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Commentary & Analysis

VDP Lessons--Then and Now

by Heidi Tolliver-

By WhatTheyThink Staff
Published: July 19, 2004

by Heidi Tolliver-Nigro The lessons of the early days are relevant -- and even critical -- to us today. July 19, 2004 -- Last month, I created a profile of today's successful variable data printer, a profile that is very different from what was prognosticated when the technology first came out and even, I suspect, from what many people believe today. In future columns, I will build on this profile by talking about where the applications and the market are now, but before I do, it's interesting and enlightening to look at where they have been. In part, I want to talk about this because, while many companies have moved on from the early misconceptions about this marketplace, many have not. So the lessons of the early days are relevant -- and even critical -- to us today. We don't want to repeat the mistakes of the past. When digital printing was introduced in the early 1990s, the potential of variable data was recognized, but nobody knew what challenges would befall those who began to implement these applications in the field. In those days, the common notion of variable data was that it could be used to sell anything to anybody. Because the idea was to boost sales of digital presses, and because most commercial printers are small to mid-sized operations, there was much talk about using this technology in local marketplaces. One could make the argument that this was really just demographic segmenting combined in a single-step with mail-merge addressing. Kind of Publishers Clearinghouse with four-color images. At that time, it was commonplace to hear people talking about personalizing flyers and mailers to help local businesses boost sales of everything from golf balls to electronics. For example, it was suggested that local electronics stores could capitalize on sales by marketing stereo speakers to customers who purchased stereos by offering them the latest speakers six months later. (Not so) wild generalizations If we had to boil down the characteristics of these programs, they typically looked like this: They were one-off programs in which success or failure was judged solely on the response rates generated by that particular program. VDP was perceived to be useful by any kind of company for selling anything. Novelty was a major part of VDP's effectiveness. VDP was treated like a production technology, not a marketing strategy. Because VDP was still relatively new (at least, in the four-color, commercial print marketplace), "personalization" meant putting someone's name on the cover and personalizing graphics based on things like gender or age demographic. However, one could make the argument that this was really just demographic segmenting combined in a single-step with mail-merge addressing. Kind of Publishers Clearinghouse with four-color images. What was selling these applications (both to customers and to consumers) was novelty -- recipients paying attention based on their names and addresses in lights, not because the pieces had some kind of heightened relevance to their lives. Considering that these programs were being spearheaded by local digital printers focusing on the mechanics of VDP rather than its marketing dynamics, this is to be expected. Much of what was driving the market was, "Let's see what VDP can do, and when we do it, what kind of results we get." Customers were primarily those adventurous enough to experiment -- hoping to cash in on one of those super-high response rates that showed up in the trade press occasionally -- but when the programs didn't receive the results they expected, they soured on it quickly. Then and Now… Today, such notions have all but been dismissed. There are three primary reasons: The average commercial printing customer does not have the kind of customer database necessary to develop variable data printing applications. Rented lists are no longer considered a cost-effective way to develop prospect lists. Lists are often out of date, too expensive to clean up (remove duplicates, place data into the appropriate fields, put into the proper formatting, etc.), and do not contain the kind of personal information necessary to create true personalization. Companies successfully utilizing variable data have in-house customer databases, either based on recent contacts from those customers or based on relationships with those customers over time. This does not mean that VDP marketers do not make use of rented lists to boost customer information they already have. They do. But they use them to supplement in-house databases they already have. It has been recognized that the value of the product being sold must be sufficient to justify the creation of a variable data program. You aren't going to use a $2 per-piece mailing to sell small-ticket items. You will use it to sell automobiles, financial services, and vacation packages. This is why, despite the fact that magazine publishers have extensive customer databases and are experts at targeted marketing, they have yet to catch on to variable data. The value of their product -- what is the average cost of a magazine subscription? $18? $22? -- is too low to justify the expense. Especially in light of the effectiveness of their existing highly targeted and segmented direct mail programs. The value of variable data printing is no longer being judged on the ROI of individual campaigns alone. Increasingly, it's being evaluated as part of a larger effort to develop and maintain long-term relationships with customers. In many cases, lifetime customer value has become more important than immediate ROI. What this means… These applications are being implemented based on a corporate initiative to provide more personalization and customization in the way AIG speaks to clients. When you put these three things together, you paint a picture that is very different from local printers working with local customers to market to their local customer lists. You are looking at large corporations with IT departments, huge customer databases, and high-value products -- companies that already recognize, based on the value of those products, the importance and value of developing long-term relationships with customers. A good example is AIG SunAmerica, which is working with Royal Impressions, a digital printer in New York City, on a series of applications to customize newsletters, postcards, and other promotional materials on behalf of its independent financial advisors. These applications are not being driven by short-term ROI. They are being implemented based on a corporate initiative to provide more personalization and customization in the way AIG speaks to clients. In fact, AIG will not even be able to assess ROI on the applications for months … or longer. This is not to say that ROI isn't important in the success of the variable data marketplace. It is. As we'll discuss in future columns, it is the ability to prove ROI on certain kinds of marketing programs that has allowed the industry's leading-edge VDP printers to grow their VDP programs over the last year, despite the tough economic climate. It's just that ROIs are no longer the reason d'etre of these campaigns. In many cases, they've become a bonus.

 

 

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