, targeting and personalization capabilities while achieving the highest levels of postal efficiency possible.

"Those are often contradictory goals, but we have been able to make it happen," Jaeger states. "One result is that we have set new annual records for direct mail production and mail savings, and expect that trend to continue into the new year."

The 1,000-pound gorilla in the mailroom is Quad/Graphics' pending acquisition of Baltimore-based Vertis Inc. Given the sensitivity of the $258.5 million deal—which includes legal disputes by unsecured creditors involving Vertis' Chapter 11 status that are ultimately unrelated to Quad—the public company has chosen not to comment at this juncture.

At the time the deal was announced, Quad said in a release that clients would benefit from an enhanced range of products, services and revenue-generating solutions; expanded industry vertical expertise; increased manufacturing flexibility and distribution efficiencies from an extended geographic footprint; and new opportunities to realize mailing and distribution cost-savings from the combined volumes and capabilities of the two companies.

Jaeger believes the inaction of Congress on the postal reform front has caused a "crisis of confidence" for mailers, which has probably caused some companies to pull back or restrict volume growth going into 2013. Still, he points to the election cycle as proof positive that direct mail still retains its distinction as the leading market channel for driving response.

"On the postal front, our ability to enhance our commingling and postal optimization systems to help our customers better control costs gets only more important as rates rise and as customers look to us to provide solutions," Jaeger concludes.

"We also showcased, at the DMA (show), our new interactive print solutions that combine the power of print with mobile technology applications on smart phones and tablets, for example, giving marketers new ways to make connections with customers. That created buzz and excitement, and has the potential to infuse new energy and interest into the direct mail space." PI