Econonmics of Direct Marketing


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DMA Panel at ACCM

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  • Econonmics of Direct Marketing

    1. 1. Evolving Economics of Direct Marketing Jerry Cerasale - DMA Joe Schick – Quad Graphics Stephanie Jackson - Zinio David Miller – Yahoo Neil O’Keefe - DMA The Power of Direct: Relevance. Responsibility. Results.
    2. 2. Evolving Economics of Direct Marketing <ul><li>Stephanie Jackson </li></ul><ul><ul><li>Senior Manager, Strategic Marketing Solutions, Zinio Systems </li></ul></ul><ul><li>David Miller </li></ul><ul><ul><li>Senior Director, Product Management for Ranking, Pricing & Optimization, Yahoo! Sponsored Search </li></ul></ul><ul><li>Joseph E. Schick </li></ul><ul><ul><li>Director of Postal Affairs, Quad/Graphics, Inc. </li></ul></ul><ul><li>Jerry Cerasale </li></ul><ul><ul><li>Sr. V.P., Government Affairs, DMA </li></ul></ul><ul><li>Neil O’Keefe </li></ul><ul><ul><li>V.P. Catalog and Multichannel Merchant Segment, DMA </li></ul></ul>
    3. 3. History of Catalogs and Direct Marketing <ul><li>1774 </li></ul><ul><ul><li>Benjamin Franklin creates first American catalog </li></ul></ul><ul><li>1872 </li></ul><ul><ul><li>Aaron Montgomery Ward produces first modern catalog </li></ul></ul><ul><li>1917 </li></ul><ul><ul><li>DMA founded as the Direct Mail Advertising Association </li></ul></ul><ul><li>1957 </li></ul><ul><ul><li>DialAmerica Marketing becomes the first company completely dedicated to inbound and outbound telephone sales and services. </li></ul></ul><ul><li>1967 </li></ul><ul><ul><li>AT&T creates a WATS line – Predecessor to the 800 # </li></ul></ul>
    4. 4. History of Catalogs and Direct Marketing <ul><li>1983 </li></ul><ul><ul><li>AOL founded as Quantum Computer Services </li></ul></ul><ul><li>1994 </li></ul><ul><ul><li>Jeff Bezos founded, Inc. </li></ul></ul><ul><li>2004 </li></ul><ul><ul><li>Facebook </li></ul></ul><ul><li>2006 </li></ul><ul><ul><li>Twitter </li></ul></ul><ul><li>2008 </li></ul><ul><ul><li>Sears launches Mobile Sears 2go </li></ul></ul><ul><ul><li>Montgomery Ward launches a website </li></ul></ul>
    5. 8. On-Line Catalog
    6. 9. Video
    7. 10. Email Catalog Requests
    8. 11. You-Tube
    9. 12. Facebook
    10. 13. 3D Bar Codes
    11. 14. Mobile Solicitation
    12. 15. Behavioral Marketing
    13. 16. Mobile Interactive
    14. 17. Twitter
    15. 18. Yahoo Shopping
    16. 19. Search with Video
    17. 20. Change in Budgets: 2008 to 2009 Source: 2009 Response Rate Report 30% 7% 63% Email 30% 47% 23% Catalog 30% 11% 60% Search 25% 8% 67% Internet 52% 6.5% 42% Mobile Same Decrease Increase Channel
    18. 21. Printing Modifications <ul><li>Trim Size </li></ul><ul><ul><li>Tabbed Booklets </li></ul></ul><ul><li>Page Count </li></ul><ul><li>Self Mailer versus Catalog </li></ul><ul><li>Postcards </li></ul><ul><li>Letters </li></ul>
    19. 22. Jerry Cerasale Sr. V.P., Government Affairs, DMA
    20. 23. Postal Rate History <ul><li>Prior to 1971 </li></ul><ul><ul><li>Congress set postage </li></ul></ul><ul><li>1971 to 2007 </li></ul><ul><ul><li>Board of Governors proposed rates </li></ul></ul><ul><ul><li>Postal Rate Commission recommended rates </li></ul></ul><ul><ul><li>Governors approved rates </li></ul></ul><ul><ul><ul><li>Rates were set at cost plus a markup </li></ul></ul></ul><ul><ul><ul><li>USPS was required to breakeven in a future test year </li></ul></ul></ul><ul><ul><li>Last rate case under old law = 20% to 40% postage increase for Standard Mail flats </li></ul></ul>
