Podcast — The Next Wave of Direct Mail

In this podcast, Lori, still practicing social distancing, sits in the studio by herself talking with Jill Harrigan, J Bentz and Jack Bochonok on topics ranging from the holiday shopping season, Amazon and 2021 planning. Hear this expert panel discuss the challenges and opportunities marketers are currently facing.

(Podcast Transcript)

Lori Paikin:  Just like last quarter and the quarter before, I'm alone in the studio recording the Two Gals & Some Data podcast. On the phone with me is an expert panel with J Benz, NaviStone client partner and Jill Harrigan and Jack Bochonok, members of NaviStone business development team. Hi, everyone.

Lori Paikin:  Over the past six months, as so many of us have lost the ability to attend industry events and brainstorm and learn and share with our peers, NaviStone has implemented monthly thought leadership webinars and round tables to help fill that void. We've talked about relevant industry topics like life after third-party cookies, navigating the Amazon, planning for holiday 2020 and planning for 2021. In our most recent round tables, Marketing Therapy Thursdays, our goal was to simply facilitate the sharing of information across advertisers, our clients and prospects. Today, we'd like to share out our point of view on each of these topics because it's not just about data, it's about how to use data to make money.

Jack, I'd like to start with you. You facilitated our first round table, A December to Remember, focused on holiday planning. I'd like to turn the tables on you and ask you some of the questions you had asked the participants. Based on your experience more than 15 years working in marketing with retailers and advertisers, what changes are you noticing with regard to the holiday season?

Jack Bochonok:  Thanks, Lori. 2020 is by far the most unique holiday season that I really think we're ever going to witness. One of the biggest issues that became obvious right away were holes in the supply chain. Retailers are frustrated because the consumer demand is strong, but they can't fulfill those orders. A few months ago, I spoke to a company that sold musical instruments. Since the start of COVID, they saw a substantial uptick in traffic and orders. This is because you can learn to play a musical instrument via video conferencing, so this was a perfect solution for many. The problem lies is that they couldn't fulfill all the orders and many got canceled.

So we also saw changes in timing and the impact that that has actually had. Since retailers need you to encourage holiday shopping earlier in the season, many have actually moved their code freezes up by as much as two months. So that means that whatever they were going to be focusing on with their website or across the partner network, it needed to be sorted out much sooner than the historical end of October code freeze. So additionally, we're seeing promotional times will be started much sooner than that Black Friday, Cyber Monday period.

Lori Paikin:  Those are some really good points and exactly the same things that I've heard as well, issues with securing inventory, maybe more so for those reliant upon purchasing from abroad, but definitely across the board. It's such a delicate balance, right? Which is the bigger risk: having too much inventory on hand that doesn't sell or too little and not being able to meet the demand? In a white paper that Dentsu put out last week, I read that the top metrics that CMOs are being evaluated on today are new customer acquisition and growth of customer base, which was the number one metric by far with 70% of respondents saying that they're measured on this. Then short-term revenue, cost and expense reduction, and product and service innovation. But to me, these metrics seem contradictory. You need to invest in order to support growth. Jack, what do you think? Is the focus on cost reduction or said differently, the limited ability to invest and test new programs and channels impacting the ability to meet the number one objective of customer acquisition and growth of the customer base?

Jack Bochonok:  Yes, Lori. Absolutely. Since shipping times and product selection are just not what they used to be, consumers are becoming less loyal to brands that they have historically shopped with. So when the consumer can't get what they want or in time, they start looking at brands that can. So given this increased lack of loyalty, it's both an opportunity for brands to acquire new users, as well as really focusing on retaining their own customer base. But with everyone working from home, collaboration is suffering, making it harder to get new programs off the ground. Businesses have said that they're doubling down on existing proven partners that they've worked with as they thought they couldn't take the chance on something new. Additionally, since so many people are spending more time at home, marketers are investing more into direct mail. People are at home. When that physical piece of mail is sitting on their counter or their coffee table, it serves as a reminder of those products and services that they were interested in.

