In a month when WPP CEO Sir Martin Sorrell announced job cuts in the mature markets of the advertising and DM empire, and with forecasts of UK unemployment next year to reach the three million mark, the DM sector is holding its breath.
WPP agencies include OgilvyOne and Wunderman, yet Simon Taylor, Wunderman's client group managing director, says the agency has seen no redundancies as yet, neither in-house nor in the client companies the agency serves. "There's a lot of caution in the air and hatches are being battened down, but so far we've been ok."
Suppliers of traditional DM channels are forecasting diminishing volumes in the new year. However, in the nine months before September's banking crisis, five of the top ten direct mailers by volume were mailing more compared to last year, according to Nielsen Media Research.
But Caroline Worboys, managing director, Callcredit Information Group, says that in a multi-channel world, it is wrong to focus on mailing volumes to ascertain whether direct is suffering. "They are less of an indicator due to the proliferation of mobile and online media and channels," she explains.
For that reason, the AAR's head of direct marketing, sales promotion and integration, Tony Spong, says the agency side is healthy. "Most are producing 50 per cent of their output in digital."
Karen Webster, product director of suppression provider Morta-screen, adds that she has seen
little impact on mail volumes and that a downturn "plays directly to our strengths".
Media experts are urging clients to view the impending recession as an opportunity. "Rates across many media are at their lowest in more than a decade, in some media lower than even 20 years ago," says Mike Colling of agency Mike Colling & Co.
Those who remember the last recession say this downturn has yet to compare in its severity. "There are [still] briefs kicking around the marketplace. In the 90s, there were none," says Robert Keitch, the Direct Marketing Association's director of media channel development and environmental affairs.
INDUSTRY REACTION:
SUSAN HOWSTAN
Associate director, Direct Recruitment
"Fewer people are hiring, and when they do they are becoming particularly risk-averse, taking ages to make their minds up. In quite a few cases they miss out on hiring good people as they've been snapped up elsewhere. Salaries for analysts and data planners have definitely not increased for the past two years. I haven't seen lots of redundancies on the data side, but I have noticed that if people leave for other jobs they may not be replaced. I have every confidence that by the second quarter of next year, agencies and client companies will have realised that they need to hire if they want to stay ahead of the game and not overload and hack off the people they already have."
BEN ALLAN
Managing director, TILT
"TILT's door drop volumes are up 11 per cent for 2009 so far, but we expect overall D2D and DM volumes to be down circa 15 per cent. Agencies and clients are not hiring, and there will be redundancies. The data owner and broker side of the industry is likely to be hit the hardest.
"Clients are approaching the recession in three ways. The first is to stop everything and review media/creative agencies along with internal overheads; the second is to cautiously commit budget month by month; the last is to believe in the product and market, and to continue or increase spend. Many clients are seeking more senior sign-off on spend to cover their own backs."
DANIEL FINN
Digital media consultant, Sony DADC
"In the current economic climate the shift in advertising budgets away from traditional media into digital marketing will continue to increase. With its eBridge solution, Sony DADC is in contact with marketers across a range of sectors including automotive, mail order, financial and FMCG who are all emphasising the need to use media channels including DM and digital that can effectively measure response and engagement in real time and clearly define the return on marketing investment. The recession poses challenges and opportunities for marketeers willing to invest in a bespoke and tailored approach to their communications."
NICK EARNSHAW
Consultant, Jaywing
"The DM industry has been built on its ability to deliver, and crucially, to measure response, and is therefore best placed to meet the current need for accountability of marketing spend head on. We cannot hide from the fact that budgets are contracting, having a negative effect on nearly all areas of advertising and marketing. But it is time the discussion of channels as separate entities came to an end.
"Direct mail is most certainly in decline. But the fact that mail volumes overall are declining isn't an indication that the principles of direct marketing are themselves no longer valid, rather that spend is being diverted into digital. But we should not make the mistake of thinking that digital is buoying direct marketing.
"An approach like synaptic marketing, that brings together real-time data with stored offline insight to generate relevant and timely interactions with customers through the most relevant channel, is direct marketing taken to the next level."
FRASER CHURCH
Business development director, dsicmm
"Clients are definitely being more careful with their budgets within the current economic climate; however, careful is not necessarily a bad thing. The current focus is very much on return on investment and ensuring that each marketing pound works as hard as possible.
"Clients are increasingly focussing on making their data work harder for them, with a noticeable increase in the creative content being driven by customer profiles. This has led to the recognition of an individual being much more than just their name and address. We are now seeing factors such as geographical location, previous transactional history and family composition driving content."
TONY SPONG
Business director, AAR Group
"One of my main bugbears is the constant mix up between direct marketing and direct mail. It is something we need to take very seriously as it continues to put mail as the sole medium for direct marketing in both industry's and consumer's mind.
"Direct marketing is in rude health at the moment with most agencies producing over 50 per cent of their output in the digital media channel. Yes I do expect volumes of mail to continue to reflect changes in the media landscape, but the role of paper-based communications will also change, as they have been doing for the last ten years. Customer magazines are examples of delivering a branded experience in an increasingly targeted way. The way that we always survive is to find new and creative solutions to get round problems. The winners will rise to the top; the losers will be those that have been getting away with being lazy and that is the same in any line of business not just ours."
