Podcast — The Future of Direct Mail in 2018

2018 will be the year of direct mail as technology evolves and direct mail becomes part of an individualized customer experience.

(Podcast Transcript)

Allen Abbott: Hi everyone and welcome to the 2 Guys and Some Data podcast. On this show, we don't just talk about data. We talk about how you can actually use data to help you make more money.

Larry Kavanagh: I'm Larry Kavanagh.

Allen: I'm Allen Abbott. Our topic today is a fun one, direct mail. Yes, we talk about direct mail a lot. But today we're going to talk about where are we now with direct mail? Where's it going in the future? And more specifically, what should we expect in 2018?

Larry: Well, Allen I know the question that is on everyone's mind, so I will just answer it off the top. No direct mail is not dead in 2018. I think the real question is, why do people keep on wondering is direct mail dead? I was thinking about this and I think it gets to ... I think the reason is people are used to one technology replacing another technology. They're used to VHS tapes being replaced by digital music hard drive et cetera. They're used to going ... The old example, they're used to horses being replaced by cars. But I think what's missing in that conversation is that when a technology is replaced, it's because what replaces it does everything the old technology did better. Direct mail, advertising has had a lot of innovation over the last 100 years. Direct mail was really sort of the first advertising medium. Radio came along, it didn't replace direct mail. Television came along, it didn't replace radio or direct mail. The internet came along, it didn't replace direct mail, radio, or television. And it's because each of these advertising mediums does something different that the others can't do. Direct mail, for example, is really the only advertising medium that will let you know, pretty much exactly who it is you're marketing to. Who is the person on the other end reading the message? Last I checked, there is no mail blocker on people's mailboxes. There is no spam folder inside people's mailboxes. I think, most importantly, if you look at things like the response rates that direct mail can generate. They're a lot higher than the response rates that you see in other mediums. So I think what people are missing in all of this when they ask the question, is direct mail dead? They're not paying attention to, or they're missing the fact that it actually does ... that each advertising medium has its strength, has its place, and it does something that the others can't.

Allen: Well said and I would add to that, that people actually look at their mail. Part of it is because there is so much email now, that you really, you can't, the sheer volume of it, you can't possibly look at every email. So what do you look at? Well, the first thing maybe you do is you look at the sender. You delete 80% based just on the sender. Then maybe you look at the subject line, then another 15% go. Then you're maybe actually looking at five out of every 100 emails, but every day you go to your mailbox, or the post office, however you get your mail and you have this stack of stuff in your hand. People look at it, and they examine it, and the ability to do creative things on the cover of the catalog, on the envelope, gives you an opportunity to generate interest and have people actually open that mail and look at it. The quantity of it is limited, so most people take a moment out of their day to look at their mail and see what they got. They clearly don't look at all of it, but they, at least, have considered it and hopefully remember what they received. That kind of mail bring value to everybody, even millennials. I have two millennials. My boys are both in that range and they get very little mail, but there are a couple things that they like to use. They like to use coupons. They're both still early in their careers and try to be somewhat frugal. If they get coupons in the mail, they look at those, and they say, "Is this useful to me?" They actually interact with that. People 18 to 24 actually use physical coupons twice as much as they use anything digital. So there's a very specific use of direct mail there for the younger generation. The success of direct mail is no accident. As Larry said, you can know exactly who you're communicating with. I think that the best is yet to come, and what we're going to see in 2018 is an increase in the use of data to drive content that's very specific and very geared at individual people or, at least, people who are in similar lifecycle stages or have similar interests. We'll talk a little bit more about that, but Larry first do you want to do a little trivia?

Larry: Sure. I have a great question for you. We're talking about direct mail and how it's still effective. My question to you is how many adults in the United States, made a purchase from a catalog in 2016?

Allen: So that's a tough question especially since I don't know what attribution method you're using to determine that. Right now, I'll say it's more than 50 and less than a billion, but I want to think about that and maybe we can get back to that a little bit later.

