Can news like this get any better? Only 12 companies in the top 100 spent less on direct mail in 2002 than they did in the 12 months previously.
Twenty-seven spent more than £10m on direct mail, 11 more than in 2001, while in 2002 our top 100 spenders in direct mail went through £0.88bn - up nearly £0.25bn since 2001. That puts the percentage rise in spend for direct mail at a staggering 28 per cent for the 100 biggest players.
On an initial glance, results from this, the first league table on spend for the top 100 direct mailers, make impressive reading. The experts may have predicted tough times but our figures, in association with Thomson Intermedia, tell a different story about how marketers spent their cash.
The verdict is that mail continues to be the robust channel of choice for direct marketing activity. Of the channels tested (mail, inserts - including press advertising - doordrops, web and outdoor), mail was the largest. Fifty-six per cent of the top 100's total DM spend went on mail, up five per cent compared with those in the top 100 in 2001. Just to enter the table in 2001, you only needed to be spending £1.8m on mail. Last year, you needed to be spending £2.8m.
The table is fascinating for more reasons than just the numbers. The surprises were the number of new entrants (nearly a third of the table), the total absence of the automotive sector and a poorer-than-expected showing from the charities.
It came as no shock that the table was dominated by financial services companies. Sixteen of the top 20 are from this sector, although many may overestimate its dominance. In real terms this sector is down since 2001.
Here, they originated 71 per cent of all the money spent on mail by the top 100; in 2002, it was down to 64 per cent. But by stealth, it is in fact the media and entertainment sector that has nearly doubled its spend on direct mail from £38m in 2001 to £75m in 2002. Retail, although bolstered mostly by Tesco, is also up - from £90m to £160m.
Finding clear patterns is difficult with a table like this, although several trends do emerge. Take the new entrants. There are only six in the top 50 - Goldfish, Credit Plan, Citibank, Matalan, More Th>n and Woods Supplements - a reflection of the solidity of the top half of the table.
But for these recent converts, the proportion of spend on mail is greater than the average.
Apart from More Th>n (the odd one out, spending 27 per cent of its total spend on mail), the lowest (Matalan) spends 48 per cent of total DM spend on mail, followed by Citibank at 70 per cent. The rest all spend more than 85 per cent of their DM budget on mail. Credit Plan ploughs 95 per cent of its resources into mail, for Woods Supplement it is practically 100 per cent, while Goldfish spends 88 per cent. All this shows that for those breaking into direct marketing, post is by far the most popular channel.
That said, for some of the new entrants that embody a more unconventional and youthful approach, such as More Th>n and Virgin One, direct mail is a far less important part of the mix, with other channels featuring strongly. "It's tempting to say this reflects fresher thinking, with more established firms guilty of a 'we've always done it this way" mentality," says Kevin Allen, planning director at agency Cramm Francis Wolf.
Mike Tildersley, marketing director of More Th>n, comments on the dominance of other channels in its media schedule: "DRTV and the web are becoming a key part of our marketing mix. TV work accounts for another £8m."
For Tildersley, who is seeing sales growth of 40 per cent year-on-year, just 60 per cent of his direct mail spend is now on acquisition, with other channels muscling in on this role. But for retention activity, mail is the channel of choice.
The same sentiment is echoed by Anthony Newman, who is responsible for direct marketing at Cancer Research UK. It has climbed the table from 85 to 44, mainly through the merger of Cancer Research and Imperial Cancer Research. He also says mail is largely a tool for existing donors. "Direct mail isn't our biggest earner," he explains. "We use a lot of telemarketing and that, plus TV, would bring our spend closer to £20m. We've found mail only to be successful if you have a warm relationship already and we're only sending more mail because we have more donors to serve."
Tildersley and Newman point to what is a key message from this table - channel relevance. Unlike other league tables, there is no prestige in coming first, especially when it confirms the huge gulf in spend between top-placed MBNA and its closest 'rival' Lloyds TSB. Of the 96 million mailings MBNA sent, nearly 68 million were prospect mailings, supporting the popular view that the company simply blitzes people irrespective of targeting (see table above for the full prospect/existing customer splits of the top 10).