    21. 24. Postal Rate Setting <ul><li>Competitive classes of mail (bulk parcels, Priority, Express) </li></ul><ul><ul><li>Market rates set by Board of Governors </li></ul></ul><ul><ul><ul><li>Sum of all competitive classes net revenue must cover 5% of USPS institutional (fixed) costs </li></ul></ul></ul><ul><ul><li>Postal Regulatory Commission annually reviews revenues and costs and issues an Annual Compliance Review </li></ul></ul><ul><ul><li>PRC may hear complaints that rates are unlawful </li></ul></ul>
    22. 25. Postal Rate Setting <ul><li>Market Dominant classes </li></ul><ul><ul><li>(First-, Standard, Single piece parcels, Periodicals) </li></ul></ul><ul><ul><li>Set by Governors </li></ul></ul><ul><ul><ul><li>Each class average increase may not exceed CPI </li></ul></ul></ul><ul><ul><li>PRC reviews announced rates has 45 days to determine whether or not in compliance with the CPI cap </li></ul></ul><ul><ul><li>Postal Regulatory Commission annually reviews revenues and costs and issues an Annual Compliance Review </li></ul></ul><ul><ul><li>PRC may hear complaints that rates are unlawful </li></ul></ul>
    23. 27. Changing Role of PRC <ul><li>New PRC—more than a name change </li></ul><ul><li>Subpoena power </li></ul><ul><li>May require rate adjustments </li></ul><ul><li>Demands more data </li></ul><ul><li>Produces annual compliance reports </li></ul><ul><li>Hears complaints </li></ul><ul><li>More powerful, BUT </li></ul><ul><li>USPS has ratemaking flexibility </li></ul>
    24. 28. Summer Sale <ul><li>July 1, 2009 through September 30, 2009. </li></ul><ul><li>Mailers who mailed over 1 million Standard letters and/or flats from October 1, 2007 through March 31, 2008 are eligible to participate in the sale. </li></ul><ul><ul><li>about 3,250 mailers accounting for 75% of Standard Mail volume (letters sent this week) </li></ul></ul><ul><ul><li>Didn’t get a letter but think you should have?—appeal at </li></ul></ul><ul><li>Mailers will receive a rebate of 30% on any mail volume in that period which is over the past threshold. </li></ul><ul><li>Mailers’ rebate will be adjusted if their October, 2009 volume is less than their October, 2008 mail volume adjusted their mailing trend. </li></ul>
    25. 29. Summer Sale <ul><li>Vol. = Volume </li></ul><ul><li>Post = Postage </li></ul><ul><li>Oct 1, 08 thru Mar 31, 09 Vol. ÷ Oct 1, 07 thru Mar 31, 08 Vol. = Trend </li></ul><ul><li>Trend x Jul 1, 08 thru Sep 30, 08 Vol. = Threshold </li></ul><ul><li>Jul 1, 09 thru Sep 30, 09 Post ÷ Jul 1, 09 thru Sep 30, 09 Vol. = Avg. Post </li></ul><ul><li>(Jul 1, 09 thru Sep 30, 09 Vol. - Threshold) x Avg. Post x 0.30 = Unadjusted Rebate </li></ul><ul><li>(Oct 08 Vol. x Trend) - Oct 09 Vol. = Oct Adjustment </li></ul><ul><li>Unadjusted Rebate - (Oct Adjustment x 0.30) = Final Rebate </li></ul>
    26. 30. Summer Sale <ul><li>Mailers will pay full postage during the summer. </li></ul><ul><li>After October 31, 2009 USPS will determine the rebate which each mailer is due. </li></ul><ul><li>Rebates will be credited to the mailer’s permit account before December 31, 2009. </li></ul>
    27. 31. Summer Sale <ul><li>USPS will be sending eligible mailers letters that will provide the Threshold as determined by USPS data systems. </li></ul><ul><li>Mailers who believe they are eligible but did not receive a letter or mailers who do not agree with the USPS determined Threshold may appeal to USPS. </li></ul><ul><li>USPS, shortly, will provide DMA with the contact for any appeals. </li></ul><ul><li>We expect mailers to receive these letters by this week. </li></ul><ul><li>Appeal at [email_address] </li></ul>
