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Report Says Direct Mail Spending Will Plummet

By David Dodd
Published: May 21, 2009

Direct mail spending will decline 39 percent during the next five years from $49.7 billion in 2008 to $29.8 billion in 2013, according to a study released earlier this week by Borrell Associates, a media research and consulting firm.  Research reports usually contain fairly measured language, but this one has several dramatic statements.  For example, the report describes direct mail as "the largest and least-read of all print media" and goes on to say, "Direct mail has begun spiraling into what we believe is a precipitous decline from which it will never fully recover."

Borrell Associates contends that marketers (especially smaller, local businesses) are increasingly using e-mail instead of direct mail for many purposes.  The study states that advertisers spent $12.1 billion on e-mail marketing in 2008, and it predicts that e-mail spending will grow to $15.7 billion over the next five years.  Borrell also contends that most of the growth in e-mail marketing will be local.  The study states, "We're expecting local e-mail advertising to grow from $848 million in 2008, to $2 billion in 2013, as more small businesses abandon direct mail couponing and promotional offers and turn to a more measurable and less costly medium, e-mail."

Other recent research points in the same general direction.  Earlier this year, Winterberry Group released a study estimating that direct mail spending declined by 3 percent in 2008.  The Winterberry report predicted that direct mail spending would fall by another 8 to 9 percent in 2009.  More significantly, Winterberry Group believes that the changes now affecting direct mail are systemic, and not cyclical, in nature.  In other words, things won't go back to "normal" when the current recession ends.  Winterberry Group contends that direct mail is changing from a "mass" to a highly "targeted" communications medium that will create the greatest value for marketers when it is used as one component of sophisticated, data-driven, multichannel marketing programs.

The conclusions and predictions contained in these research reports may or may not turn out to the completely accurate.  But it is undeniable that the marketing landscape is changing, and those changes will have major repercussions for the printing industry.

G. David Dodd is available for speaking engagements and consulting projects. To get more information contact us here.

G. David Dodd is a principal of Point Balance, LLC ( www.pointbalance.com ), an executive education and management consulting firm. Point Balance provides cutting-edge management education programs designed for printing and publishing executives. The firm also provides management consulting services involving business strategy development, strategic marketing, cost management (including activity-based costing), business process management, and balanced scorecard performance management systems. Dodd is a co-author of Activity-Based Costing for Printers: An Implementation Guide, the authoritative resource relating to the use of activity-based costing by printing and publishing firms. Dodd also co-authored Making Value Added Services Work, a comprehensive reference tool for printing company managers who are just beginning to consider diversification or who have already added new services and are not receiving the benefits they expected.

David Dodd can be reached at ddodd@pointbalance.com,931-707-5105.

 

Discussion

By Michael J on May 22, 2009

Thanks for the info. I think the opportunity for commercial printers, Staples and the franchises is in
“We’re expecting local e-mail advertising to grow from $848 million in 2008, to $2 billion in 2013 . . .

The reality is that most small business does not use any marketing at all. They are too busy running their businesses. The issue is that if email is combined with measurable local print, it means affordable multi channel marketing for small business.

Google Ad Sense brought over 1,000,000 new advertiser's into the market. Fighting over a shrinking pie is a loser. Getting a piece of new buyers in the market place is a winner.

Given that most market size predictions are made by projecting past history forward, they don't take into account Black Swans. I wonder what the projections were for the Kindle, the iPhone or the iPod, or Amazon before they had a history in the market.

 

By Dennis McGarry on May 22, 2009

I agree that things are changing at a more rapid pace than I thought they would. However, I see a clogging of the pipeline to move this much volume to email marketing. The oversaturation in email has a number of inherent problems for marketers. Bad email addresses, not knowing who really received (or opened) the message, competition with other e-messages, spam and ad blockers, etc., make it very difficult for a small advertiser to measure the effectiveness of email marketing. Print on the other hand is timeless, in your hands, proven, mailable, deliverable, creative and sometimes novel.

Long live the combination of Print and E-messaging!

 

By Smith C on May 22, 2009

There will always be a niche for direct mail,
true the players will be far and few between.

Yes-mail advertising is increasing, but sometimes enjoying and with the amount of
e-mail the average business executive receives as long as there is a exit button I will use it.

