Williamsburg Company: Direct Mail About to Fall
May 29th, 2009 by WY Daily Staff
Borrell Associates, a top forecaster has marketers shifting away in droves.
The past few years, newspaper and Yellow Pages advertising have entered steep declines as the internet continues to chew up more of advertisers’ budgets. Now there’s another category in danger: Direct mail.
Borrell Associates, the Williamsburg based media research firm, predicts that spending on direct mail will slip 39 percent over the next five years, from $49.7 billion in 2008 to $29.8 billion by 2013.
Annual spending will fall behind the internet, broadcast TV and newspapers. Meanwhile, spending on email campaigns, while not picking up all the slack from direct mail, is expected to soar to $15.7 billion, up from $12.1 billion last year.
In that time, the amount spent on local email advertising will more than double to $2 billion. Gordon Borrell, chief executive officer at Borrell Associates, spoke to Media Life Magazine about why direct mail has become vulnerable, why email marketing is set to explode, and what email’s advantages are over direct mail.
Why is direct mail so vulnerable right now?
Direct mail is being hit with a double-whammy – the lower cost/better results of “targeted” advertising opportunities such as so-called addressable cable commercials and various forms of internet advertising, including email and targeted banners.
Why is email marketing seeing such huge growth?
The internet is currently used by about 75 percent of all adults, and reading email is the most prevalent thing they do. In the rush to develop money-making internet ventures, I think everyone has focused on the “come to me” web and overlooked the “send to you” email. The high growth ahead is part of the catching up.
Plus, I think email has become far more sophisticated than it was just a few years ago, so the opportunities around delivering full graphics and video via email are starting to blossom.
What advantages does email marketing have over direct mail? Do more people read it?
Email marketing has one key thing that direct mail lacks: the ability to filter.
Right now a lot of good offers get trashed because they’re buried in catalogs or envelopes or tucked inside a “shopper” newspaper that comes in the mailbox. With email you can tell your software to filter out the unwanted stuff, and more importantly, deliver the good stuff.
So with email there’s less of a “lost value” factor and more potential for higher response from the consumer. I’m pretty certain more people read email than direct mail, but it’s not really an apples-to-apples comparison because not all email is advertising as such, and I’m not sure we could actually quantify that.
Why is email marketing preferable to display/banner or search advertising for some advertisers? Are there particular categories that tend to favor email over the other types of online advertising?
It’s the difference between setting up a lemonade stand and hoping customers will drive by, or calling thirsty people and asking them if they’d like some lemonade.
It sounds a helluva lot more powerful to tell an advertiser his message is being sent to 10,000 people than it is to say it’ll get 10,000 “page views” or be exposed to 10,000 “visitors.”
Right now the big categories are around health and medicine (most of which is spam), travel and electronics, including software. This will likely branch out more to general merchandise, especially clothing, and other things that people tend to buy online like books, video games and music.
I’m not sure we’re going to see a lot of grocery coupons delivered via email like you see being delivered in direct mail, though.
What will drive the huge growth in local email advertising, and what forms of advertising will suffer by contrast?
Local is still troublesome for email because of the small size of the lists and the unsophisticated segmentation. These lists may have tens of thousands or hundreds of thousands email addresses, but few companies have segmented them well enough to be able to deliver, say, an email invitation for a private showing for a new Lexus to all males age 36-54 with incomes over $100,000 in three ZIP codes around Minneapolis.
The sophistication is growing slowly, and once it gets there I think you’re going to see a mass abandonment of direct mailings when that occurs.
I think you may also see a little pain and suffering from radio and cable, which tend to compete for direct mail dollars because of their targetability.
What did you find most surprising or most interesting about this report?
The report’s intent was to describe the growth ahead for email, but the biggest surprise came when we wondered where all that growth would come from.
Advertisers generally don’t increase their spending; they take from something else. So a spiraling increase in email had to come from somewhere, and all of a sudden we saw this larger-than-life growth in direct mail over the past 15 years.
When we applied the “disruptive technologies” scenario, we found that direct mail looked like a mirror image to other businesses that virtually collapsed due to a marketplace disruptor eating at its foundation like termites.
What is the most important thing media buyers and planners can learn from this report?
The response numbers for direct mail look horrible, and if our scenario is correct, the bottom is going to drop out. Planners and buyers probably want to remain ahead of the curve and get very savvy about direct mail’s ROI and compare it with other forms of targeted media.
Addressable cable, radio, and perhaps email advertising might have better ROI at this point. I wouldn’t advise anyone to just abandon current buying habits, but I would worry that they had indeed become “habits” without any recent testing that provided quantifiable results.
The fact is, all forms of media advertising work. It’s just that some work better than others, according to the campaign’s goals. Advances in technology continue to help lower the cost of delivering commercial messages, so it’s important for buyers and planners to continuously test and prove ROI for each medium.