    28. 32. Summer Sale <ul><li>DMA is hosting a webinar with Tom Foti of USPS </li></ul><ul><li>Date: May 11, 2009 </li></ul><ul><li>Time: 12:30 to 2:00 EDT </li></ul><ul><li>Register: the- </li></ul><ul><li>Charge: $15 </li></ul><ul><ul><li>to cover cost of the phone line </li></ul></ul>
    29. 33. Email / Can SPAM <ul><li>No permission required </li></ul><ul><li>Header must be truthful </li></ul><ul><li>Subject line must relate to the email message </li></ul><ul><li>From line must have sender (marketer) or initiator (service or list provider) </li></ul><ul><li>Must have Internet based opt-out </li></ul><ul><li>Must have postal address for sender (may be PO Box) </li></ul><ul><li>New rules for joint messages—may pick one of the advertisers to be the sender (whose opt-out and address must be in email) </li></ul>
    30. 34. Other Issues <ul><li>FTC and Congress </li></ul><ul><ul><li>Behavioral Advertising </li></ul></ul><ul><ul><ul><li>Tell consumers what is happening & allow opt-out (we hope—working against opt-in) </li></ul></ul></ul><ul><ul><ul><li>Applies to you if you advertise on others’ web site; allow third-party ads on your web sites </li></ul></ul></ul><ul><ul><li>Prerecorded messages </li></ul></ul><ul><ul><ul><li>Must have written consent by 9/1/09 </li></ul></ul></ul>
    31. 35. Other Issues <ul><li>State Issues </li></ul><ul><ul><li>Do No Mail—many bills no action </li></ul></ul><ul><ul><ul><li>Mail Moves America is very active—join it </li></ul></ul></ul><ul><ul><li>SSUTA—States looking for funds thus requiring collection of sales taxes for out of state marketers </li></ul></ul><ul><ul><ul><li>Need Congressional approval </li></ul></ul></ul><ul><ul><ul><li>States not really streamlining </li></ul></ul></ul>
    32. 36. Joe Schick Director of Postal Affairs, Quad/Graphics, Inc.
    33. 37. Reducing Postal Costs <ul><li>Address Management & Quality </li></ul><ul><ul><li>Ensure accuracy, deliverability and that USPS requirements are adhered to (Move Update) </li></ul></ul><ul><li>Mailpiece Design </li></ul><ul><ul><li>Meet machinability/automation requirements while still being creative to draw response </li></ul></ul><ul><li>Comail/Copalletize </li></ul><ul><ul><li>Becoming a normal step in the production process that is extremely successful in lowering postage costs while at the same time helping the USPS manage their costs </li></ul></ul>
    34. 38. Reducing Postal Costs <ul><li>Dropship </li></ul><ul><ul><li>Maximize number of SCF entries for postage savings and realize improved delivery </li></ul></ul><ul><li>Targeted & Consistent Delivery </li></ul><ul><ul><li>Meet client in-home requirements </li></ul></ul><ul><ul><li>Manage process around published USPS Service Standards and CETs (Critical Entry Times) </li></ul></ul><ul><li>Postal Advocate/Consultant </li></ul><ul><ul><li>Help clients navigate through postal policies and regulations </li></ul></ul><ul><ul><li>Relationship with USPS at all levels to represent clients’ interests when needed </li></ul></ul>
    35. 39. And Adding Value <ul><li>Database Management </li></ul><ul><ul><li>Right message to right address/person at the right time </li></ul></ul><ul><ul><li>Environmental concerns </li></ul></ul><ul><li>Consultative Direct Marketing Services </li></ul><ul><ul><li>Providing full service </li></ul></ul><ul><ul><li>Credibility with clients – sell the value-added products and services </li></ul></ul><ul><li>Personalization </li></ul><ul><ul><li>Proven to generate higher response when used in conjunction with other services </li></ul></ul>
