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The Future of Direct Marketing looks bright

Source: B&T Magazine Australia

THE DIRECTION OF DM

By Sebastian McCarthy on  23 March 2011
The direction of DM

 

Considering the industry it’s in, it might sound strange to say that direct marketing has an image problem. But, it does. It’s not cool or hip or seen as the next big thing.

Direct marketing, widely known as DM, is often confused, misused and marginalised by many in the advertising and marketing world. For starters direct marketing is not direct mail, although they share the same abbreviation. Direct marketing does not just comprise email marketing, or SMS marketing or mail outs. Direct marketing is not a channel, it’s a practice, and it is about instigating a direct response from a consumer through targeted communication.

 

Direct marketing involves the use of data and research to create a personalised targeted message, but it is not all about numbers either.
“There’s still a perception that DM is all about databases, but it’s more than that,” Jo Lloyd, managing director of Wunderman Sydney, says. “It’s still seen to be unsexy.”
Robin Sinclair, head of DM agency The Blue Group, agrees that direct marketing is not well defined, but says in the current environment it is “core now, because of the explosion of media”. “Direct marketing’s about making a connection one-to-one with relevant brand information,” he adds. Or as Tess Doughty, managing director of Rapp Melbourne, puts it: “DM is everything. DM’s not a channel, it’s the principles with which you approach a marketing challenge.”
Definitions aside, direct marketing is on the rise. No matter how you pigeonhole it, DM is a practice that is coming to an ascendancy.

It’s also an industry that has experienced tremendous change in the past two decades. Rapid technological advancement, the importance of digital platforms, a focus on securing return on investment and accountability, and the move away from mass communication have conspired to put DM at the forefront of modern marketing philosophy.

Brad Waggoner, associate creative director of BMF, says the biggest change in DM has been the “explosion of the digital landscape”. “There are a lot more contact points now,” he says. “Potentially everything is DM now. But, the fundamentals are still the same – having the right audience and message at the right time. DM is all about trying to have as much knowledge about consumers as possible.”

 

Simone Blakers, managing director of Mark, M&C Saatchi’s digital and direct arm, is another who believes the advent of digital has had the biggest impact on DM, and the huge amount of change has added to the confusion. “Marketers are really struggling to find a clear definition of what DM is,” she says. “The social media push is making marketers rethink their whole databases. DM is media neutral but still has core values of eliciting a response and being measurable.”

 

Kate Fury, communications and awards director of the Australian Direct Marketing Association (ADMA), says in some ways the DM industry has changed “seismically” but in other ways “very little”. “The way direct is practiced has changed dramatically because the industry has been incredibly fleet of foot in adapting to emerging channels and making them work for it,” she says.
“But at its heart, direct marketing has always been about a conversation between brand and customer that results in a measurable action, and that hasn’t changed.
So while the mechanics may be different, that’s only made the principles of direct marketing more relevant than ever.” Apart from the advent of digital technology and internet platforms such as social media, online shopping and search marketing, the global financial crisis also played a large role in DM’s recent evolution.
“The GFC was a significant turning point for marketing globally because it put the spotlight on measurability and accountability,” Fury explains. “And that’s meant the amount of direct marketing, or the proportion of budgets allocated to direct, is greater.”
The ability to better record and analyse data and information has also been pivotal. Research has been empowered with greater insights and greater knowledge to make more accurate marketing decisions.” Importantly, she adds: “DM has always been about driving response, but the increase in the quality and quantity of data available to marketers means the industry has been able to become more keenly focused on what to do with the response once they have it – better analytical interpretation, faster adaptation, deeper customer relationships.”

 

Today, DM sits as a channel-neutral practice that can go across all media. But previously, that wasn’t always the case. “In 15 years it has changed dramatically,” The Blue Group’s Sinclair says. “Direct marketing has become much more integrated into agencies and marketing disciplines. Fifteen years ago it was mostly just mail and coupons. There has been a big change in the media we use.” The fact that DM has changed so much means the industry has needed to re-evaluate itself. No longer just the last add-on to a campaign, DM and its industry has had to retool itself for a new century with new marketing challenges. And there’s no denying that some marketers have struggled to keep up.

 

Rapp’s Doughty says there is still confusion amongst clients. “It depends on the individuals, [but] some people still see customer relationship management (CRM) as being direct mail.” According to Jess Littlewood, senior strategist at DM shop MercerBell, some clients “get it, some have always been driven by data” while others “need help”. Blue Group’s Sinclair adds that actually, “some clients have led the way and forced mainstream agencies to change”.

 

Paul Rawlings, head of one to one marketing at the Commonwealth Bank, says he cringes when he hears “marketers talk about direct marketing as direct mail”.
“We as an industry are facing some of our biggest challenges and biggest opportunities with the ever-expanding number of marketing channels available, and the ever expanding number of ways our customers can choose to talk to us,” he says. “We need to stick to our basic, tried and tested principles and apply them to the new technologies and channels.
Direct marketing is definitely digital marketing, telemarketing, email marketing and social marketing – yes, the technology and the channels continue to change, but the thinking behind quality marketing in these channels uses the same disciplines direct marketers have been employing for decades.”
Just as marketers have had to adapt to the brave new DM world, so have the agencies themselves. Staff in DM companies have had to be re-trained, new roles have been created and new structures have been established. Wunderman’s Lloyd says addressing the skills shortage in the DM industry “continues to be a challenge”. “All agencies are struggling to get good solid people,” she says. “Education is absolutely critical – we’re massively falling behind.”

