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Direct Mail--Enough Elbow Room, Growth?

December 1998
Cherry Hill, NJ$59.76$124.509GBF Graphics
Skokie, IL$53.76$82.70

10GTC Transcontinental Group
Montreal$50.45$720.72

Is there room for growth in direct mail printing beyond the elite of the industry, given that the number of jobs is shrinking while new companies compete for the printing dollar? The responses are somewhat mixed.

Kevin McNamara, vice president of marketing for Banta Direct Marketing Group in Chicago, notes market growth for segments such as advertising agencies, direct mail agencies, retailers and financial services companies.

"Those companies enjoyed productive growth in both the promotional marketing materials and marketing communications materials areas, as well as the direct mailer," McNamara says. "The majority of that growth came out of the direct mail portion of those businesses and, in particular, the direct mail programs—packages that required some level of personalization."

McNamara sees those segments as having significant growth potential in 1999, with the market at large ("depending on whose numbers you look at," he adds) growing in the 6 percent to 7 percent range. He feels Banta will benefit from that strong growth rate.

As the print customer's fortunes go, needless to say, so does that of the printer.

"We get a lot of mixed messages from our major customers," McNamara points out. "Some businesses are doing very well; they will continue being bullish on the health of their businesses and investments, and in making their businesses stronger. For them, 1999 is business as usual. The businesses that are dependent upon their industry segments and diversity of their businesses overseas, are the ones that are experiencing some softness. Even so, we're very optimistic that the industry—marketing and promotional materials—will continue to be one of the fastest-growing print markets (in 1999)."

McNamara isn't alone in his assessment. The Direct Marketing Association, in New York, projected a compound annual growth of 7.6 percent for the consumer category and 10.2 percent for business-to-business between 1997 and 2002, or 8.6 percent overall for that same period. The study also found that growth rates in all direct marketing media exceed the total U.S. growth rates of 5.1 percent for consumer sales and 5.4 percent for business-to-business sales in that same timespan.

Time to Change
Peter Gargano, executive vice president of sales and marketing for Quebecor Direct, saw 1998 as a year of continuing change and challenges for direct mail printers. Acquisitions, he notes, have further consolidated the direct mail printing industry, which paralleled a growing trend among customers to use fewer suppliers capable of providing a wide range of products and services.

Competition, price erosion, reduced production cycles and faster response times, he adds, are the salient challenges printers are facing.

"We believe 1998 will prove to be a good year for Quebecor Direct in two key areas," Gargano points out. "First, our group has seen a significant increase in sales this year, which has solidified our position as a market leader. Secondly, we have made advances concerning our initiative to fully integrate the business units that make up the Quebecor Direct Group. Being a more fully integrated group will allow us to better serve our customers by accessing the many enormous capabilities of our entire network of facilities."

Uniting the Force
As an example, Gargano points out the investment that his company made in upgrading its estimating systems. Starting in 1999, Quebecor Direct will be using a technology-driven system of estimating that will link its plants and sales force, and provide quicker responses and standardized pricing for products, regardless of which plants produce them. The result is more flexibility in meeting its customers' schedules and promoting the geographic advantages its group enjoys in having the luxury of multiple plant locations.

According to Gargano, databased marketing efforts will result in flat levels of product volume in 1999, with growth coming in the form of more sophisticated in-line finished products and greater use of personalized formats.

"Mature segments of our business, such as cards, order form envelopes, non-personalized letters and other basic direct mail components, will not offer any significant growth opportunities," Gargano forecasts. "This is why we have decided to expand and upgrade the personalization capabilities of our group."

Helen Zucchini, marketing director for Advance Direct, Boulder, CO, points out that 1998 brought an expansion of products and services for its customers.

Advance Direct enjoyed 35 percent growth in 1997 and to further growth, she says, the company felt it needed to add to its product mix.

"We wanted to offer our customers a total package solution," Zucchini says of the goal for 1998. "Now we can provide complete data processing services, a full lettershop, laser and ink-jet imaging technologies, in addition to our complete array of printing capabilities.

"Even with the growth of digital direct marketing, there's still a strong demand for traditional, printed direct marketing," Zucchini points out.

"With the growth of the Internet, traditional direct mail is necessary to get someone to look at your Web site."

Zucchini is concerned about one issue that may still be a factor in 1999: public perception that direct mail is an invasion of privacy. She also notes the services that are available to have one's name removed from direct mailing lists.

Don't Fear the Mailer
"With direct mail, there's the fear that somebody's watching you," she says. "They know what you order, know what products you get. There's a degree of paranoia involved with it. That's why direct mailers have to do their part by complying with the self-regulation guidelines the DMA will be imposing on its members in 1999."

Ron Marak, director of sales and marketing for GBF Graphics, in Skokie, IL, fears the direct mail printing arena has become crowded with new competitors, which has made for a fiercely-competitive environment. He expects the same conditions for the coming year.

"Direct marketers are going to continue to market on a one-to-one basis, reducing the amount of mailings they're going to require," he says. "And they're going to be looking for the highest response possible from the targeted mailings they're going to be doing."

Even as the number of direct mail printers increases and the volume of print jobs decreases, the direct mail industry still finds ways to grow. Whether or not printers and direct mail printing customers will continue to flourish in 1999 and beyond remains to be seen.
 

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