DIRECT MARKETING : Special Report : Being Direct; Direct marketing principles underlie some of...

Direct marketing in 2006 was a tiny slice of the adspend pie, according to ASA figures. Addressed mail netted 1.6 percent of adspend; unaddressed mail got a tad more at 2.9 percent.

It's a different story overseas. In the United States, the DMA predicts growth in direct marketing spend in 2008,

In the United Kingdom, direct marketing spend is exploding along with overall marketing spend. The Belwether quarterly marketing spend survey predicted the last quarter of 2007 would see the strongest growth of marketing spend yet recorded.

Going by the numbers, New Zealand has a long way to go. But are we measuring right? Do addressed and unaddressed mail equal direct marketing? Not at all. Most media can be direct, from television to magazines to billboards.

Ant Rainger, director of Connect Communications, says direct marketing principles underlie some of today's best-known businesses. "They might not be 'direct marketers' as we know them, but the owners of Google, YouTube, MySpace, and Bebo - to name a few - are building multimillion-dollar businesses using DM principles," he says.

It's been a period of beginnings for the local DM scene. At least five DM agencies have sprouted in the past 18 months, often by people leaving larger agencies. There has also been movement in the data space, with Veda Advantage purchasing Atlantis' marketing division.

Former TEQUILA\ md Ben Goodale formed justONE more than 18 months ago, and reports a steady flow of clients, many choosing justONE without a pitch. "We have staff here they'd struggle to find in an established agency," he says.

Goodale says the affordability and availability of CRM tools is sparking marketers' interest in one-to-one approaches. "We're talking to people now that a while ago you'd never imagine coming into the one-to-one space," he says. "Clients have a real appetite to do clever strategic stuff one-to-one."

Twenty celebrated its first birthday early September, following a year that went "better than we could have hoped", according to director Simon Breed. He and fellow directors Hamish Travers and Mark Wilson came from AIM Proximity, where they saw a missed opportunity to bring together smart data with great creative.

"AIM and Proximity iD were still working as two separate businesses," says Breed. "We saw the opportunity to pull it all together and provide a cradle-to-grave service."

December 2006 saw the launch of Total Direct, a DM specialist agency to serve clients of parent company Total Media. Managing director Matt Gardner says it's been a busy 12 months helping traditional advertisers take their first steps into DM.

January 2007 saw the formation of Rapp Collins Limb Walker. It's a return to the agency world for Robert Limb and Lance Walker, who have spent the past few years consulting within large corporates.

In June 2007, Joseph Silk began his own agency, Silk, after being general manager of Wunderman for a couple of years. Silk now offers a virtual agency service to clients, resulting in lower overheads and a flexible structure. He founded his agency after Wunderman was essentially wound down by parent company Y&R. For Silk, the shift back to a strategic planner role, while "fantastic", was not a direction he wanted to go in. "It gave me the opportunity to do something I always wanted to do," he says.

Meanwhile, Y&R focused on integrating its operation, bringing in DM planner Tracy Wilson to replace Silk. Wilson was part of a 'planning hub', a team comprising senior staff in interactive, media, customer insights and direct that offers insight to all other parts of the agency.

"The nice thing about it is that the best idea goes forward," says Wilson. She says the integrated model has raised the bar across the agency. "Each of the account teams have to upskill themselves on the direct channel.

"All marketers and agencies should be thinking this way," she adds. "Direct is not its own individual space, it's part of a whole solution."

But can direct and creative cultures thrive under the same roof? Keith Norris, outgoing chief executive of the Marketing Association, thinks not. "The culture of mainstream brand agencies is driven by creativity; one-to-one direct culture is driven by results," he says. "I don't know anywhere in the world where they've successfully mixed cultures on a long-term basis. Plenty have made it work short-term, but sooner or later there are basic cultural differences."

TEQUILA\ managing partner Mike Larmer sees it differently: "I don't think specialisation (in DM) and holistic thinking have to be separate," he says. "The team that wins the World Cup can synergise backs with forwards, can't they?"

Toby Hilless, chief manager of retail marketing for ASB Bank, says while there will always be a tension between the two cultures, successful marketing comes down to having the right people in the right team.

One of the issues potentially confusing for marketers is the proliferation of options as marketing media and approaches converge. Particularly with new media, it's no longer obvious which supplier can meet the brief.

"There are 14-year-olds building websites," says Gardner. "That's who we're competing against. Clients need to work it out for themselves."

Geoff Cooper, managing director of Proximity iD, agrees, saying the best results come from the best marketers. "Really good marketers can get really good results from the partnerships they form with their agencies."

Limb says agency integration isn't nearly as important as integration between parts of client organisations. Coming from an agency background, he says he used to think what agencies did was important. "It's been an eye-opener working in corporates and seeing how much of the customer experience is determined by communications direct from the company," he says. "Increasingly you're seeing marketing and customer experience roles combined into one."