Lori Paikin:  I like that one.

Jack Bochonok:  Yes, indeed. I also think it's worth mentioning, Lori, that many companies pulled a fair amount of budget from Google, and then you need to spend it someplace else or they're going to lose it or part of it for next year.

Lori Paikin:  That's a really interesting point that you bring up about Google. I read an article on cnbc.com that shared while Facebook and Amazon are seeing ad revenue increase, Google ad revenues are projected to be down 5.3% in 2020, largely as a result of decreases from the travel industry, which we all know has been hit disproportionately hard. You mentioned shipping times. I remember when shipping for holiday ended early December and then it extended to mid-December. In recent years, it's gotten later and later. In many cases, you could order by December 23rd and ensure Christmas delivery. Do you think consumers can still count on ordering that late in the season?

Jack Bochonok:  Lori, that's a great question and I think the answer is no. Consumers cannot wait as long as they have in previous years. This is because the shipping demand is so high that many companies are finding it hard to find reliable shipping services. I heard that drivers are being paid up to three times what they were pre-COVID to support the demand and there's simply not enough drivers on the road. So you got other options like UPS or FedEx. They have surcharges to get that product to the consumers in time. That's quite expensive. Companies haven't budgeted for this. So you literally have the hardest trade-off between do you forsake margin or do you support a good customer experience?

As I mentioned earlier about the supply chain issues, coupled with shipping delays, this is a tough holiday season. I'm starting to think of Black Friday and Cyber Monday as the last ship date, not the time to start shopping. Where I think the real winners will be are those brands that still have those physical stores, but they're supporting the shop online and pick up in store. However, one thing to consider is that all companies are in the exact same boat, including Amazon. Amazon has done a great job kicking off the season sooner, encouraging users to shop early.

Lori Paikin:  Great points, Jack. Speaking of Amazon, that's actually a great segue into the second round table session, Surviving the Amazon. Let me turn to J for this topic. Holiday season typically kicks off around Thanksgiving with Black Friday and Cyber Monday, but now, it seems like Amazon has dictated the start of the holiday season with Amazon Prime Days in mid-October. How do you think retailers and consumers feel about the holiday season starting this early?

J Bentz:  Thanks, Lori. From what I've seen, it's a bit of a mixed bag between advertisers who are ready to kick off holiday on October 13th and 14th and those who weren't. Any of the retailers that were prepared had to be prepared because well, they work with Amazon and Amazon was acquiring product and storing that product long before Prime Days even started. Overall though, retailers seem happy with the early start. With all of the delays and issues with delivery companies, it's all a good thing. The season kicked off early. We won't have the same drop dead dates that we had in the past, and that's mainly because packages are just taking longer to go from point A to point B and retailers don't want to be held with a delivery requirement when they know that that's not realistic.

Lori Paikin:  Yeah, just right along the lines of what Jack was saying. Regardless, it does sound like Prime Days were pretty successful this year with sales jumping 36% suggesting that consumers were on board with the early start to the season as well. How do you think this could impact Black Friday and Cyber Monday?

J Bentz:  Yeah. Good question. Having so many sales and flash deals on Prime Days has both had a positive and a negative impact to retailers, Black Friday's and Cyber Monday's plans. Let's say a retailer is deeply embedded with Amazon and sold a fair portion or a good portion of their inventory during Prime Days. If that's their biggest promotion of the year, little be left for shoppers come Black Friday and Cyber Monday. However, on the flip side of that, if you only sell, say maybe 10% of your inventory through Amazon, Prime Days likely won't impact those two historically large shopping days of the year for you. So it can go both ways. Now, with that being said, there will absolutely be deals on Black Friday and Cyber Monday, but not like consumers are accustomed to seeing. From what I've seen and from what I've read, the big box stores have already featured their best deals of the year. Chances are, we'll continue to see this trend where Amazon is leading the way and other retailers are trying to compete or keep up. Either way, I think it's good for consumers.