However, there is evidence that a natural ceiling for mail volumes is being met in the upper echelons of the table in preference to other channels.
The top 10 in 2002 spent just two per cent more on mail than the top 10 in 2001, but spent 15 per cent more in all other channels. One of the biggest shifts in budget allocation has been Norwich Union Direct, where mail accounted for 65 per cent of DM spend last year compared with 92 per cent in 2001. A compelling fact is that while there may be some fallers in mail spend, total spend is higher in all but a handful of cases.
Changing priorities
So who are the biggest winners and losers, and what explains the changes?
Every firm has its own story to tell, but some are more obvious than others.
American Express has rocketed 62 places to number 10, increasing its mail spend from £2m to £15m. One-third of its mail goes to existing customers, signalling more CRM activity, but the jump also suggests a widening of its credit rating and a less exclusive approach to targeting.
PDSA, the highest ranked charity, jumped seven places to number 33, spending more than BT and Prudential. DM director Clive Mollet describes this as "assertive" rather than aggressive marketing. "There's a lot of talk about charities being aggressive, but I don't over-mail," he says. "Our database has grown by 30 per cent in the past year. One mailer generated £500,000 from 500,000 prospects. People who are responsive will be targeted by others, so we have to get there first. Prospect mailers have worked fantastically for 10 years and we'll do it as long as we can afford it. We've tried other channels like doordrops, but have found they don't work."
Most of the new entrants are financial services firms - Goldfish being the highest at number 13. Many, as Jonathan Spooner, creative director at financial services specialist agency Ping, observes, are the result of de-integrations, such as Zurich and AXA, which separated from Media Insurance. These new entrants are keen to distance themselves from the carpet-bombing tactics that tend to be associated with the financial sector.
Ellie Wallace, head of corporate communications at Goldfish, says the company is very careful about allocating money.
"We only mail once a quarter, a rolling total of one million customers a month" she says. "The high spend is due to the sheer number of products we have rather than a scatter-gun approach. Sending 750,000 mailers at a time is about our limit because we want to analyse the results. Next year, the aim isn't to spend more, but to do more with our money."
It is mid-table where other trends occur - not least with Tesco, up 34 places to 31. "The top 30 are pretty much all about acquisition activity," says Clive Humby, chairman of Tesco's data consultancy Dunnhumby. "Tesco heads the pack that actually talks to its existing customers."
According to Humby, Tesco has a communication programme with 40 different customer streams set for the rest of the year. He describes its task ahead as more a job of "air traffic control" - not over mailing but "giving customers a good range of enticements and announcements". Based on the intelligent use of data, response regularly reaches 15-20 per cent, with the limiting factor more that if 10 per cent respond to a mailing with a voucher for £2.50, the cost of redemption can surpass that of the campaign.
But it hasn't all been good news. Troubled firm NTL is one of the largest fallers, down from 59 to 86. Despite this, David Meadows, head of marketing at NTL South, is upbeat. "We have a wide contact strategy, from press wraps in local papers to DM doordrops," he says.
Meadows relies on a one to three per cent response and has just completed an exercise with Claritas to screen and model all of its data.
But there's no doubt that the economic pressures on business are being felt. "You just can't ignore the economic climate," says John Regan, European business director, EHS Brann Discovery, which works with AA, up a modest three places mid-table, and also Scottish Widows, down 20 places and almost off the table. "This is one client that's focusing in on what it's got," he says. "We were doing lots of acquisition work but there's virtually none now."
Those who fell out of the table in 2002 include Paramount Bank, Scottish Friendly, Royal & Sun Alliance, Cooperative Bank and People's Choice Insurance - all feeling the pinch of the stock market downturn and scaling back accordingly.
