Direct Mail Outlook : Mail Continues to DeliverDecember 2013 By Erik Cagle, Senior Editor
That the direct mail marketing sector has any reason to foster optimism is nothing short of a miracle. And it is really a testament to the small clique of major mail print production and processing firms that have enabled the space to continue producing results that still make it one of the most viable marketing channels available.
The U.S. Postal Service (USPS) is certainly not doing the direct mail space any favors, requesting an exigent rate increase of 4.3 percent. With postage taking up the better part of 60 percent from the direct mail marketing spend, there's less and less meat on the bone. But the USPS has its own problems, and thus far nothing Postmaster Patrick Donahoe has done could spur Congress into addressing the issue of postal reform.
Yet, the sector keeps plugging along, fighting off the troubled Mr. ZIP and alternative, online marketing channels to remain an attractive and viable option for marketers to showcase their products and services. According to the Direct Marketing Association (DMA), expenditures in the United States are expected to rise to $196 billion by 2016, which represents a 3.8 percent compound annual growth rate (CAGR) from 2011. In fact, more households read advertising mail now than they did 25 years ago. And debunking the myth that direct mail is your father's/mother's method of shopping, the DMA found that the 22- to 24-year-old age cohort is the most likely to respond to a direct mail piece.
Sophisticated Data Needs
Daniel Thornton, president of RR Donnelley's Response Marketing Services, says that print budgets are required to deliver positive results. He notes that the Chicago-based printer is seeing a trend toward mail packages with sophisticated data requirements, an increased use of two- and four-color variable imaging, and a decrease in components and package dimensions.
"Complex imaging requirements are being driven by the industry's desire to integrate and use large amounts of consumer data points," Thornton notes. "Leveraging strategic investments in data analytics, predictive modeling and list procurement, RR Donnelley helps marketers mail smarter by coupling its investments with data, content and personalization strategies."
RR Donnelley continues to make investments in its ProteusJet Multiweb variable color imaging technology. The proprietary technology provides full-page, 100 percent customization, eliminating the need for print versioning, plate changes and the small postal strings which, at low densities, increase cost.
The interactive element is playing a growing role in the direct mail marketing efforts of customers. Technologies such as variable video, augmented reality and near field communication (NFC) give marketers countless ways to pair the digital and print worlds, Thornton points out, earning higher returns, increased reader buzz and expanding audience reach.
"These print-to-digital technologies continue to evolve and to gain market acceptance among consumers," he says. "By combining print-to-digital technologies with existing campaign strategies and integrating digital features into print materials, marketers are able to entice consumers to interact in a way they are receptive to, reach new audiences and increase campaign effectiveness. Already trending in certain demographics, interactive print is catching fire and emerging as the future of marketing."
RR Donnelley, a member of The Coalition for a 21st Century Post Office and the Affordable Mail Alliance, is among the many firms advocating sensible reforms that can provide a sustainable future for the USPS. Thus, direct marketers rely heavily on Donnelley's postal optimization services to guide and provide them with the best postal costs possible.
"The Postal Service provides financial incentives to mailers who build mail density within their campaign files," Thornton notes. "Imaging holds the key to achieving these incentives. Replacing plate versions and string copy with variable-processed color imaging, marketers can cost-effectively increase file density by keeping list saturation intact without sacrificing personalization, targeting or color, and without increasing production costs."
"Using our data and analytic services team to identify the best responding targets, we make our ProteusJet MultiWeb technology available to deliver compelling messages and offers," he adds. "We support these mailings with Internet media, interactive experiences and mobile technology to deliver a cohesive, relevant and personal experience to the consumer. This, in turn, boosts responses rates, increases interaction with brands and delivers financial success to our clients."
Mail volumes have been slow to build as direct marketers await signs of a strengthening economy and improved consumer confidence, notes Steve Jaeger, president of direct marketing for Sussex, WI-based Quad/Graphics. Many direct marketers are mailing only to loyal customers and to prospects with a high propensity to respond, while innovative, high-value campaigns focused on acquisition and loyalty have been suspended. Jaeger points out that with delivery costs accounting for 60 percent of campaign budgets, marketers seek greater postal savings along with distinctive packages integrated with non-print media to ensure maximum return on investment.
