Changing cultures
Marketing spend is on the increase according to the Bellweather Report, which was released last week. The report reveals an increase in marketing spend over the recent months, with direct marketing budgets showing the largest gain. It also states that across the UK 10.1 per cent of companies reported an increase in their direct marketing budgets, and that this growing share was largely at the expense of traditional media marketing.
Traditional above-the-line marketing is often finding its budgets being reigned in with the growth in the number of media channels that are available – and the rise of internet and below-the-line communications continuing.
During a period when advertising spend by clients has become tighter than ever, direct marketing is one aspect that is continuing to flourish.
“One of the things that is driving the continued popularity of direct marketing is new technology,” says David Metcalf, head of wholesale banking at Lloyds TSB Scotland and chair of the Direct Marketing Association Scotland.
“If you take direct marketing in its widest sense, and not just traditional direct mail but also internet, text messaging and mobile marketing, there’s more companies adopting the new technological approaches and I would expect that there will be a significant trend towards new technology in the direct marketing activity that is on the go.”
Alistair Hastie, sales and marketing manager of Johnston Mailing, explains that the broad appeal to clients of direct marketing is its cost effectiveness. “Direct marketing is now far more profitable due to the targeted nature of the techniques involved,” he says. “There is a no more direct way of speaking to the people who are most likely to buy your products. Direct marketing volumes are increasing all the time – although the top 100 mailers have decreased – which in turn is increasing sales and profits for the companies using direct marketing in their marketing strategy. For example, Direct Mail Information Service notes that £27 billion is spent by consumers and businesses as a result of direct marketing. Similarly for every £1 spent £14 is generated.”
Lynn McMillan of Guy Robertson Partnership believes its tracking ease is key. “The job of a marketing manager is not easy and anything that can be tracked succinctly for reporting can only make that job easier,” she says. “It is also allowing them to connect with consumers in a more real way that is more immediate and in the case of digital, more flexible. This argument for transparent ROI is enhanced by the ability to drill down into not only days of response, but times as well.”
In recent times, traditional above-the-line advertising agencies have begun to invest in direct marketing divisions and companies, for example, The Union has launched Union Direct, The Bridge launched Point and The Cello Group has launched Target Direct, with other companies – including 1576 – investing heavily to integrate b-t-l functions into the agency.
“Particularly in the Scottish market, budgets dictate that you’ve got to offer full service but there are relatively few pure advertising accounts any more,” says Daniel Clare, managing director of Union Direct. “Also increasingly, and quite understandably, clients are looking for increased return on investment, with an evaluation of what they are undertaking – direct activity will certainly enable them to do that with pure, classic direct mail, or increasingly digital. So there is a huge opportunity to precisely target who it is that you want to be talking to, get out a relevant message to them and measure the effectiveness of what you’re doing.”
Helen Hourston, managing director of creative services at IAS Smarts Response believes that established agencies opening direct marketing divisions is not a recent trend, but a growing one. “Those that are only just doing this now are a bit behind the market,” she says. “Direct marketing has been taking an increasing percentage of overall marketing spend for a number of years now and it’s hardly surprising. Clients are looking for accountability from their budgets and relationships with their customers. Direct marketing can provide both.”
However, it may be felt that with more agencies moving towards integration and offering clients a direct marketing approach, this might further clutter a marketplace fighting for clients, and have an adverse affect on the business of ‘specialists’ in that specific area, potentially damaging the Scottish marketplace.
Yvonne Balfour, managing director of b-t-l specialists Navigator, does not agree, though. She believes that a move into direct marketing is a positive step forward. “It’s certainly not damaging and market competition exists already,” she says. “It’s more a case of agency survival and reflecting clients’ business needs and the change in media channels.”
Balfour continues by explaining why she feels clients are choosing to use below-the-line as a preferred marketing tool, when purse strings are tightening: “Direct marketing is more measurable and that’s what clients need. They need to communicate brand messages to reach their desired target audiences – and as budgets are becoming squeezed, brands are looking to achieve this in the most cost effective way. Direct marketing has always been a highly cost effective and measurable discipline.”