Larry: Very good. Well, I think you're in the right range, but I would suggest you need to narrow it a little bit. Let's talk about where direct mail is headed in 2018. Allen I think you're right on about what can happen with content inside direct mail. So while I talked earlier about how new advertising mediums didn't replace direct mail, new technology however is beginning to transform what direct mail can do. And it's actually turning direct mail into something different than it has been historically. The change is a little slow in happening, but definitely the technology is there. Really, that technology, is the ability ... is digital printing and is the ability to really, dynamically, create a mail piece, create a ... whether it's a catalog or a letter that is really specific. That uses what you know about somebody's interest to create something that's a unique piece of mail in their mailbox. I was in a digital printing plant a few months ago and heard about a phenomenal example of what Kroger is doing. Kroger, the grocery store company, is doing. They have as I suspect anyone who shops at Kroger or Kroger related store knows, these shopper cards that you swipe when you go through checkout and they're keeping track of every item that you purchase back to your phone number, back to your household. They have taken that concept of the old supermarket flyer where they would take ... where they would mail this 16 page flyer that might have 300 items in it, to everyone who lived within a certain radius of a store. And they have transformed that into a personalized piece of direct mail. They actually have ... This printer was telling me, they have two to three thousand items that they will have the images and the pricing et cetera loaded up for and they will dynamically choose what are the right 300 items for that particular individual and create a 16 page, 100% personalized, custom catalog, custom flyer for that shopper. That, I think, is where print technology can be combined with all of this data technology that we have to really change the way in which direct mail is being used. As we talked about in the last podcast, the other thing about direct mail that I think is really bringing it to the forefront is not only this use of data and technology, but among all of the advertising mediums out there, all of them are seeing contraction in the number of ad opportunities that they have. Pop up blockers are reducing the number of impressions that display ads can get. Spam folders are reducing the number of advertising opportunities for email. There's nothing blocking a mailbox. You got just as many ... It's the one advertising medium where your opportunity to advertise has remained constant. In a world where all the other opportunities are decreasing, relatively speaking, it's opportunity as a percentage is increasing.

Allen: That's a great point, and I think there's something else that's very important that's happening. The very first blog post we did, in 2016, when we launched Navistone, was entitled Direct Mail Isn't Dead. It was the most read blog post for a very long time, until we published a blog post earlier this year that was called It's 2017 and Direct Mail Still Isn't Dead. And that is now the most viewed blog post that we have put out there. But I think we're reaching a point, and it's an important point, where we're not going to have to go out in 2018 and say, "It's 2018 and direct mail still isn't dead." Because things are changing, so my generation was very biased toward catalog and direct mail. That's all there was. That's all we knew. When the internet came along, there was a lot of skepticism and we would ask, "Is this really incremental, or are we just cannibalizing business that we would already get?" Then when it became pretty apparent that the internet was for real and it was going to impact commerce in a way that no one really could have anticipated. We grew another generation of people who everything had to be digital. And direct mail was for old people and the direct mail team was in the sub-basement, off in the corner, doing whatever they did and it really wasn't important. But, I think, now we're at the point where the next generation has evolved. Actually, I've worked with a couple companies helping them get into direct mail. Where the entrepreneurs were ... they're young guys in their 30s, and to them, direct mail was just another medium to communicate and it did things, particular things, particularly well. They embraced it for that reason alone. That era of bias against direct mail, I think, is coming to an end. I think part of it is because of the gain in usage and popularity of things like programmatic postcards. So really the postal direct mail equivalent of the abandon card email, only with direct mail people, as I've said earlier, they actually look at the mail piece. As a shopper what are you more likely to remember? One of a hundred emails you received in a day, or 500 emails you received in a day, or a physical piece that you actually have to pick up and you look at it and low and behold, it's something that you care about.

Larry: You're right on. I'll tell you that one of the questions I get from people who are steeped in the digital marketing tradition. When I tell them what we're doing with direct mail and I talk to them about direct mail, their first comment is, "Oh, man. I just throw my direct mail away. It's all junk." Of course, we all know what that old pejorative junk mail was all about. There was a Seinfeld episode where Kramer tries to cancel his mail. Allen, I know you're the Seinfeld expert, how did that one go?

