Amidst all the news of declining volumes for print, direct mail remains a bright spot among the many different print markets. Annual spending on Canadian direct mail advertising, excluding catalogues, is $2 billion to $3 billion and growing at a healthy clip, more than 4% a year. In 2005, companies and other groups sent out about two billion pieces of direct mail, which constitutes 15% of Canada Post’s revenue.
There are a number of reasons for the growth of direct mail, but it really boils down to one simple fact: direct mail works. Thus, advertisers and marketers continue to use it. It provides something tangible, convenient, colourful and can be persuasive. After all, print is a medium that must be physically delivered to the reader, and mail is the most common method of doing so. Nearly half of everything printed gets mailed, the vast majority of which is direct mail.
Direct mail accounts for the largest volume of household mail and represents more than one-fifth of everything mailed–the largest category and slightly ahead of bills. Computer-generated mailing lists and advanced database technology provide an efficient and cost-effective means of dividing and sorting mail by demographic characteristics.
Mail is an important medium, one that inspires trust and helps build brand and product awareness. Relative to other media, it is inexpensive and flexible. Direct mail remains a growing medium because of its inherent advantages as well as external events, such as “do not call” legislation, pushing direct marketers in that direction. As a result, regular mail continues to be the essential tool in communicating with the consumer.
Use of direct mail in Canada is still relatively undeveloped, with per capita spending barely one-third of that in the U.S. The key users of direct mail are consumer-oriented companies, including financial services firms such as banks and credit card companies, magazine companies that solicit subscriptions, mail order businesses, and non-profit organizations. It is particularly important to local merchants.
As alternative media have become fragmented, direct mail becomes more important. With hundreds of television channels and dwindling newspaper circulations, physical mail is one of the last ways to reach a large number of consumers. Direct mail is an increasingly attractive option as better databases and software allow targeted promotions to individuals based on past purchases in stores and on the Internet. Innovations in inserting and in digital printing make it easier for businesses to personalize direct mail.
Nevertheless, direct mail faces a number of problems and volumes are threatened by a range of factors. Consumer interest is falling as mail volume increases and response to interactive channels grows. Companies are also extremely concerned about costs, particularly postage and paper; the on-going price increases and cut backs in service certainly will not help.
As mailing becomes more complex and integrated, the pressure on logistics and distribution intensifies. This will lead to better targeting, which may slightly offset the growth in pieces.
But the growth and acceptance of Internet and e-mail technologies represents a potential damper to the growth of direct mail. Consumers increasingly want more interactivity with their advertising, and corporate ad budgets are moving in that direction.
The economics of e-mail is compelling when compared to print. In a 2004 study on “The Future of Direct Mail” prepared for GAMIS (now PRIMIR), Kubas Consultants estimated that 60% of the cost of a typical direct mail campaign is directly related to printing, including paper, postage and distribution, while only 40% is pre-media, including management, list preparation, and creative. And these numbers may be low for Canada, where postage appears to take a higher proportion (40%-50%) of total costs.
The principal direct competitor and closest analog for direct mail is e-mail, including SMS (short message service) messages to mobile devices. Access to both is widespread. And clearly e-mail works. And, given the cost differential, e-mail can be compelling.
Nevertheless, e-mail is still a disposable medium, and the presence of spam is serious. One approach to spam is opt-in marketing. But even this requires an initial solicitation, which can often be accomplished through direct mail.
Another, less direct, competitor is Internet advertising. The Internet is the most popular form of interactive marketing. In addition to both permission-based and unsolicited e-mail, Internet advertising can work in the same manner as direct mail, targeting prospects by context or Web-browsing patterns.
The relative paucity of obvious electronic technologies competing with direct mail provides some indication about the relatively positive outlook for direct mail. Paper remains a strong delivery mechanism. Ad agencies, public relations firms and marketers all like direct mail. Direct mail will not go away because advertisers need to source customers in the first place, and they do so through direct mail. Direct mail will continue to grow steadily, if not as rapidly as the past.