    36. 40. And Adding Value <ul><li>VDP (Variable Data Print) </li></ul><ul><li>PURLs (Personal urls) </li></ul><ul><li>Paper & Ink Management </li></ul><ul><ul><li>Focus on quality of mailpiece to generate response </li></ul></ul><ul><ul><li>Compatibility with USPS requirements for machinability and automation </li></ul></ul><ul><ul><li>Environmental considerations </li></ul></ul><ul><li>Environmental Consciousness & Applications </li></ul><ul><ul><li>Part of doing business from Day 1 </li></ul></ul><ul><ul><li>Mail Moves America </li></ul></ul><ul><ul><li>Greening the Mail Task Force </li></ul></ul>
    37. 41. And Ensure the Long-Term Viability of the USPS <ul><li>Work As a Business Partner for Success with New Products and Services </li></ul><ul><ul><li>IMB (Intelligent Mail Barcode) </li></ul></ul><ul><ul><li>FSS (Flats Sequencing System) </li></ul></ul><ul><li>Support the USPS Politically </li></ul><ul><ul><li>HR 22 </li></ul></ul><ul><ul><li>Closing and/or consolidation of facilities </li></ul></ul><ul><li>Involvement In USPS/Industry Initiatives </li></ul><ul><ul><li>CEO Council </li></ul></ul><ul><ul><li>MTAC </li></ul></ul><ul><li>Add Expertise To USPS and Industry Groups </li></ul><ul><ul><li>Area Focus Groups </li></ul></ul><ul><ul><li>PCCs (Postal Customer Councils) </li></ul></ul>
    38. 42. Stephanie Jackson Senior Manager, Strategic Marketing Solutions, Zinio Systems
    39. 43. Factors impacting Direct Marketing Channel Distribution
    40. 44. Logistical (cost) <ul><li>Print continues to increase in cost </li></ul>Percentage of Cost attributed to various Print Production Efforts Source: PPA
    41. 45. Environmental <ul><li>Consumers and corporations are becoming more focused on green efforts </li></ul>55% of Companies Have already planned strategies to Go Green to increase their profitability* *Harris Interactive <ul><li>Corporate Mandates to decrease paper in and paper out </li></ul><ul><li>Customer requests not to receive print </li></ul>The Reality The Result
    42. 46. Generational <ul><li>Multitasking families and the next generation live on multiple channels at once </li></ul><ul><li>Families today live a 43 hour day : </li></ul><ul><li>8.7 with media </li></ul><ul><li>7.9 with technology (phone, games, music, ) </li></ul><ul><li>6 .2 with family and friends </li></ul><ul><li>10 with School or work, </li></ul><ul><li>8.1 with Sleep </li></ul>
    43. 47. Technological <ul><li>New technologies shift focus away from traditional methods print to even newer forms of mobile interaction </li></ul>Paper / PC Mobile Flex-Mobile Flex-Display Foldable <ul><li>Trees </li></ul><ul><li>Website </li></ul><ul><li>Zinio </li></ul><ul><li>Apple </li></ul><ul><li>Zinio </li></ul><ul><li>Kindle </li></ul><ul><li>Sony </li></ul><ul><li>Polymer Vision </li></ul><ul><li>Qualcomm </li></ul><ul><li>Plastic Logic </li></ul><ul><li>Liquavista </li></ul><ul><li>MEMS </li></ul><ul><li>Samsung </li></ul><ul><li>Not unimaginable </li></ul>
    44. 48. Use of Multiple Channels Increases Response
    45. 49. Print to Mobile Interaction <ul><li>Include SMS calls inside print magazines. </li></ul><ul><li>Advertisers or Publishers insert a content specific code on the printed material. </li></ul><ul><li>Featured Articles, Editorial and Advertisements. </li></ul><ul><li>Bonus content that doesn’t fit in the print edition. </li></ul><ul><li>Promotional messages </li></ul><ul><li>Coupons </li></ul><ul><li>Rebate forms </li></ul><ul><li>Rich media samples – audio & video </li></ul>
    46. 50. Online/Digital to Print Interaction <ul><li>Insert Printable Coupons within Digital Magazines </li></ul>
    47. 51. Print to PURL <ul><li>Drive to PURL from print to convert print optins to digital </li></ul>
    48. 52. David Miller Senior Director, Product Management for Ranking, Pricing & Optimization, Yahoo! Sponsored Search
