Ground-breaking research conducted by Nielsen Media Research (NMR) for Marketing has uncovered surprising facts about the kinds of direct mail consumers are most likely to open and those they discard without even opening the envelope.
The financial services industry has long been accused of 'carpet-bombing' households with hundreds of millions of unwanted credit-card and loan offers, yet the study found that consumers are more likely to open those mailings than letters sent by mail-order companies and charities - the second- and third-biggest users of direct mail after financial services companies.
The research - commissioned by Marketing and based on results from NMR's panel of 10,000 consumers, who log each piece of direct mail they receive and what they do with it - provides unique insight into the scale of direct mail wastage. Marketers have traditionally measured the success of their direct mail campaigns by response rate, which averages between 1% and 3%, but that method offers no measure of other campaign objectives, such as raising awareness or shaping a brand image.
On average, 22% of all direct mail sent in the year to June 2006 was never opened. While some in the industry may be jubilant at the thought of consumers opening nearly 80% of direct mail, the unopen rates for mail-order firms and charities are higher still, at 30%. In the case of mail order, this translates into 222m pieces of direct mail remaining unopened, costing £148m; for charities, it is the equivalent of 150m mailings at a cost of £64m.
Financial services, meanwhile, achieved a better-than-average unopen rate of 15% - a result that surprised all the industry veterans Marketing contacted. But because the financial services industry is the biggest volume user of the channel, accounting for 37% of all direct mail, the sector still accounts for 32% of all unopened mail.
The significant variations in unopen rates could be explained by a number of factors. A mail pack sent from a company to a consumer who is already its customer is more likely to gain their attention than a cold mailing from a company engaged in a major customer-acquisition drive.
The type of product or service on offer is another important factor. An envelope sporting an image of a new car or a boat on a crystal clear lagoon is more enticing than a plain appeals letter from a charity. There is also some correlation between high-volume mailings and high unopen rates, and it is widely held that letters with name or address errors are most likely to be binned at once.
Indeed, the most fundamental error made by companies from all sectors is simply getting the targeted individuals' names and addresses wrong. According to NMR's study, on average 4% of all direct mailings had name errors and an additional 1% had a mistake in the address. These problems can easily be avoided: data-cleansing tools are available that can significantly reduce the likelihood of both types of error.
'There is a definite correlation between data quality and open rates,' says Tim Pottinger, database solutions manager at EuroDirect. 'If the name and address on the envelope are inaccurate, it will not be opened by the individual who receives it.'
Mark Roy, chief executive of The REaD Group, which sells suppression files containing detail changes such as information on people who have died or moved, adds: 'As a financial services organisation, if you can't get the name right, what hope have you got of winning the customer?'
Pottinger agrees that such simple errors could have a dramatic effect on the bottom line. 'A big financial services organisation could lose hundreds of thousands of pounds through errors, not including the brand ramifications of sending out inaccurate information,' he says.
Indeed, for big organisations, a 4% error rate in names could make the difference between profit and loss for a campaign, according to Roy.
In a recent survey of 1500 UK consumers by Experian, owner of address-management firm QAS, 47% of prospective customers said they would be 'put off' responding to offers that interested them if the companies failed to use their correct name or address. Almost a quarter claimed to receive duplicate 'prospecting' mailshots from the same company at least once a week.
A successful mailing needs more than just the correct name and address, though. It is vital that the data used to decide which consumers to target is accurate. Marketers can buy in or collect data on a consumer's income, age, gender, family size, purchasing behaviour, interests and attitudes. That data must then be properly analysed to ensure that a relevant offer is sent to the right demographic at an appropriate time.
The days of clients renting lists and sending out mailings using simple criteria are long gone, according to Peter Thompson, commercial director of Experian Prospect Targeting. 'As data owners, if we are to be successful, we have to offer marketers far more analytical services, providing analysis and consultancy around our data,' he says.
An intelligent use of data combined with emotive creative execution is crucial, says Arjan Dijk, senior marketing director at financial services company Capital One, which is the UK's third-biggest user of direct mail, sending out nearly 68m items in the year to June. Despite the high volumes involved, Dijk says its mail is carefully targeted. 'We send to less than 15% of the mailable population in the UK,' he says.
The company has developed a model of targeting the type of consumer most likely to respond to a direct approach, then sending a relevant offer and creative tailored to the individual's circumstances. It has hired data specialist Acxiom to build a bespoke database that pulls together every available data source in the UK to enrich the targeting. 'We make use of our data through hard work and smart work,' says Dijk.
Capital One's creative agency, WWAV Rapp Collins, creates about 20 different mailings a month. 'On a yearly basis, across all our channels, we send out 2000 different tests,' says Dijk. 'I'm not sure all industries are this rigorous.'
Paul Dunn, head of Media Insights at Nielsen Media Research, agrees that some financial mailings have comparatively high open rates because the sector's marketers use databases more effectively than those in other industries. 'Companies such as Lloyds TSB make good use of cross-selling and upselling to their customer base,' he says.
Thierry Saada, director of sector marketing at Royal Mail, says that targeting and relevance are key to achieving high open rates. 'The financial services industry put a lot of investment and time into targeting. It has also invested a lot in terms of mailing to its customer base,' he says. 'It gets an improved return on investment from better targeting and constructing a better product offering for its existing customer base.'
Among the big three direct mail sectors, charities send out the smallest proportion of mailings - 27% - to existing contacts. They also had the highest rate of unopened mail sent to potential supporters, at 76%.