David Grandi, agency director at Marketing Impact, says many marketers feel on top of DM when in reality they're far from it. "They're marketing their services and products using direct mail but are they targeted?" he asks. "Too often I see businesses operating in internal silos. The administration silo often controls the financial aspects of business and isn't interested in 'fluffy' marketing, while the marketing silo works autonomously with little thought for the business fundamentals."

Managing agencies, and managing internal change: it's a heavy load for marketers and the companies they work for. Are they up to it? For starters, do they understand that direct marketing is more than a medium?

"I think marketers do 'get' DM and the potential that comes from building databases, developing contact strategies and relationships focusing at best customers," says Rainger. "Obviously this is the simplified version and undersells some of the other possibilities DM can deliver, but in principle I believe the core understanding absolutely exists."

"Some definitely get it," says Cooper. "Others struggle with the concept, to be polite. But the really good marketers live and breathe from the customer's perspective."

"Basic skill levels in DM are retarded," says Norris. "More marketers 'get' one-to-one marketing as a business concept, but we have fewer people who really know it inside out as practitioners."

Hilless, who sits on the Marketing Association's board, says the marketing community is aware of the shortage, and enrolments for the Certificate of Direct Marketing continue to exceed supply. The Axis Ad School has also introduced a direct marketing element for the first time this year, with the school reporting strong interest from students.

Silk says it's confidence marketers are lacking. "The stripping out of middle management over the last 10 years has left us with very senior and very junior marketers in companies," he says. This gap in the middle has meant less on-the-job mentoring, resulting in marketers who understand the concepts, but lack confidence to take risks.

Boyd Wason, md of Tango Communications, says sometimes the pressure of annual budgets prevents marketers who do know better, from implementing one-to-one marketing based on understanding concepts like Life Time Value (LTV). "A long game will be more profitable, but could mean that companies need to divert funds towards creating long-term value," he says.

Cooper agrees. "LTV as a marketing driver will only be successful in organisations with longer-term objectives, a strategic direction over a number of years," he says. "If your objective is short-term, there's nothing necessarily wrong with that, but LTV won't be that useful to you."

Two companies that are wholeheartedly embracing the one-to-one mindset are Subway and Westfield.

Westfield's marketing manager Debra Brooks explains that while direct marketing was a radical departure from traditional shopping mall marketing, it wasn't a hard sell to management. "We see the opportunity to get to know our customers better," she says.

The move to direct has been propelled by the affordability of emarketing. "We couldn't afford to mail everyone on our database," she says, "but emarketing gives us the opportunity to reach a lot more customers cost-effectively."

Meanwhile Subway overhauled its stamp-based loyalty programme by implementing a CRM platform integrating point of sale with email to support an evolving customer contact strategy. The programme now gives Subway detailed information on who their most loyal customers are, such as frequency of visit, average spend - and of course, favourite sub.

Subway joins a number of businesses in adopting a programme-based, rather than campaign-based, approach. Simon Morgan, gm of Publicis Dialog, says clients and agencies are still stuck in 'batch' land, rather than seeing the possibilities of constant message streams. "Marketers still think they're limited by a minimum send amount," he says. "Maybe it's a hangover from the minimum postal run."

A daily send to people who purchased one week ago would be far more effective and relevant than a newsletter, says Morgan. "And the cost is no different from sending all at once," he says.

Morgan also points out marketers aren't using personalisation to its full advantage. Cooper agrees. "I get a full colour letter saying 'Dear Geoff' to show off that it's personalised," he says, "but nothing in the message is tailored to me. So what?"

There are examples of badly done DM, and then there are good ones. "A recent highly targeted campaign went out to 80,000 customers," he says. "Of those, 30 percent of the segment contained an individual. Seventy-eight percent of all communications went to fewer than five people. A few years ago, you couldn't have done that."

It sounds like the era of genuine one-to-one communication is approaching fast.

How's Your Data?

A big issue facing marketers is the need for usable, up-to-date data. Here are five steps you can take to ensure your data is working for you:

1. Bring it all together. APN Data gm Sue Winny says a single view of data is crucial for decision-making. Thankfully, it's possible to create a universal database without losing individual databases.

2. Check your data against NZ Post's PAF (Postal Address File) to ensure deliverability. If you're using an external list, ensure the list has a digital Statement of Accuracy (SOA) certificate. The SOA helps you know whether the addresses in your list actually exists. An SOA of 100 percent means NZ Post delivers to every mailing address in the list. Mailing lists need an SOA certificate to attract bulk mail postage rates.

3. Separate existing customers from prospects using NZ Post's Delivery Point Identifier (DPID), a seven-digit number assigned to each address.

4. Identify opportunities to gather information from your customers, not only what they give you, but what they tell you in their transactional data.

5. Keep it clean. "A lot of companies don't realise that data dies at quite a speed," says Winny. "Maintaining the data is incredibly important. You do that when you understand it's a living thing, not just a prospect list."

Simon Young is an Auckland-based writer. simon@simonyoungwriters.com