Allen: That was actually hilarious. Kramer gets upset because all he gets in the mail is Pottery Barn catalogs. He goes to the post office and he, basically, tells the people at the post office he wants to opt out of mail. He doesn't want to be on the do not mail list for particular advertising. He wants to stop all of his mail. He learns because he ends up in a very dark sub-basement room with the Postmaster General of the United States explaining to him why he needs to get his mail. Kramer, in Kramer fashion, just sort of slinks off and takes his pile of mail and walks away. But the reality is, you can't opt out of mail. It's going to be there and the smarter we are at using it, the more receptive people will be.

Larry: Well, in the answer that I give those digital natives who are asking me about direct mail is, the reason why we do it is because it works. It actually works really well. In fact, response rates have been rising for direct mail. Customer acquisition costs, when you use direct mail, have been decreasing. I think the reason is we're seeing less junk. The Kramer's of the world are getting fewer ... aren't getting Pottery Barn catalogs every week. As well, the targeting is getting better. As well, I think, people are beginning to embrace this idea of let's tell a story with direct mail. Let's be specific. Let's know something about the person and make sure we are marrying the right message with the audience. In a way, I think, one of the things that people, the digital natives, complain about direct mail, and someway it's actually forcing this change in a good way. Direct mail is not an inexpensive medium. It costs real money to put a piece of advertising mail into somebody's mailbox. You can't just spray and pray like you might do with a digital display campaign or an email campaign. You've really got to know something about that person and get the right message there. As a result, I think it's improving direct mail. It's improving the consumer experience. It becomes a virtuous cycle. I don't know that it will ever get to the day where people don't talk about, "Oh, I have junk mail," but they're certainly using it a lot more. I think that's only going to lead to better things in the future. Now, we know that sometimes it can take, not even sometimes, that it usually takes as much as 20 touch points for a consumer to finally respond to a company. I think if you used direct mail right, you might be able to cut that down, or maybe you use some of that less expensive media that's more spray and pray to figure out who is actually interested, harvest that digital signal, to know who's actually interested and then use direct mail to hone in and really use it as the advertising medium that's going to convert. That's going to get people over to that conversion.

Allen: Yeah. I think we're going to see, and I think we're seeing it already, is that the advertisers, themselves, have recognized that consumers are looking for a break from all that online clutter, and from being online all the time, and from just the endless stream of ads that they see when they're online. Direct mail provides that break, but it still allows advertisers to reach consumers very effectively. Again, you have to be smart about it. If you mail everyone, you'll go broke pretty quick, but if you're smart about, who to target and what to target them with, direct mail is just going to get bigger and better in 2018. Of course, as Larry said, the technology is there for companies to personalize and individualize direct mail in a way that we've really never done before.

Larry: Well said. On the topic of direct mail marketing. Let's get back to our trivia question. As you may recall, today's question involves catalogs. In the year 2016, Allen, how many American adults made a purchase from a printed catalog? I'll give you a clue. It's sun shining today.

Allen: Okay. I am going to guess that because catalogs are, in theory, the media of choice of older people, that perhaps 60 million people made a purchase last year from catalogs.

Larry: Well, I understand, solid logic, great way to go, but it's not just older people who purchase out of catalogs. Believe it or not, over 100 million people, almost 101 million people, purchased from a catalog last year. That answer comes to us directly from the Direct Marketing Association, and, yes, my kids are rolling their eyes because I made a bad pun, but it's what I do.

Allen: Wow, and that's great for catalogs and it's great for advertisers. That medium is hanging in there. Again, I expect those numbers to go up in 2018 and do so in an environment where you lose a Victoria Secret out of the mail and that's 100 million pieces of mail. There are 100 companies coming in to replace that mail that are mailing, maybe, a million pieces a year and doing it in a smart manner. I think you're going to see more customized catalogs and why wouldn't you order from something like that?

Larry: Even the Sears catalog is making a comeback I read the other day. Well, that's it for us today on 2 Guys and Some Data. We hope you got a lot out of this episode. We'll be back with more tips that can help you use data to actually make more money. To learn more about both the present and future of direct mail, check out our website at navistone.com/blog. And, if you liked what you heard today, we encourage you to had over to iTunes and leave us a five star review. Thanks for listening and we'll see you next time. I'm Larry Kavanagh.

Allen: And I'm Allen Abbott. Thanks for tuning in.