Mail-order companies also rely heavily on mailings to new prospects, with only 36% of direct mail being sent to existing customers. The industry encompasses operations as diverse as traditional big catalogues such as Littlewoods, wine and book specialists, collectibles companies and fashion brands such as Boden and Fat Face.
'It surprises me that the share of prospect activity (carried out by mail-order firms) is double that targeting existing customers. Direct mail is the perfect medium for mail order, yet these companies do not appear to make (good enough) use of existing databases,' says Dunn.
Andrew Wilson, founder of the Catalogue Consultancy, says traditional catalogue companies built big businesses by offering customers credit to buy from their catalogues, but they are now suffering because their offer is less relevant in an age when most consumers can obtain credit easily.
Ashley Bolser, whose eponymous direct-response agency has worked for Grattan and Littlewoods, believes the traditional mail-order companies failed to embrace the internet quickly enough. In contrast, newer, smaller companies such as Boden, Joe Browns and The White Company have successfully used their catalogues to drive customers to their websites.
Many charities have similarly failed to innovate. Clive Mollett, founder of charity consultancy 121 Fundraising, says such organisations often share donor lists, which can result in copycat marketing. 'A lot of stuff similar in style and content is going to a fairly small group of individuals,' he says.
Scott Logie, managing director of Occam, a database company whose services include a list-swapping service used by 120 charities, says one reason unopen rates are high in that sector is that some charities feel compelled to mail everyone listed on their database. He says it can be a struggle to persuade charities that it is not cost-effective to mail their least responsive donors.
'Although charities aren't going to get many donations from, say, the bottom 20%, they still feel a need to tell people about their work,' says Logie. 'If 30% of the recipients are not opening the envelopes, that approach is clearly not working.'
With direct mail accounting for more than 70% of charities' and mail-order companies' total marketing budgets, it is clear that unopen rates will continue to cause a serious headache for marketers, until their causes are corrected.
DATA FILE - UNOPENED MAIL
Sector % of all % of % of
unopened sector mail acquisitive
mail unopened mail unopened
1 Mail order 32.13 29.76 68.00
2 Finance 24.21 15.47 74.00
3 Charities 23.23 30.00 76.00
4 Entertainment and media 5.95 24.07 86.00
5 Travel and transport 2.64 12.06 85.00
6 Pharmaceutical 2.08 17.75 73.00
7 Retail 2.00 13.38 61.00
8 Household equipment 1.61 21.53 87.00
9 Telecoms 1.41 14.15 85.00
10 Utilities 0.75 12.56 72.00
11 Motors 0.68 8.40 88.00
12 Drink 0.62 30.00 53.00
13 Computers 0.41 25.93 18.00
14 Leisure equipment 0.41 22.24 89.00
15 Food 0.38 16.03 57.00
16 Gardening and agriculture 0.32 30.39 91.00
17 Social and political
organisations 0.30 13.00 35.00
18 Cosmetics and toiletries 0.29 14.04 62.00
19 Household stores 0.18 12.35 66.00
20 Online retail 0.18 14.66 94.00
21 Clothing and accessories 0.09 9.56 52.00
22 Property 0.04 7.14 100.00
23 Government 0.03 9.00 67.00
24 Household appliances 0.02 4.09 57.00
25 Miscellaneous 0.02 7.89 100.00
Source: Nielsen Media Research
Note: figures are for 12 months to June 2006
DATA FILE - ADDRESS ERRORS
Sector % of all % of mail
address with
errors errors
1 Finance 39.07 1.13
2 Mail order 22.47 0.94
3 Charities 16.65 0.96
4 Entertainment/media 4.79 0.87
5 Pharmaceutical 4.25 1.63
6 Retail 2.70 0.81
7 Telecoms 2.24 1.02
8 Travel and transport 1.70 0.35
9 Household equipment 1.24 0.75
10 Leisure equipment 0.77 1.87
11 Utilities 0.77 0.58
12 Social and political orgs. 0.57 1.13
13 Cosmetics and toiletries 0.54 1.20
14 Household stores 0.54 1.69
15 Motors 0.54 0.30
16 Gardening and agric. 0.46 1.96
17 Food 0.31 0.58
18 Clothing/accessories 0.15 0.74
19 Online retail 0.15 0.57
20 Computers 0.08 0.22
21 Government 0.00 0.00
Source: Nielsen Media Research
Note: figures are for 12 months to June 2006
DATA FILE - NAME ERRORS
Sector % of all % of mail
name errors with errors
1 Finance 37.23 4.20
2 Mail order 21.28 3.48
3 Charities 20.21 5.00
4 Entertainment and media 4.93 3.52
5 Pharmaceutical 2.60 3.92
6 Retail 2.50 2.95
7 Travel and transport 2.39 1.92
8 Telecoms 1.97 3.50
9 Household equipment 1.48 3.49
10 Utilities 1.26 3.72
11 Motors 0.99 2.14
12 Gardening and agriculture 0.39 6.54
13 Leisure equipment 0.37 3.55
14 Drink 0.32 2.71
15 Cosmetics and toiletries 0.30 2.57
16 Social and political orgs. 0.28 2.00
17 Food 0.28 2.04
18 Clothing and accessories 0.26 4.78
19 Computers 0.24 2.61
20 Household stores 0.22 2.66
21 Household appliances 0.16 4.68
22 Property 0.14 4.55
23 Online retail 0.12 1.72
24 Miscellaneous 0.06 3.95
25 Office equipment and supply 0.04 40.00
26 Government 0.00 0.00
Source: Nielsen Media Research
Note: figures are for 12 months to June 2006
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