Opening new channels
What's clear is that those that have a new message or proposition have been the ones that have stayed in the table or moved up. Esure, a new entry with direct mail spend close to £4m last year, is just one of the success stories. It has built its approach on a shameless dedication to testing its communication strategies, says customer marketing manager Chris Bowden.
"We've only been up and running with direct mail since last summer," he says, "but it's already second largest to TV spend. We've tested envelope messaging, numbers of inserts, even packs with Michael Winner on the cover."
A bold approach coupled with this commitment to testing has seen strong results - Esure's latest control pack produced a 30 per cent uplift. Others seem to have lost their nerve. Financial services company Liverpool Victoria is down 10 positions, but there are reasons behind that, according to Richard Marshall, business development director at TMW. "It's a project-based client and there's an element of tactical activity," he says. "Last year Tax-Free Savings looked like they would lose their tax-free status, and so marketing activities were curtailed."
Specific reasons notwithstanding, many of this year's crop enforce the view that if you're new in an arena, you can challenge the established firms. "The table confirms that more work is coming from the second division, rather than Premiership League player," observes David Green, marketing director at data services provider GB Group. "Smaller companies are admitting they can't compete on brand and are putting more of their money into data."
Britannia, which used to be GB's second largest client, fell 20 places, but Green puts this down to a change of chief executive, which brought a shift towards ATL channels: "The company has suffered as a result, but it is already talking about reversing this, spending big money. It will definitely be up again in the next table."
Finding the right channel to suit the brand is also part of the explanation.
Direct mail spend for Egg, which fell 16 places to 39, remained virtually static in 2002 compared with 2001. However, in terms of its internet spend (see table, page 16), it broke into the top 10 at number 10 in 2002, leaping from 28th place in 2001 with spend of nearly £3.5m. It clearly knows where its priorities lie and is putting its money where its mouth is.
Mark Young, managing director of the Leaflet Company, thinks doordrops could be one reason behind some of the falls in mail expenditure shown in the top 100 table. He might, as one would expect, have a vested interest in arguing this, although according to his own research, 84 of the UK's top 100 advertisers now use doordrops as part of their marketing mix. This has risen from just over half last year.
"It's always been something people haven't been too open about investing in," he says. "Many more companies are trying it and getting results." This view is partially backed up by our figures here. Many of the companies that dropped out of the top 100 list in 2002 spent more on doordrops than they did in 2001.
Demographic details
There's one more significant finding not shown here in the tables that's worth commenting on. Thomson Intermedia also provided a breakdown of the age, region and social characteristics of where mail is sent for the top 100 players.
It reveals that the spending habits of our top 100 is still very regional.
Of the nine regions Great Britain was carved into, Londoners get more than 20 per cent of all the mail sent by 17 of the top 100. GUS Home Shopping pumps 27 per cent of its spend into the capital - up from 13 per cent in 2001. For some like Telewest, which is promoting its more southern-based broadband capability, this is understandable, although for Sainsbury's (24 per cent), British Gas (20 per cent), DFS (20 per cent) and NSPCC (24 per cent), there is less of an excuse.
If the reason behind this southern bias is based on traditional notions of affluence, then patterns for age group/social demographic data don't provide many answers. Mail is spread through most age groups fairly evenly, except for obvious mailers like Saga. However, where polarisation does occur, many companies are honing in much more closely. Saga, for example, sent 47 per cent of its mail last year to the over 65s, a rise from 40 per cent in 2001. First Direct has obviously spotted that the mid-market is now one of its key targets too. In 2001, it sent a fifth of its mail to the 25-34 age group; last year it was a third. Abbey National, in 19th position, is also fine-tuning its targeting. It posted 28 per cent of its mail to the 45-54 age bracket, a big rise compared with the 20 per cent this age group commanded the previous year.
Speculation that American Express has widened its mailable universe (it did not want to comment) can be proved by looking at a breakdown of the social groups it targets. In 2001, 18 per cent of its mailings went to the C2 category, compared with 22 per cent in 2002. The E group also rises from 8 to 10 per cent in the same period.