In an effort to bolster its value proposition to clients, Quad/Graphics launched a pair of highly automated, regional commingling centers, in New Berlin, WI, and West-ampton, NJ. The facilities are delivering clients greater postal savings, shorter cycle times and improved in-home management.
"We have also invested heavily in sophisticated, high-value digital and in-line capabilities and in our conventional and lettershop platforms, allowing us to create distinctive packages that lower cost per response," Jaeger remarks. "Our print production platform gives our customers flexible options as their needs change, whether within a single campaign or over multiple campaigns and time frames."
Jaeger shares his colleague's sentiments in regards to helping the USPS find a clear path to fiscal sustainability. He points out that Quad/Graphics has been visible on Capitol Hill, with Chairman, CEO and President Joel Quadracci testifying about the need for postal reform to enable Mr. ZIP to remain a viable option for marketers to promote and distribute their products.
"Meaningful reforms, like allowing the USPS to right-size its operations for the realities of changing volumes, are necessary because price increases alone cannot fix the USPS' financial situation," Jaeger says. "The USPS felt it had no other choice other than to file an exigent rate increase because it is uncertain Congress will be able to pass postal reform legislation before year end. Given significant costs associated with mail delivery, postal optimization through commingling and other means, is a must to reducing postage costs and achieving proper alignment with in-home delivery dates."
Looking ahead to 2014, Jaeger points out that with more channels open to consumers than ever before, it puts marketers under pressure to coordinate and connect their content across all the channels. Given this, he feels Quad/Graphics is enabling its clients to use print successfully in tandem with other channels to acquire and retain customers, increase response rates and promote their brands consistently.
"Connecting and integrating content and branding across media channels in a single campaign is proven to lift the response for each channel," he says. "We make it easy for our clients to execute multichannel campaigns. Because we have a data-driven, digital workflow, we take content we receive for producing a printed mail piece and quickly repackage it for multiple outputs, including online, e-mail and mobile. Each of these outputs is customized to the recipient, using data our clients have about their customers. This results in relevant messaging, to the right person at the right time, to drive up response and revenues. On the back end, we reduce costs related to print production and distribution through a sophisticated commingling program."
The 2013 campaign was marked by significant capital investments for IWCO Direct of Chanhassen, MN. With clients facing a three-pronged challenge of increasing ROI, attaining the maximum postal discounts for clients (backed by fast, predictable mail delivery) and the simplification of supply chain management, IWCO Direct's outlays in continuous inkjet technology played a significant role in the company meeting client needs and attaining more than 8 percent year-over-year growth, notes Jim Andersen, company CEO.
"The positive impact of this technology on customers' response rates was evident with multiple instances of double- and triple-digit lift in response rates for acquisition campaigns," Andersen says. "Other contributing factors to our growth include the expansion of our services for creative, strategy and analytics, and our advancement into a new vertical market."
Among the key additions made by IWCO Direct: two Océ ColorStream 3900 inkjet presses from Canon Solutions America aimed at bolstering personalization capabilities. The presses utilize Océ's premium pigment ink solution. Earlier in the spring, IWCO Direct's Mail-Gard division, which provides business continuity and disaster recovery services, installed an Océ JetStream 2200 inkjet press at its Warminster, PA, facility.
Mail Volume Pressures
In terms of the challenges presented by the USPS and its request for an exigent rate increase, Andersen notes that clients, already under the gun to do more with less, would have to reconcile an above-inflation increase with other costs in their direct market spend. As a result, he says mail service providers would be under the gun to reap more efficiencies and/or mail volume could face a reduction.
"If the issue the USPS is trying to address with the exigent rate increase is reduced revenue due to declining mail volume, they are taking the wrong approach," he says. "Mail is just one of a number of channels our clients can use to communicate their marketing messages. We know mail works, but it needs to remain cost-effective. Raising prices is not the way to drive higher mail volume."
Andersen points out that marketers have shown a strong interest in four-color variable data digital printing for high-volume mail based on IWCO Direct's ability to deliver a highly customized package that offers enhanced targeting capabilities, resulting in higher ROI. Such programs include elements of strategy, creative, data/programming, production and mail planning with shorter production cycles to create the most relevant campaigns possible. IWCO Direct is also integrating analytics and strategy into its direct mail solutions to increase effectiveness and response rates. PI