    49. 53. Agenda <ul><li>Economics of Search Marketing </li></ul><ul><li>Search Marketing as Part of Direct Marketing Umbrella </li></ul><ul><li>Some Examples of Search Marketing / DM Interplay </li></ul><ul><li>Future of Search Marketing in DM context </li></ul>
    50. 54. Search Marketing <ul><li>Beautiful and instant marriage of a large volume of explicit statements of interest with marketing offers </li></ul><ul><li>‘ Near real time’ measurable performance </li></ul><ul><li>Necessary, but not sufficient for optimal direct marketing </li></ul><ul><ul><li>Even Yahoo! uses combination of online marketing and direct mail to market its own search marketing product </li></ul></ul>
    51. 55. Yahoo Search Commands a Large and Attractive Global Audience <ul><li>53 million people use Yahoo! US every day* </li></ul><ul><li>2.8 billion Y! US searches conducted every month* </li></ul><ul><li>Search Marketing represents an extremely powerful acquisition tool, yet only ~40% of US DM advertisers use any Search Marketing** </li></ul>*comScore Media Metrix 2.0 January 2009. **Forrester Research, Understanding the Marketing and IT Relationship, March 2009.
    52. 56. Search Marketing as a DM Complement all Targeting www Search Campaign Performance Web Analytics Testing/Refinement Performance-Based Automation Multi-Channel Customer View www 1 www 2 www 3 Testing/Refinement Mail Stores Phone Email Communication Sequencing Contact Strategies Testing/Refinement Search Marketing Display ad Web Blogs Forums Contact Strategies +
    53. 57. Example 1: Drive Search Traffic to Your Site <ul><li>Drive awareness </li></ul><ul><li>Drive online sales – in front of customer at time of purchase </li></ul><ul><li>Test marketing messaging (A/B) </li></ul><ul><ul><li>Product names </li></ul></ul><ul><ul><li>Direct mail or offline messaging </li></ul></ul><ul><li>Analyze online behavior to inform other channel marketing </li></ul><ul><ul><li>Assess offline demand, inventory, pricing, product naming </li></ul></ul><ul><li>Acquire, cultivate, and remarket to the customer </li></ul>Offline Marketing Cycle Time: 6 mo ?? Cost: >$10,000s ?? Search Marketing Cycle Time: 1 week Cost: $100s Testing Testing
    54. 58. Targeting Examples Temporal Time of day Day of week Demographic Gender Age Geo Country State DMA City Zip
    55. 59. Example 2: Target & Customize Experiences <ul><li>Siphon off geo, demo, and temporal targeted traffic </li></ul><ul><ul><li>Send to custom landing pages </li></ul></ul><ul><ul><li>Cookie and “acquire” as “known” customers </li></ul></ul><ul><ul><li>Test messaging and gauge preferences/demand of segments </li></ul></ul><ul><ul><li>Learn value of your segments or new segmentation </li></ul></ul><ul><li>Influence & inform direct mail / store / phone / web / email strategies </li></ul><ul><li>Offline marketing to search marketing via ‘custom’ keyword </li></ul><ul><ul><li>Enhanced by Search Retargeting </li></ul></ul>
    56. 60. Possible Future of Search Marketing + DM <ul><li>Enhanced cultivation & remarketing </li></ul><ul><li>When a ‘ specific ’ customer searches, do something ‘ different ’ </li></ul><ul><li>Search Marketing: </li></ul><ul><li>Custom bid </li></ul><ul><li>Custom offer messaging </li></ul><ul><li>Custom landing page </li></ul><ul><li>Other Direct Marketing: </li></ul><ul><li>Trigger for a custom email/mailer/call/ display ad offer </li></ul>Previous click Previous conversion Current prospect Current customer Possibilities for ‘ Different ’ Possibilities for ‘ Specific ’
    57. 61. Discussion and Questions & Answers The Power of Direct: Relevance. Responsibility. Results.