Lori Paikin:  Managing promotions certainly a challenge. Are there other challenges you think advertisers will have to deal with as a result of kicking the holiday season off so early?

J Bentz:  I think it could be a number of challenges actually. One that comes to mind is sales. Some advertisers feel like they don't need to discount this year because they've seen a strong spike in sales and consumer acquisition due to COVID, while others are reducing prices to help move inventory and stay afloat. In the second scenario, if the inventory isn't selling as expected, an advertiser cuts the price to help offload it. Nowadays, a retailer can't just cut the price and call it good, especially when they're selling through Amazon or similar marketplaces. They have to coordinate through the platforms to ensure seal prices are uniform and they're happening at the same time. While this doesn't sound difficult, it's a rather cumbersome process having a quick sale. Pretty difficult.

Lori Paikin:  Yeah. No, that's a good point.

J Bentz:  I mentioned shipping earlier. I think this will be another challenge to overcome. More and more people are shopping online from home resulting in more deliveries. The flood of online shoppers since the pandemic started has just overwhelmed the fulfillment and shipping supply chains. Then you add Prime Days, Black Friday and Cyber Monday when millions of people shop for holiday and the delivery people are holding on by a thread. It's difficult for retailers to compete with Amazon's two-day shipping. We've become so reliant on items showing up to our doorstep in just a day or two. When that can't happen, we find a vendor who can deliver that promise. Shoppers fulfilling their needs through Amazon because of the benefit of fast shipping is creating a challenge for all retailers this season.

The last thing I'll add here, Amazon kicking off holiday early this year will likely result in sold out inventory, back orders and low stock issues later in the season. So if you think you'll get a better deal by waiting, you might, but not on the items that you likely want. If you want to gift a particular item this year, you should buy it early. Just don't wait.

Lori Paikin:  I think that is a great tip. Thanks for that reminder. Now, what about opportunities? Working with Amazon certainly creates opportunity as well. I had an interesting experience with Amazon last month. It was my husband's birthday and I wanted to buy him sunglasses, but that's very personal like apparel. You need to try it on. With COVID, we haven't been going to stores to shop. So I bought five pairs of sunglasses from Amazon, and then my husband picked the pair he liked. The others were all returned, but not via the mail to Amazon. They were returned through my local Kohl's. I thought that was so interesting. What a great way to help brick and mortar that doesn't need the real estate they previously needed and also give Amazon essentially, a warehouse. It seemed like a win-win to me.

J Bentz:  For sure. Personally, I love that I can return things to Kohl's now. I don't know why, but I find it far more convenient to stay in a line at Kohl's than I do going to the post office, maybe because I can just look at more things. It's funny. I think advertisers have a love-hate relationship with Amazon and other distribution partners like it. As a user, I certainly do. But I really believe Amazon has created a lot of opportunity for advertisers, shoppers and employees alike. What comes to mind first is providing a platform for sellers to sell products to a whole new audience they might not have had from their own marketing efforts. For example, Lori, maybe a pair of those sunglasses was from a brand that you've never heard of before. Thanks to Amazon, you bought them and now you have awareness of that brand, even if you did end up returning them.

Lori Paikin:  Right.

J Bentz:  Also, the opportunity to heavily discount off season items and not discount seasonal items is another one. While we've all seen the deals of the day and the lightning deals featured on the homepage of Amazon, this is a great opportunity for an advertiser to validate product need and even liquidate limited or out of season inventory quickly while remaining on brand and on trend with seasonal items. The two-day shipping for prime members is another added benefit too. When products are fulfilled by Amazon, this is a huge added bonus. As I mentioned earlier, this is a really tough benefit to compete with. Let's be real. As a consumer, there's also the added benefit of buying things you never knew you needed. I fell victim to this on Tuesday night. An oil sprayer, who knew I needed an oil sprayer? Amazon did. How many times have you or someone found exactly what you were not looking for on Amazon and you bought it?

