PI 400 -- Direct Mail - The Direct Approach

BY ERIK CAGLE

Don't be fooled. When it comes to the overall health of the direct mail marketing segment, many of the big hitters within the commercial printing sector are well positioned, entrenched even, for the economic storm that has struck the country.

Perhaps it is because the major players in this sector are battle tested. After all, 2000 sent a strong message that prospects for a flat growth year in 2001 were readily apparent. The Internet had already been providing avenues for direct marketers to explore. And a pair of postal increases struck within a six-month period, with more in the works.

The events and fallout surrounding the September 11 attacks on New York and Washington have uniquely, but temporarily, impacted the strategies of the nation's leading direct marketers, particularly the perceived threat of the transfer of the bioterrorist chemical Anthrax through the U.S. Postal Service (USPS). This relatively recent development is obviously still playing itself out, with perhaps the true impact still to be felt.

A number of the biggest print providers for the sector do regard this challenge as another development that must be reconciled, but not so unique or so great an impact to throw them from their game plan.

Following the adage that the best way to earn a buck is to spend two, a universal theme is clear. To make it in 2002 and beyond, the three operative terms are: investment, investment, investment.

Jim Andersen, president and CEO of The Instant Web Cos. (IWCO), Chanhassen, MN, has been on top of generating hard and soft cost savings for his company and his customers. IWCO added in-line finishing capabilities to drive cost savings and reduce cycle times, and its creative service utility has been providing clients with format options to boost response rates, as well as enhance production efficiencies and provide opportunities for automation discounts.

IWCO found the manufacture of embossed and customized plastic cards a major coupe in generating higher response rates for clients. Andersen also had a private firm take IWCO's pulse in the form of a customer satisfaction survey aimed at the printer's top 100 clients. Customer spotlights introduce clients to the IWCO production team face-to-face, while its Direct Mail Academy provides customer education opportunities related to IWCO's single-source, vertically integrated solution.

Stealth marketing campaigns have given way to full-disclosure return addresses with an emphasis on sender information in light of the September 11 fallout, Andersen notes, but he feels the long-term issue that heads a short list of concerns and variables to watch is postal reform. "It's been talked about frequently, but there has to be action to preserve and grow the direct mail sector," he states.

"We continue to see forays of Internet auction purchasing, which focuses on price without taking into account the cost of sacrificing relationships, service and, frankly, all the deliverables associated with it."

Investment has also been a buzz word around Lehigh Direct, Broadview, IL. Ray Frick, president and CEO of The Lehigh Press, reports his company has invested $15 million into the direct mail division.

A six-color Heidelberg M-600 heatset web press with Scitex imaging and an advanced finishing line highlight the enhancements, which aren't limited to hardware and software. They have also recruited skilled salespeople into the fold during 2001, which adds to the overall value.

"We've added to the robustness of our sales and marketing engine through recruiting, as well as concurrently taking a major technology step forward that materially enhances our value proposition," Frick states. "Lehigh's focus is to enhance our value proposition for both present and prospective customers."

Frick is confident that the September 11-induced mail scares will result in perhaps only a temporary slowing, followed by forward momentum in the segment. A counter trend to the political climate may find more people staying home and thus taking advantage of more opportunities generated through the mail.

"Direct mail traditionally has done quite well in so-called down economies, because it offers excellent value for the dollar versus the retail channel," he adds.

Frick points out that direct mail solicitations are quite cost-effective, with growth rates that typically top other sectors. He also sees opportunities for Lehigh in offering its specialized web components.

The most notable event that has occurred in the markets Quebecor World serves is the focus now on developing programs that increase responses in traffic and their direct mail promotions, according to Brian Sullivan, president of the Commercial/Direct Group for the Montreal-based company.

Quebecor World is honing its overall value package by adding more services, working with clients to reduce costs and helping them grow their businesses through creative marketing ideas. The total solutions package includes such services as pre-media consulting, digital asset management programs, online inventory and usage analysis.

Sullivan is confident Quebecor World can grow its direct marketing sector in 2002, as evidenced by the construction of a second mega-facility in Atlanta. Some of the variables he feels bear monitoring are:

* The in-line process of production will become the preferred process because of the ability to factory seal.

* More personalization on the outside of the in-line carrier envelope will provide better peace of mind for the consumer when determining whether to open the package.

* An increased use of personalized catalog and magazine cover wraps will replace the poly-wrapped carrier.

* Market strategies that include plain packaging (name and address only) will slowly disappear.

* The demise of companies without good name recognition will reduce the market.

The 2001 campaign also proved to be a challenge for the direct mail sector, according to Susan Henricks, president of RRD Direct, a division of R.R. Donnelley & Sons, Chicago. Agency billings were off significantly from 2000, she notes, which had a "ripple effect" on the sector.

"Once the economy and world situation stabilize, we fully anticipate that marketing plans will include a heavy direct marketing focus," Henricks says. "This is attributed to the fact that direct mail has become a very strong and cost-effective medium for marketers to communicate with consumers. It is by far the most trackable form of media from a cost and response perspective."

Donnelley has bolstered its clients' mailing campaigns by working with the USPS to develop new ways to penetrate deeper into the mail stream, reducing costs and providing more precise delivery dates. The latter allows RRD Direct's clients to better staff call centers.

Banta Direct Marketing Group, Menasha, WI, enjoyed a solid year despite the softness in the economy, reveals James Cyze, group president. The printer invested in expanding in-line imaging capacity and promptly sold it out. And while some of the company's more traditional marketers hedged their bets, Banta made inroads with new some customers.

"Despite the challenges of the economy," Cyze states, "our aggressive cost management, coupled with a burning commitment toward continuous improvement in our manufacturing platform, has allowed us to produce significant increases in our bottom line earnings on equivalent sales volume to 2000."