Interestingly, Black Horse Finance, which fell 29 places to 89, was the only mailer in 2002 that put more than 10 per cent (11 per cent) of its spend to the A group. This was up from six per cent in 2001. It all goes to show that behind the top 100 list, far more subtle movements abound, with this business clearly reassigning money where it feels the most value will be gained.
But this, you might say, is the story of this entire supplement. Direct mail, while still the dominant medium is, as this report reveals, a highly delicate channel. Riding high when ATL is down, it must still prove itself for some, while for others, mail has to be more refined and more targeted than ever before to generate the response it deserves.
- Morgan Stanley is one of the only companies to have spent less across all DM channels in 2002 compared with 2001. Virtually all its spend is in mail, and that's down by £7m.
- Freemans spent nearly £9.5m on mail, and only £400,000 in other channels in 2002. In comparison, the year before it spent £5m on mail and £2.5m in other channels.
- The FMCG sector is down from 11 million mailers in 2001 to 5.5 million in 2002.
- Woods Supplements spent practically 100 per cent of its budget on mail. For established players such as Matalan, spend on mail is less than half the total budget, and for More Th>n, only a quarter.
- Liverpool Victoria's total spend was virtually the same in 2001-02 falling by only a few hundred thousand pounds, but it has increased its direct marketing spend by £2m.
- While Tesco spent £9m on mail, it still spent nearly £30m on other direct channels. BT has the biggest difference - £7m on mail, compared with £55m in other channels.
- BT spends the smallest proportion of its total direct spend on mail at only 12 per cent. Second is Boots at 15 per cent, followed by Procter & Gamble at 17 per cent and BSkyB, which spends 23 per cent of its total DM budget on direct mail.
- Morgan Stanley is clearly one of the casualties of the economic climate. Its spend on direct mail has fallen from £20m to £13m in just one year.
- Fifteen of the top 100 spent less in all channels measured in 2002 compared with 2001. Most were down by 5-10 per cent, but two showed dramatic falls. Morgan Stanley and NTL both dropped their total spend by one-third.
- Next has doubled its total direct marketing spend, but quadrupled its direct mail spend.
- In 2001, six companies spent more than £20m on direct mail. By 2002, this had increased to nine.
- In 2001, 17 companies spent more than £10m on direct mail. By 2002, this had leapt to 27.
- Sixty-five companies spent more than £5m on mail in 2002, up from 41 the year before.
- Marbles, up 27 places, has doubled its overall spend, but has tripled its direct mail spend during the same period.
- Halifax is the only company in the top 10 to have spent less on direct mail in 2002 than 2001.
- Thirteen of the bottom 20 companies are new entrants to the top 100 table.
THE FACTS BEHIND THE FIGURES
All the data in our tables is compiled by Thomson Intermedia, which uses the GfK Hometrack panel. This comprises a minimum of 6,000 individuals reporting on all the press, doordrops and direct mail they receive each month.
They are recruited through interview to ensure that the entire UK population (from age, sex and different income groups), is properly represented.
According to the size of the panel, a weighting is also applied based on social class, tenure, number in household, type of dwelling and presence of children. This allows for an estimate of the nationally representative size of the mailing.
A spend figure is then calculated based on the weight of the mailpack and Royal Mail rate card to the size of the mailing. Direct mail spend does not include items such as statement mailers and any other regular communication. Spend figures also include an estimate of the supplier costs involved, from creative to print. Similar spend figures for press and web are deduced from size/rate card data. Web spiders also collect occurrence data from the top 300 sites and work out impressions and the cost per thousand rates. Spend is then calculated based on industry standard cost per thousand rates. A blue-chip base of 400 firms regularly benchmark these figures to see if they tally with theirs.