 

By Cary Sherburne on May 22, 2009

It is also interesting to note that 51% of direct mail goes to existing customers. If marketers start taking advantage of TransPromo in large numbers, that 51% of direct mail is at risk. And why wouldn't they? They already have to produce and mail transactional documents. It does not cost that much more to add promotional or educational messages to make better use of white space, and it costs nothing more to mail them. It can be done in black & white, but for a relatively reasonable incremental cost, it can be done in color, and there are many proof cases for the ROI this communications method delivers.

Transactional documents get opened and read. According to InfoTrends research, people spend an average of 2-3 minutes reading bills and statements, and they often look at them more than once. Using these "onserts" also allows marketers to eliminate those annoying and irrelevant inserts we usually just send straight to the round file. My only surprise about this forecast in the decline in direct mail is that it hasn't hit us sooner.

Michael is right, the key for printers is to get up to speed on multichannel communications and offer a blended range of services that more effectively address the market realities of today.

 

By Aaron Hale on May 22, 2009

I agree with Cary that the benefits that a direct touch with TransPromo delivers is undeniable, however I do not share her surprise. TransPromo both from the Markter's perspective and the service provider's perspective is a very complex and costly process that is not for the squeamish.For those who do dare, however the ROI is the just reward.

The systemic vs. cyclic nature of the decline that Winterberry points out goes beyond the direct mail application into the print industry et al. Michael is spot on that offering multi-channel solutions for graphic communications companies today are table stakes.

When this economy recovers it is not going to be your father's print industry. Printers have to get into the business of being full service communications providers where actual print will represent a necessary but smaller component in the process.

 

By Lithoman on May 22, 2009

Keep in mind we had direct email for a long time. It is more commonly known as SPAM. There is a fine line between bulk email and spam.

If a marketing organization wants to target a geographic area they can get my address from the US Postal Service. Where would they go to get my email address?

Many of the traditional forms of direct mail are becoming obsolete. Credt card applications go right to the trash.

 

By Lithoman on May 22, 2009

The printing industry is it's own worst enemy. They just sit there and watch a new disaster unfold every week and don't do much about it. They send boatloads of money to trade associations that are supposed to be advocates of the industry. When a report like this one comes out by some self serving "research consultant" we never hear anything from our trade leaders refuting their claims. They sit on their hands and wallets and seemed resigned to the fact that what these snake oil salesmen's claims are fact. The print trade associations need to be shaken up and start fighting for our industry.

Crap like this report gets into the business mainstream and the claims they make are self fulfilling and turn into fact. Who is doing an intelligent and slick "research study" showing direct mail to be a growth industry? What printing trade association is designing a counter PR attack? No we just sit there and send our checks to the trade groups and resign ourselves to the fact that we have no control over our destinies. Claims become facts and more print shops close. When is this industry going to wake up and start fighting for it's survival? Even if this report's claims turn out to be true at least we can say we did everything we can to fight it. Who is going to be the well funded advocate for this industry? Our very survival is at stake. Sitting on our hands and passively waiting for the recession to end is no longer an option.

 

By Joe Petrucci on May 22, 2009

I don't know about Lithoman, but all of our clients are using email where it makes sense with the primary focus being on postage/print cost reduction. Even when confronted with the challenges that email presents (deliverability, spam, etc.), they want it because it is cheaper.

We teach them to use direct mail and email the right way, which is critical if we want to keep the revenue and profit from that customer. Multi-channel capabilities are key and helping them with strategy is now one of core deliverables...

We win clients each week from people that are only selling printing. The change in the market is real from where we sit...

 

By Michael J on May 22, 2009

I have to say I'm with Lithoman with his description of the problem with trade associations, but we part ways with the solution.

I think the trade organisation business model is broken. While they are non profit, salaries and overhead has to be paid. So it means selling reports to printers. Then collecting more money from printers to do public relations campaigns or lobbying campaigns.

The last thing the 95% of printers need is public relations or lobbying. They need work.

Why not look at what Lee Gallgher has been doing over at InfoPrint and his work with the CMO. It's all focused at the top of the pyramid, but their focused, intelligent, numbers supported research landed a huge contract for one their customers doing a multi year transpromo project with Cox Communications. InfoPrint gets the clicks, the customer gets the sale. All nicely aligned.

So, suppose instead of a trade association that does "Print is Good" campaigns, rebrands themselves and sells, instead of gives, very potentially value information, they use the money to organize regional proof of concepts projects.