Yet, Alasdair Gibbons, client services director at Clayton Graham, says that simply because direct marketing remains popular with clients, neither it nor below-the-line marketing is proving to be more profitable than the other: “The fact of the matter is that many, many clients are now alive to the benefits of integration. Clients like the ease of briefing through one point of contact. They recognise that an integrated agency will, or should be, fully aware of their strategy and objectives, meaning that they, the client, can enjoy efficiencies as they are not educating and monitoring a number of providers. Finally they enjoy the budget benefits that flow from integration.”
Story’s managing director, Sue Mullen, feels that direct marketing is simply the obvious choice when it comes to looking at the most cost efficient, individual marketing scheme. “Clients have to look at costs of all marketing communications,” she says. “Direct marketing falls under this in the same way conventional agencies do. We can simply argue better on the basis of ROI. The shape of budgets are changing and all agencies either follow the trends into areas like direct marketing and digital or face a tougher future.”
As with everything in marketing, the advancement of technology has seen marketing go worldwide, but direct marketing has always been something that caters for a specific target audience, so how important is the internet to this form of marketing?
Claire feels that the two can work very well together. “As far as I’m concerned, and probably most people are concerned, online is just another tool that is part of direct marketing,” he says. “It needs some different skills and some different disciplines but it’s a very important element. And like everything in the marketing communications mix, things should be working together. People shouldn’t be out doing advertising here, direct mail here and PR there, online there, all different messages, different audiences, and different creatives. The key to success is working in an integrated way across all media and using the right media at the right time against the right target audience and against the right objectives. I certainly don’t see online as opposed to direct marketing. I see it as part of what we are offering our clients and what we need to offer our clients.”
“It’s fundamental,” agrees Metcalf. “More and more of the contact mechanisms will rely on internet as part of the proposition. Whether it is used as a vehicle to contact the customer in the first instance or whether it’s part of the fulfillment process and is going to be the main medium going forward. What might be interesting to watch is how that is delivered, whether that’s through desktop, laptop or mobile phone or any new device that we can’t contemplate at the moment. The underlying technology will be absolutely fundamental.”
Graeme Harrowell, managing director of Adrel feels that, as ever, the cost factor is also important in the use of online marketing: “The general growth in direct marketing due to improved technology and expertise has meant that agencies are segmenting to create more business. The internet and direct mail are well linked, as it is a low cost option for direct marketing and has allowed larger audiences to be targeted, although it does have the initial challenges of obtaining addresses.”
Alistair Hastie of Johnston Mailing highlights the potential problems that the direct marketing market faces, not just for agencies, but printers and mailing companies, who are feeling the pinch, not least due to the growth of online: “Companies are going under in recent times, due to the increased competition driving down prices. Companies have also stood still in the face of advances in mailing technology and not invested when maybe they should have or invested in problematic machinery which has meant a fall in orders due to unhappy customers. They may also have not been be flexible enough to cope with changes in the marketplace, or rising paper, printed materials, machinery, energy and staffing costs. The volumes are there. The problem is when your technology cannot meet the demands of your customers. Companies sometimes try to be able to do everything for everyone, whereas a focus on a niche area of direct mail may have been more successful.”
With the growth in the use of direct marketing, can a campaign be successful if it is the sole marketing strategy?
Ian White, head of Leith Direct believes that it is possible, with certain campaigns. “It very much depends on what the objective of the campaign is,” he says. “If it is to build awareness across a large cross section of individuals, it’s probably not the best channel to use. If your objective is to promote or sell a product or service to a very clearly defined group of individuals, it can be extremely successful as a stand-alone channel.
“However, for me, the best examples of direct marketing today take a really strong creative thought (that is being used across a number of channels) and execute it in a creative and relevant manner.
“Integration got a bad name for itself when people didn’t truly understand what it could be, however now we’ve got our heads round it, I think it will become the norm as opposed to a short lived trend.”
Last word has to go to Mullen, who highlights an example of one, exclusively direct mail campaign, which Story produced: “We relaunched a brand, Ardbeg, solely through a direct marketing CRM strategy – the financial success and awards for this work speak for themselves. Can we now put an end to this above-the-line/ below-the-line discussion and get on with making money for our clients please?”