TOP 100 MAILERS BY SECTOR
2002 2001
pounds pounds
Finance 563,880,064 447,312,608
Retail 160,832,384 90,674,056
Entertainment & Media/Leisure 75,690,304 38,208,232
IT/Communications 28,054,066 17,853,604
Education & Charities 20,069,258 8,289,152
Government & Utilities 8,757,484 9,938,222
FMCG 5,549,733 11,159,617
Travel 5,437,549 2,466,427
Pharmaceutical 5,015,352 n/a
Electrical & Household 4,193,152 4,360,994
Automotive 2,142,827 1,683,945
Toiletries/Cosmetics 1,683,389 1,690,933
Other 8,862 67,672
TOTAL 881,314,422 633,705,462
TOP 10 MAILERS 2002: RETENTION VERSUS ACQUISITION
Mailings for
existing customers Mailings to prospects
Company Mailings Spend Mailings Spend
pounds pounds pounds pounds
MBNA 27,865,356 16,719,213 67,973,952 40,784,372
Lloyds TSB Group 24,562,052 14,737,232 31,584,458 18,950,674
Capital One 7,258,641 4,355,185 42,606,720 25,564,032
Book Club Associates 4,733,399 2,840,039 39,015,536 23,409,322
Halifax 13,271,488 7,962,893 27,046,408 16,227,845
Barclays 11,517,764 6,910,658 24,000,280 14,400,169
Norwich Union Direct 12,371,654 7,422,992 22,253,958 13,352,375
Royal Bank of 13,672,735 8,203,641 20,137,336 12,082,402
Scotland
Saga Group 8,524,079 5,114,448 25,081,236 15,048,742
American Express 7,941,695 4,765,017 18,423,334 11,054,001
Unaccounted mailings Total
Company Mailings Spend Mailings Spend
pounds pounds pounds pounds
MBNA 579,071 347,442 96,418,379 57,851,027
Lloyds TSB Group 944,792 566,875 57,091,302 34,254,781
Capital One 455,415 273,249 50,320,776 30,192,465
Book Club Associates 438,267 262,960 44,187,201 26,512,321
Halifax 440,599 264,359 40,758,495 24,455,097
Barclays 603,490 362,094 36,121,534 21,672,921
Norwich Union Direct 268,718 161,231 34,894,330 20,936,598
Royal Bank of Scotland 309,354 185,612 34,119,425 20,471,655
Saga Group 382,879 229,727 33,988,194 20,392,917
American Express 79,637 47,782 26,444,666 15,866,800
SAGA GROUP BREAKS INTO THE TOP 10
Saga Group: direct mail spend doubled in 2002
pounds
Direct mail spend 2002 20,392,916
Direct mail spend 2001 10,267,591
Total direct spend 2002 25,267,992
Total direct spend 2001 15,542,844
Saga, which provides everything from financial, health and holiday services to the over-50s, was the one company that took most of our commentators by surprise, rising seven places and breaking convincingly into the top 10 by doubling its direct mail spend. It is a familiar name in our monthly Mail Watch figures, regularly spending more than £1.5m a month, and it sealed another fantastic year when it profiled Tony Blair, who this year celebrated his own 50th birthday, on the cover of its own publication, Saga magazine.
But the effort has clearly been gearing up. A £15m call centre for 600 staff was completed at the end of 2002 and 2003 has already been prominent for pitches. The £5m creative business account for its financial division Saga Services was recently fought over by Doner Cardwell Hawkins, J Walter Thompson, AMV Advance and Leo Burnett.
The growing importance of mail as a medium is shown by the fact that (excluding TV), mail takes £20m of its £25m total spend. Saga was one of the lead advertisers taking part in a recent initiative by the Preference Service which sent 500,000 people over 50 a 'Reward Pack' for filling in a preference service questionnaire.