 

The position of digital producer is one that is in high demand, as digital knowledge continues to be highly rated. BMF’s Waggoner says his agency has changed its management structure and no longer has a head of DM. “Most of our teams have the ability and desire to work on all elements,” he says. Rapp’s Doughty says her agency works closely with DDB stablemate Tribal, and hires account people with digital knowledge. “We’re upskilling DM people in digital,” she says. “The DM industry has always had problems with skills and shortages.”

 

The rapid evolution of DM and cross-pollination of several disciplines has resulted in greater competition in the DM sector. Everyone, it seems, wants a piece of the DM pie. Because of the expansiveness of digital especially, there is so much cross-over in modern DM that the number of operators – from creative agencies to digital hotshops, PR agencies and social media companies – flirting with the sector has mushroomed.

 

Wunderman’s Lloyd describes DM as personal and intelligent advertising, and says digital is just “another channel that sits within direct marketing”. “Everyone wants a piece of social media,” she says. “Marketers have a long way to go to understand personal advertising and how to use it.” Lloyd believes every marketer wants digital to be part of their brand’s marketing strategy but DM “is so much more than that”. “We have to stay clear on what we do,” she says.

 

With so many agencies seemingly offering DM services to clients, is the DM sector now too crowded? According to Lloyd, it is getting crowded because every brand wants digital, but the point is whether these agencies can “offer the depth and analytics of the data” compared with traditional DM shops.

The blurring of the DM space with other disciplines could mean that DM as a specialist practice is diminishing.

ADMA’s Fury says there has been a significant integration of direct disciplines into agencies. “A couple of years ago having data and CRM specialists in-house was rare,” she says. “But that’s now par for the course and we’re at a new tipping point where far-sighted agencies such as BMF are introducing marketing sciences departments to delve more deeply into consumer behaviour and ultimately, influence it more effectively.”

 

While industry figures agree that today DM is just part of the general creative mix, most feel that its founding principles and way of thinking are still imminently important. “The fundamental principles of DM haven’t changed, if you think they have you’re barking mad,” Wunderman’s Lloyd says. “There’s still an element of specialism. Agencies that want to offer everything are on a suicide watch”.
Rapp’s Doughty believes that you still need people who have “an understanding of the principles of direct”. “They think differently,” she says.
“They have a thirst for data, to use data.” The Blue Group’s Sinclair agrees that DM is part of the mix and but it still needs to have context. “It’s ubiquitous,” he says. “Everything now has a call to action to it. But that’s not sufficient, it still needs to have a DM strategic context.”
Education and regulation are key ways that the DM industry and those involved in it can be kept on the right path. “ADMA has a Code of Practice which members, including agencies, must abide by,” ADMA’s Fury says. “It sets out standards of conduct for all direct marketers, minimises the risk of breaching legislation and promotes best practice.

 

Beyond that, we’re educating – through training, seminars and conferences that canvas emerging issues and opportunities for the industry. We run a creative course and an account management course specifically geared to agencies and have also just introduced an agency-based mentoring program.”

 

For many years direct marketing was personified by direct mail. To the outward eye that was the primary focus of DM. This may have changed but the common view of direct mail is still fairly negative. Wunderman’s Lloyd says the stigma around direct mail “is slowly dying”, but there remains a perception that direct mail as a channel is dead.

“It’s not,” Lloyd says. “It still has a role to play.”

MercerBell’s Littlewood agrees, and says mail is “making a comeback”, while Mark’s Blakers believes people are confused about how to best use direct mail. “It still has a role,” Blakers says. “For certain segments, it’s really effective, like Generation Y. We need to make sure we don’t throw a medium out with the bathwater. Facebook and Twitter are not always the answer.”

 

Electronic direct mail [EDMs] is another direct response media channel that suffers from an image problem, and is now over-used. Wunderman’s Lloyd says advertisers and agencies need to be careful when creating their campaigns and selecting the media they use. “EDMs are becoming saturated,” Lloyd says. That channel could be killed. You have to be mindful of that situation.”

 

Across the Australian DM industry there is a general feeling of optimism and positivity about the future and where DM currently sits in the advertising landscape. Changes in media consumption, consumer engagement, media channels and in the use of research mean that DM has the spotlight shining brightly on it. What is marketing in the modern economic environment if it is not accountable, measurable and effective?
What is communication between a brand and a consumer that is not personable, targeted and responsive? In a word, useless.
DM is at the forefront of today’s marketing world because it is embracing these truths. It is empowering technology to make marketing more accountable, personable and engaging. What will the future for DM bring? Wunderman’s Lloyd believes DM agencies will really understand how to use multi-channels and the art of collecting the right information will be important. “There’s an absolute plethora of data and information [out there],” Lloyd says.
“Data is knowledge, but you have to have the right knowledge.”
Rapp’s Doughty sees the increased use of digital, new technologies and how social media is incorporated as being key issues in the future. “The industry needs to look at quality of databases and lists,” she says.
To MercerBell’s Littlewood, DM will come to the fore in the future. “DM people have to step up and be part of the lead, not be in the background,” he says. On the brand side, testing and learning, and being reactive will be even more important. “It’s fundamental to what we do and will become much more complex and fragmented,” CBA’s Rawlings explains. “We need to be ready to respond to and engage with our customers however they want to do business with us.”

 

For ADMA’s Fury, the power and responsibility afforded to DM people will grow in the future and the way the industry responds will ultimately shape its destiny. “A lot of opportunities are being handed to marketers via the explosion of customer data and how the industry chooses to respond will be key to its future,” Fury says. “The need to respect privacy, provide choice and engage one-to-one with empowered consumers is going to impact what we say, who we say it to and when.”

 

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