If it turns into a sale, they get an appropriate fee. The overhead could be supported by the advertising budget of the vendors. It would have to be arms length to preserve the independence, but I think that could be worked out.

If we are telling the truth,a multi channel marketing campaign, using 1 to 1 and transpromo techniques should be the right way to get printers to buy their stuff.

In any case, since I'm no longer in the game, I just can't see how the investment pays off for the 95% of printers in our industry.

FYI, Here's the link to Lee Gallagher's blog to see what they've been doing with the Chief Marketers Organization.
http://www.transpromo-live.com/

 

By Harvey on May 22, 2009

It is natural that any media that has failed to deliver substantial ROIs like the traditional direct mail product mix has, is soon to go bye-bye. Everything that I have seen and experienced about the true power of variable direct mail confirms to me (and all of my clients) that well constructed, dynamic variable print direct mail, followed by well-trained telemarketing appointment setters will be proven to be the cross-media program of choice for B2B marketers once they learn how to wield this power. When done creatively, we have experienced response rates well into the 50-80% range. Try getting that from emails.

 

By Paul Care on May 26, 2009

Its only reasonable to use waste-free services such as email. Everyone benefits, provided hardcopies are provided where needed.

 

By Mike B on May 26, 2009

We hear "systemic" vs "cyclic" change every day from every direction. The two salient questions are 1) Is it true? and 2) What can the average (not the RR Donnelly's of the world who just buy companies) printer do about it? It appears the data points to systemic or "structural change" as our industry prefers to call it. However, the move from lumbering offset printer, i.e. commodity manufacturer, to nimble-footed marketer is difficult and expensive. As many have commented, becoming a "marketing communications company" is much more than simply relabeling. It is my belief there will be 20-40% fewer commercial printers in the next 2-3 years. I am betting on the diversification, multi-channel, cross-media, marketing services, 1:1 marketing hubris but no telling if we get there. I just know to only rely on offset printing seems like a sure fire way to be either a) 6-feet under or b) competing on cost basis with China and Kenya.

 

By Mike L on May 26, 2009

We do need to be multi-channel marketers with a much broader footprint in terms of services to survive. You have to be able to consult, develop, and execute multi-channel efforts in conjunction with your DM. It's going to change and we will have a much needed capacity reduction in DM that in the end will make the industry stronger.

At the same time I would have to classify this as a self serving and biased report. If you do a Google search on Borrell this is what pops up "Borrell Associates is a media research, consulting and project firm specializing in local Internet advertising." Funny how their analysis draws the conclusion that the future of marketing is local internet/email. Thank you for opening my eyes and I am so lucky that you are here to help me transition. REALLY!

The bottom line is that email is a good tool for existing customers who are opt-ins, but prospecting and acquisition via standalone email is poor at best. We've actually seen an increase in e-tailers using DM to drive traffic. The future's bright if you are as well.

 

By Michael J on May 26, 2009

I think once you put QR codes, Kooaba tech or Microsoft Tags on to the Direct Mail, the equation changes pretty radically.

With Kooaba, you can point your cell phone at a picture, snap, be taken to web site or get more info about what you're looking at.

to Mike L,
thanks for the Google Search. That pretty much says it all.

 

By Martin Rego on May 28, 2009

This report is nonsense. It neglects to mention that 95% of email marketing is never read by its intended recipient. It is either filtered out by the recipient's enterprise software, or by the recipient's own computer antispam software. If it finally makes it into the email inbox, it is quickly deleted, because the recipient already has 100 other messages waiting each morning.

Direct mail, on the other hand, has to be handled, if at least to be taken out of the mailbox. It gets looked at, and read - thus gets at least 5 or 10 seconds of the recipient's attention, which is a lot more than an unread email gets.

Thus, email marketing is useless in bringing in new customers. I don't care how cheap it is. Sure, it has some use in maintaining existing relationships, but that'a about it.

The most effective marketing strategies will combine direct mail and the web. They will complement one another.

Direct mail ain't going away any time soon.

 

By Pete W on May 28, 2009

Sorry if I'm regurgitating anything already said, but everyday I see printers, marketers, business owners, etc. debate which is better: direct mail or e-mail marketing. Everyone has an opinion, but very few ever hit on the fact that both need to be used where appropriate, and more importantly, must be more planned and targeted. I believe the days of mass junk mail and spam are numbered. There are too many people with their hands in it that the end consumer sees too much advertising in their physical or virtual mailbox to take any of it seriously.

