Case study: If you’ve got it, use it

Nothing is out of bounds in modern direct marketing: mobile phone, email, SMS, iPod and anywhere
the advertising can get personal. Even talking toilets or scrolling messages on the seat.

As companies demand tangible results from advertising, direct marketers are in the spotlight and the
industry is under pressure to be innovative as an array of products competes for consumers’
attention. Trends are expected to centre on the growth of digital media, personalised advertising
messages, investment in client information databases, text messaging and podcasting. The direct
marketing sector covers advertising that is aimed at a select group of customers with a specific offer.

This separates direct marketing from advertising that sells one message to a wide audience. Some of
the biggest proponents of direct marketing are finance institutions, because pursuing a specific
demographic can mean a reduction in credit risk and a greater chance of products being sold.

The chief executive of the Australian Direct Marketing Association, Rob Edwards, says trends will
include better application of digital and online media, more effective use of data to understand
customers, and clever use of direct mail. ‘Australia is not as active in digital media because we don’t
have it to the same extent as the United States’, he says. ‘People thought e-mail would spell the end
of direct mail, and although the volume has come down, marketers are using clever mail pieces to
get better response rates.’ Edwards gives the example of a finance institution including a product
offer in a bank statement, which customers have to open. But he adds that exploitation of such
tactics could put customers offside.

The United States usually lead trends in direct marketing, and the chief marketing officer at Marsh
Consumer & Commercial Practice in Washington DC, Don Neal, says there is a push for
personalisation and immediacy. ‘In the US you can drive past McDonald’s and get an SMS message
inviting you to have a shake. Cell phones and iPods are the mediums of the future; it comes down to
mobility.’ As an example of future personalisation, Neal cites the movie Vanilla Sky, where billboards
tailer advertising messages to people’s preferences.

But that old stalwart, word-of-mouth marketing, remains important. Neal says a Harris Interactive
poll showed 75% of consumers believed word-of-mouth to be the most influential marketing tool,
compared with 26% for direct mail. ‘Word-of-mouth is a $US150-million industry and companies
have formalised it as a legitimate marketing channel. Procter & Gamble have a division for it, called
Tremor’, he says. ‘For example, a business will send 250 000 shampoo samples to girls to create buzz
in high schools.’

Reaching influential consumers remains a big goal of direct marketers. Optus exceeded sales targets
by 223% for a luxury phone when it promoted it to Qantas Chairman’s Lounge members.
Recognising different customer segments and giving them something other than advertising can also
foster loyalty. Neal says the US clothing store Gap has an e-mail campaign that divides its customers
into nine characteristics, according to style, fashion and age. ‘They send e-mails with fashion advice
people like to read, so it is information-driven, and sometimes they will include marketing or special
offers.’

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Despite new technology, direct mail is still a core component of marketing for many companies.
American Express Australia’s vice-president of acquisitions, Nick Adams, says more comprehensive
client information is available using databases for direct mail, compared with e-mail. ‘There is a
paucity of quality e-mail lists in Australia. You pay a premium price and response rates are very low,
particularly in the finance industry with issues like phishing.’

But American Express is also using SMS. After sending a letter, the company calls clients and asks
their permission to send a text message. Because credit card applications require written approval,
clients can then text back their response instead of mailing a letter. ‘We were getting 50% return
rates with fax and letter, and it’s about 80% with SMS’, Adams says.

The Sydney Festival in January also used SMS in direct marketing to lift response rates to outdoor
advertising. Posters included a keyword specific to an event, which people could send as an SMS and
receive an e-mail reply with more information. The sales and marketing manager at Mass Media,
which created the initiative, Leon Young, says consumers only received requested information and
were not bombarded with any further material.

Although spam legislation has limited the scope of e-mail as a tool in direct marketing, it is widely
used to get to existing customers. The principal of the technology marketing company Ideagarden
Consulting, Jenny Williams, says e-mail has the advantage of being cheap and it links consumers to a
web site. ‘The critical shift in the industry is “How do you create relevant and interesting material?”,
rather than “How do we send this to as many people as possible?”’

Williams says advances in e-mail marketing are centred on companies’ ability to observe how people
interact with their advertising: whether it is opened and which demographic groups respond to
specific messages.

Companies continue to experiment with online viral marketing, in which consumers are encouraged
to spread a message because of its novelty factor. Williams says an effective example of this was the
movie Wedding Crashers, which had a web site where people could superimpose pictures of
themselves and friends over the actors’ faces. ‘If you have a creative idea it can spread far from a
very small seed [e-mail] list’, she says.

The head of direct marketing at M&C Saatchi, Kimberlee Wells, says companies will increase
experimentation and the use of personalised web pages, where all content is dynamic. ‘Now,
everyone receives the same web page and puts in their details’, she says. ‘We will see direct mail
push consumers online, where all content is tailored to you, and the way you navigate a page will
determine what you see next. A major growth area will be the continued integration of direct mail
and online.’

Clever gimmicks can spread the message of direct marketers for a relatively low cost. When Manly
Council in Sydney ran a campaign last year warning of drink spiking, using talking urinals in local pubs,
it received wide response. The council’s community safety co-ordinator, Leanne Martin, says: ‘The
gimmicky aspect attracted a lot of attention and anecdotally it got a lot of people talking about the
issue. We got coverage from BBC radio.’ The campaign ran for about a month.

The director of Innovative Solutions Oceania, Luke Berry, says there is a niche market for alternative
marketing mediums. ‘I’ve seen scrolling messages on female toilet seats overseas, although the

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medium is best for products like condoms or alcoholic beverages. It’s not for companies protective
of their image.’

As the technology available to direct marketers becomes more sophisticated, Edwards says, business
will have to respond faster. ‘Clients expect instant fulfilment, and not a lot of organisations are up to
that,’ he says. ‘Digital TV might allow you to click and say “send more information”, but companies
can take a few weeks to send a brochure.’

Neal in Washington says direct marketers overcome an inferiority mentality. ‘Companies want
tangible results beyond impressions and general brand awareness, and Procter& Gamble have said
they won’t pay for anything they can’t measure,’ he says. ‘But there is an image of direct marketing
as guys in brown suits next to the Armani guys from big ad agencies. They should get over it,
because direct marketers have a seat at the table.’

Future trends

More investment in understanding potential consumers, leading to greater customer segmentation

and more personalisation of advertising.

Technology will enable direct advertisers to refine their campaign messages faster.

Increased use of digital media, SMS and multimedia messaging on mobile phones, although
Australian networks are not sufficiently established yet for this type of close-targeting advertising.

More creativity with direct mail, although the volume may decrease. For example, ANZ Banking
Group sent out musical cards to advertise its home loans, and denim pockets to represent the
money that consumers could save by using a financial planner.

Source: Searle, Jane 2006. ‘If you’ve got it, use it’. BRW, 2-8 March, pp. 58-9.