Lori Paikin:  Oh, absolutely. You can ask my husband about that. It makes me think of a funny meme that I saw on Facebook the other day. It said something like, "I don't know who needs to hear this... but you don't need anything from Amazon today." The comments were even funnier. They were all versions, some version of, "Yes, I do," which of course, I can relate to.

J Bentz:  Me too.

Lori Paikin:  J, earlier, you had mentioned the use of promotions and discounting out of season merchandise. Discounts and promotions have historically been used to drive new customers across all different programs. Just as we see lifetime value vary program to program, we also see lifetime value vary when customers are acquired from full price products versus discounted products. Do you think the new customers that Amazon drives during Prime Days, many of which are being driven by these discounts or promotions, are similar or different from customers acquired through other channels?

J Bentz:  I do think they're different. In talking with retailers, performance is typically about 50% of other channels in terms of repurchase rate when someone buys on Amazon versus directly through retailer. At the end of the day, I believe Amazon shoppers are loyal to Amazon. But what's really interesting this year that we haven't experienced in prior years is the pandemic buyer. We're not just up against loyal Amazon buyers this year, we're also experiencing the COVID buyer. While LTV might be on the lower side for Amazon, indicators are showing that the COVID buyer might actually have a little bit more staying power. So it's very important to cater to those buyers and continue to nurture them, and nurturing them into loyal customers regardless of how they came to us. So long story short, continue to re-target them and keep the conversation going because shoppers are listening.

Lori Paikin:  Yeah. So given some of this uncertainty about lifetime value of Amazon customers, and certainly the uncertainty that the pandemic brings, how do you plan? In that same Dentsu white paper that I referenced earlier, CMOs shared the top challenges they expect to face in the next six to 12 months. 21% said they expect to experience disruptions to their supply chain, 35% said decreased marketing budgets, 33% said managing to the changes in their workforce, 41% said declining consumer spend and 27% said more challenging to make decisions given remote working. So Jill, I'm going to turn this one to you as you facilitated our last round table, Curing the COVID Hangover. How do we even think about planning for 2021?

Jill Harrigan:  Thanks, Lori. Yeah. That question has come up a lot. Should we look at our numbers from previous year? Or should we focus solely on 2020 in order to forecast for next year? Should marketers invest more in certain channels and pull away from or completely eliminate others? The problem is, and of course, there's no clean cut answer because we've never been in a situation like this before.

Lori Paikin:  Yeah, exactly. You're right. Perhaps, it's a combination of some of the things that you said.

Jill Harrigan:  Right. Maybe you consider seasonality and recency. Historically, the consumer buying in January, for example, is not the same as the one that buys in November for holidays, but it with COVID and an earlier holiday season, the type of consumer that's buying in January of 2021 may actually look more like the type of buyer from November 2020 than say, last year's January buyer. I was reading a Forbes article actually recently and t said, "More than 62% of marketing leaders said the importance of marketing to their businesses had increased since the pandemic." But Lori, you just mentioned that 35% of CMOs said that they were experiencing decreased marketing budget. So unfortunately, it's really that whole scenario of needing to do more with less.

Lori Paikin:  Yeah.

Jill Harrigan:  As we're planning for 2021, this is really going to depend on each individual business. Some retailers are selling out of their inventory because their business was impacted positively by the pandemic. If you think about the home vertical. People are stuck at home, so they're shopping for things to make their home a more enjoyable place. For those retailers, making sure to stock up ahead of actually needing the inventory is really the key. But what about the retailers that are having a really hard time staying afloat? Their strategy will look totally different.

Lori Paikin:  Yeah, absolutely. Jill, I have our one and only trivia question for you today. It's a two-parter. What percentage of businesses report that COVID has helped or just minimally disrupted their business? And what percentage has said COVID impact was somewhat negatively impactful all the way to an existential threat?

Jill Harrigan:  I guess if I had to guess, I'd say 40% and then 60%.