As the business world evolves and uses direct mail and e-mail more efficiently, those printers and marketers who provide a combination of those services will be the ones profiting. Like Mike B and Mike L stated, we need to be cross-channel marketers and product providers. And this doesn't just go for direct advertising - but all printed products. Take a look at the other headline to the top-right: "Ingram Will Merge Print and Digital Operations"

All printers venture to say that nothing will ever beat a physical product in your hand. I completely agree. E-mail marketing isn't here to replace direct mail. As with all printed products and their virtual counterparts, they here to complement each other.

 

By Gordon Borrell on May 29, 2009

This is one of the most interesting and intelligent blog discussions I have seen on any media industry site, and I applaud you for this discourse.

As the primary author of the report that stimulated this discussion, I feel compelled to give a few of the commenters a (Lithoman in particular) a bit of advice: Trade associations who always act to protect --rather than develop--the industry are doing it a disservice. I agree wholeheartedly with many of the other writers. This is a GREAT time to understand the trends and learn how to ride the tsunami rather than be drowned by it.

In the past 8 years, our projections for changes in media spending (newspapers, Internet, TV, etc.) have always come true, plus or minus a few percentage points. We HAVE, however, gotten the timing wrong many times. So if we say Direct Mail is in a freefall and it'll drop 39% over the next 5 years, you can pretty much bet on that 39%, but it would be safer to say it'll occur in 4 to 7 years. (We think it'll be 5, but it's impossible to predict what will happen next year, let alone 5 years from now.)

No medium has ever disappeared as the result of another one, so it's unlikely that Direct Mail will entirely disappear. Like to other print-based industries, however (newspapers and yellow pages), Direct Mail is barrelling through a transformational time. It happened to radio in the 1950s when everyone changed their "prime time" entertainment habits from the radio to the TV. Those who go into this period of downturn screaming about the power of Direct Mail and merely trying to protect its reputation will wind up with smaller and smaller businesses. Those who see the bigger picture and figure out how to combine e-mail and other marketing options with the power of Direct Mail will wind up with larger, thriving businesses.

 

By David Dodd on May 29, 2009

In my view, it is not particularly helpful to debate the relative merits of direct mail vs. e-mail in a general way. Neither channel is the best choice in every situation. What we need to remember is that in today's marketing environment, a good marketing executive or manager will be (and should be) channel agnostic. If he or she is trying to decide between executing a particular campaign or program using e-mail or direct mail, one question will be paramount: Which version of the campaign will provide the greatest return on my marketing investment? The final decision may involve other issues, but the starting point is ROI.

By the way, marketing ROI is not synonymous with response rates. It's very possible for a campaign with a lower response rate to generate a higher ROI than a campaign with a higher response rate.

 

By Michael J on May 29, 2009

David,
I've never been able to understand how ROI is measured in various marketing campaigns. If you could point me to a place I can learn about this that would be much appreciated.

 

By Michael J on May 30, 2009

Gordon,

One approach I've used to deal with the timing problem is to stay away from "averages" on scales that have notional reality but don't reflect the real world.

A good example is the GDP or the Dow. The interesting data points are always in the outliers. The very point of the averages is to smooth out the messy state of the real world.

The issue at hand is not the overall trend. The more interesting point are the outliers and how they tell a different story.

It might capture information on the interesting question: Where is direct mail dying and where is direct mail growing.

 

By Ralf Schlozer on Jun 01, 2009

Good point - we are currently conducting research in consumer media preferences. For most consumers advertising by E-mail or on mobile devices is noticeably less popular than on other media (including direct mail). There are some outliers, who strongly prefer e-mail and Mobile messaging though (there are much less outliers for other media).
It is not only a matter of content, timing or message preparation - it also very much down to personal preferences.
And while I agree that Direct Mail volumes will decline, the impact on revenue is smaller, as mailings will become more elaborate, more personalised and more colorful = more expensive.

 

By Michael J on Jun 01, 2009

Ralf,

Just curious will you have a large enough sample to be able to define consumers by region, education, age or other characteristics? It could be very helpful for printers and marketers to understand which consumers in what area of the country doing what kind of work prefer the various modes of communication.

 

By Ralf Schlozer on Jun 03, 2009

We are conducting the research in 5 European countries. We can segment by different characteristics. It will be interesting to see how countries and consumer groups stack up.
I hope this also yields some good arguments for when to use print and when use electronic media.

 

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