With costs rising, direct mail agencies are considering paper cuts
Rising paper costs could make direct mail a pricier option for marketers – but agencies remain confident demand will remain steady.
The cost of living is impacting the price of paper
The price of paper has risen significantly in recent years according to specialist agencies in the US and UK, with cost increases of 25-50% reported. That could affect businesses of many different stripes, including marketers that rely on print media to spread their brand’s message. DIY retailer Screwfix, for example, discontinued its physical catalog in August after 30 years in print.
It could also hit agencies that specialize in direct mail marketing. In response, some agency businesses have begun to consolidate the variety of paper stocks – the type of paper available for use in direct mail – enabling them to manage their own cost base, but reducing the options available to customers.
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”Yes, the costs have impacted our prices with clients, but also we’ve had an opportunity to mitigate some of those with some creative optimization,” says Kris Persons, senior vice-president of direct marketing at US agency group Quad. The company owns a printing concern and offers direct mail services to brands, so is doubly exposed to a rise in paper costs.
In response, it’s begun offering fewer variations in paper weight and size, as part of a move to standardize its inventory.
”Standardized stocks are easier to produce and cut costs down, and we can deliver them much more quickly to clients,” she says. The reduction in variety hasn’t yet stymied client demand, Persons says.
”Marketers want to stand out in the mailbox. But one of the things we’ve seen with testing is that format is only 10% of what changes the way a consumer behaves; 90% is on your audience and the nature of what you’ve sent. So we’re trying to work with clients on the 90% of the equation, on the audience and on the creative.”
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Combined with the rising cost of postage in the US and UK, that could make direct mail a less attractive option for clients. But demand is holding, according to British agency Propack, which specializes in direct mail.
Account director Gary Walker explains that the cost increase ”doesn’t have a huge impact” on the prices it offers clients, but that ”clients working on their 2023 budgets are making allowances” for the rise and continuing with orders.
”It’s a numbers game and the numbers still work. We’re seeing a resurgence in direct mail; we’re seeing more people adopting it, more people revisiting it. An increase on the unit cost probably isn’t going to dissuade people if the numbers still work.”
Tim Bond, director of insight at the Data & Marketing Association (DMA), says rising costs could provoke innovation from agencies, even as some businesses cut back on the variety of paper options available to customers.
“There are few areas of marketing that haven’t become more expensive due to rising inflation, and direct mail isn’t any different. While this has put an immediate strain on agencies’ budgets, it doesn’t have to be all doom and gloom, as there is an opportunity to optimize direct mail campaigns to become more creative, engaging and targeted, refining when and how they target consumers.“
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He says demand could be due to long-term economic and consumer habits that kicked off during the pandemic. That could outweigh a cost rise, he adds.
“Perhaps in response to this, we will see further shifts in some of the longer-term trends we see in the door drop market. For example, younger age groups being targeted far more than they were historically. With home working far more prevalent, and seemingly here to stay, perhaps agencies and brands are realizing that they can reach these audiences more effectively and efficiently via direct mail than they have been able to in the past.”