Lori Paikin: Pretty darn close. 38% have said COVID impact was minimal to beneficial, probably those home type offers that you just talked about. 62% have said it did negatively impact their business, but whether it provided a positive or negative impact, the question is, can you expect that impact to continue into 2021? Jill, how do you think advertisers should think about customers they acquire during COVID when planning for 2021?

Jill Harrigan:  Good question. I actually think these customers will really prove to be more loyal in the long run. If you think about it, the companies who deliver what's needed to these new customers, they're doing so during an extremely emotional time.

Lori Paikin:  Yeah.

Jill Harrigan:  So I have a feeling the emotional attachment to these companies, it's going to last long after the pandemic is over. I actually recently spoke with an advertiser who told me that they're already seeing a difference between customers who started doing business with them during the pandemic versus prior customers. These brand new customers are already more active and have spent more money with them in a shorter amount of time. So that said, these newly acquired customers should really be at the forefront of any nurturing campaign the marketer runs this 2021.

Lori Paikin:  That's so interesting. I'm not sure I would have thought that, but it does make sense. I guess it's probably a little too soon to know definitively, so it makes sense to plan for multiple scenarios. You can't assume any one scenario will play out and contact strategy will certainly be a consideration.

Jack Bochonok: Absolutely. I've noticed some advertisers have cut back on their outreach in an effort to be sensitive to the challenges of the pandemic, but others, while perhaps making some adjustments to creative, are really remaining in front of consumers. From my own point of view, as a consumer, I think if you're going to reach out to your customer base, make the communication personal and entertaining in some way. Don't send a plain text email to me. Fill it with colors and light printed copy. You know what I mean? The same goes for direct mail. Look, this pandemic is hard. It's horrible for everyone. So send me something that will put a smile on my face.

Lori Paikin:  Yeah. I like that, Jill. That does bring me to my last question. It's a softball for all of our panelists. How do you think marketers should think about testing new programs? Yes or no. Any new programs out there that are must haves? J, let me start with you.

J Bentz:  Sure. My answer is yes. Testing new programs is important, especially in today's environment. You might find a program that brings more incremental performance than what you thought was your go-to tried and true program. So it's important to break through the clutter. Once you do, it'll be a game changer for your business and marketers. Personally, my go-to for breaking through that clutter is re-targeting offline with direct mail.

Lori Paikin:  I like it. Jack, how about you?

Jack Bochonok: Yes. I very much believe so. As I mentioned earlier, consumer loyalty is dropping as consumers will shop with retailers that have the product in stock and can get to the customer quickly. Most retailers bid on non-branded keyword terms. However, that's often the first thing to go when budgets become constrained. In my view, this is a time to double down on the products that you have in stock and you can get to the user quickly. I also think it's a perfect opportunity to acquire new customers. Although this may appear to be a tad self-serving, I believe NaviStone's postcard re-targeting solution can really help brands from acquiring new customers, reactivating those lapsed buyers, engaging with all those folks that have opted out of email. I think it's a great opportunity to build long-term relationships with new users.

Lori Paikin:  Jack, don't worry about being self-serving. It wouldn't be a NaviStone in podcast without just a little bit of self-promoting there. Jill, you get the last word. Testing new programs, yes or no. Anything that is a must have?

Jill Harrigan:  Yes. I think marketing is definitely all about testing. So of course, you should keep testing new programs. What worked in the past really might not work today. My biggest piece of advice is don't just do one thing, create an omni-channel strategy that works together and make sure your message aligns, whether you're sending a direct mail piece, an email, or serving up a display ad.

Lori Paikin:  Yeah. Great point. With that, I can't think of any better way to end this discussion. So that will do it for this episode of Two Gals & Some Data. Thanks to our expert panel, J, Jack and Jill for joining me today. If you want to read more from us, check us out at NaviStone.com/blog. And if you enjoyed today's show, head over to iTunes and leave us a five-star review. Thank you for listening.