RSPCA INVESTS IN DIRECT MAIL
RSPCA: business is driven by recruitment mailing
pounds
Direct mail spend 2002 3,686,085
Total direct spend 2002 5,671,856
Doordrop spend 2002 163,167
Outdoor spend 2002 1,768
Charities don't make too many appearances in our top 100 table, but one major new entrant is the world-famous animal charity, the RSPCA. In at number 85, it now spends fractionally more than £3.6m a year, which, says head of fundraising Nick Daniel, is more than it spends on DRTV and any other channel. "We're probably no more different from most charities," he says, "having a rigorous recruitment and retention policy." The RSPCA spends six times more on recruitment mailings than it does on those to existing donors. Marketing is also centralised because, while there are local RSPCA branches and shops that cover a particular territory, none of these are responsible for promoting the work of the charity.
"The business is driven purely by recruitment mailings," says Daniel, "which are, in turn, dictated by what we as an organisation have the manpower to produce, but also what level of communication our donors find acceptable to receive." This year, he says more emphasis is being put into DRTV and legacy mailings, although he admits these are hard to measure. "As for email and SMS, this isn't something we are able to test yet because it's too costly to research."
PROSPECTING BOOSTS LLOYDS TSB PROFILE
Lloyds TSB: mailing is high-volume, but highly targeted
pounds
Direct mail spend 2002 34,254,780
Direct mail spend 2001 28,285,770
Total direct spend 2002 45,383,270
Total direct spend 2001 36,206,626
If you accept that MBNA is an anomaly in terms of its direct mail volumes, it's really Lloyds TSB that heads the pack, spending just over £34m on mail last year.
This is an increase of 21 per cent on 2001's figures, something that is attributed to a growing emphasis on recruiting customers from outside its customer base.
Previously, the bank's focus of attention was on cross-sell and up-sell opportunities across its 16 million-strong customer base, backed up by a real commitment to modelling and customer analysis. Now this approach is being replicated in its prospecting activity, with consultancy Clarity Blue recently brought on board to help the bank get much smarter about its targeting (see case study, Marketing Direct, June).
So while Lloyds TSB may be a high-volume player, it's working hard to distance itself from the scatter-gun model. This view is endorsed by Andrew Kennett, client services director at WWAV Rapp Collins, which has the lion's share of the bank's below-the-line business.
"Lloyds TSB always scores highly on trust and there are strict rules about the frequency and type of message sent out. We don't bombard people. Modelling and customer insight is key to its strategy," he says.
DOORDROPS ANALYSIS
Rank 2002 Company
£
1 10,123,154 Norwich Union Direct
2 9,884,123 More Th>n
3 6,704,710 The Associates
4 6,704,368 Lloyds TSB Group
5 6,246,617 Cancer Research UK
6 5,718,938 Barclays
7 5,219,991 Safeway
8 4,805,604 Prudential
9 3,628,247 Citibank
10 3,467,712 Oxfam
INTERNET ANALYSIS
Rank 2002 Company
£
1 20,916,142 Amazon
2 13,218,666 MBNA Europe Bank
3 7,402,741 Tiscali
4 6,240,542 Casino On Net
5 5,525,204 Play.com
6 5,170,791 Dell Computer Corporation
7 5,012,252 British Telecommunications
8 4,369,958 William Hill
9 3,656,819 Ebay
10 3,334,368 Egg
OUTDOOR ANALYSIS
Rank 2002 Company
£
1 20,616,442 BBC
2 16,001,999 Ford
3 12,002,695 British Telecommunications
4 11,931,050 Orange
5 11,704,961 Guinness United Distillers & Vintners
6 10,964,905 Lever Brothers
7 9,951,018 Toyota
8 9,939,737 Vauxhall
9 9,517,641 Renault
10 8,985,473 Elida Faberge
PRESS ANALYSIS (INCLUDING INSERTS)
Rank 2002 Company
£
1 42,529,212 Ford
2 37,711,400 British Telecommunications
3 35,786,632 PC World
4 31,902,064 DFS
5 31,221,954 Renault
6 30,725,106 Dial-a-Phone
7 27,700,352 Boots
8 27,479,226 COI
9 23,967,024 Vauxhall
10 22,592,076 Tesco
_1.jpg)
.jpg)