JANET WINSLADE
Media director, Sapient
"Many marketers will reduce brand spend (even though there is plenty of evidence to suggest that this doesn't reflect marketing wisdom in the longer term). Then, they'll focus on direct marketing. Unless they have a really strong data-driven programme for both customer acquisition through which they can really tell where they're at their most efficient, and customer retention through which they know the lifetime value of their customers in terms of product-holding, cross-sell and up-sell, they're going to face challenges in justifying budgets. They're going to be looking at cost and performance. So, because email marketing creative, deployment and management costs tend to be lower, I'd foresee an increased use of email marketing, but great database management, analytics and real attention to user preferences and conversion data had better be high on their lists. There's still widespread oversolicitation in email marketing, so that'd be a good place to start making cuts. Send less frequently and more pertinently, your customers will love you for it! And test like mad, and optimise to performance - which should be the watchword in direct marketing anyhow, on- or off-line."
LISA NEVILLE
Director of operations, EDM Media
"There will be employment freezes, and inevitably job losses. I'm seeing contractors and freelancers out of work already. And there is pressure on those who have lost jobs to take posts with worse terms or salary. There has also been a halt to graduate trainee programmes. On the sales side, some companies in the direct marketing sector are already struggling, sometimes through no fault of their own. They still have healthy order books and good billings, but they can't collect payment as agencies and all clients are taking longer to pay bills. Cash flow problems can bring down a successful company. At Edm we have seen a number of clients paying bills later and later each month. But also at EDM on the list management side we have seen rises in sales and we believe this is for those lists which work best in terms of response for clients. The agencies that support and guide clients through the difficult year ahead will be the ones that survive and even thrive in these turbulent uncertain months."
MARK PATRON
Chief Executive, RedEye
"Direct mail will decline in 2009. Digital will grow, but at a slower rate than previously. Less accountable digital media such as display will decline in spend, more accountable media such as search and email spend will increase."
PAUL MILLER
Associate director, contact centres. Prolog
"We began seeing the first real effects of recession over the last couple of months. For many businesses a high proportion of their profitability comes from the last quarter and so the full effects won't be apparent until next year.
"We are seeing stability and even higher levels of activity with clients offering a low price products, however.
"From a mailing perspective there are indications of clients protecting their positions by reducing acquisition campaigns in favour of retention."
JONATHAN DE CARTERET
Founder, Post-Switch.com
"Generally, we have found that DM volumes have been largely unaffected. Some clients have postponed cold/acquisition campaigns while the financial crisis was in full swing, but these have now been reactivated. Commercial awareness and ROI has never been higher on the agenda.
"This is very much the time then to ensure that all communications with your supporters and prospects are of the very highest standard possible. For our part your Account Manager will be reviewing your account and results daily and will be the first to inform you of any significant trends relating to your results."
AMEET CHANDARANA
Head of Direct and Digital Marketing, Libertine
"Traditional direct mail will always have its place, particularly for organisations wanting to complement digital activity, however, the cost-effective and flexible nature of digital means that in the impending recession businesses will increasingly be turning to online solutions as the most cost-effective and measurable way of communicating with their audiences."
SIAN FRANKLIN
Consultant, Direct Recruitment
"In terms of creative it has pretty much come to a standstill but I think that is more to do with end of year budgets than anything else, I think it's too early to tell but I know that a lot of agencies are waiting to see what happens next year. I also think that digital will get bigger and bigger as it is a cheaper and very effective medium. I rarely get roles now where they do not ask for some digital experience. Companies will continue to advertise but will change their methods.There have been redundancies but I think that is more about streamlining the agencies. Salaries have not changed but I think that candidates are prepared to be more flexible. I have already noticed a lack of print recruitment ads and I think that digital advertising will take a drop due to demand but there will still be a need."
STEWART OXLEY
Sales and Marketing Director, Granby Marketing Services
"The key fact is that most companies wish to maintain a level of marketing activity during a period of downturn. The trick is to review the channels used and the ways the activity is undertaken to see how it can be accomplished at a lower cost."
CAROLINE WORBOYS
Managing Director, Callcredit Information Group Marketing Solutions.
"Mail volumes are less of an indicator than they previously would have been, due for example, to the proliferation of mobile and online media and channels. Companies are also facing increasing costs in areas such as data security and cross-business data sharing initiatives to support single person views.
"Over the last few months, we have started to see a reallocation of marketing budget from commodity areas (such as bulk ‘push' mailings) into projects focusing on improving effectiveness of future marketing programmes, focusing on outcomes rather than just ‘activity'"
KAREN WEBSTER
Product Director, Mortascreen
"Anyone that thought the marketing industry would go unscathed in the latest downturn is in for a rude awakening. I'm unsurprised to read of job cuts within agency networks and amongst big DM clients. However, how does this affect mail volumes? So far very little. The DM industry has to some extent future proofed itself by talking for months before the economic tsunami crashed down around our ears about the value of marketing yourself out of a recession - and to most part clients have listened. Whilst we haven't yet seen massive drops in volume, we are seeing the demand for ROI. 北京赛车pk10s have to work harder than ever before to engage the target market. As a suppression provider, this plays directly to our strengths as no one wants to waste money on mailing people that won't respond!"
EDWARD WEATHERALL
Managing director, Concep
"One client, a top three law firm, is sending 8 times the email volume that they sent at the same time last year. The types of communications we are seeing are mainly based around advisory services and updates on the potential effects the collapse of the current economy.
I see the current market as a real opportunity for the companies out there who want to take it, we are seeing a reduction in the cost to advertise a lot of companies are shutting their doors and getting rid of marketing teams which means those that take the opportunity can quickly increase their market share."
MARK RUNACUS
Chief Strategy Officer, HS&P comments:
"Practitioners of integrated direct marketing (not just direct mail) will fare better, but there is so much nervousness at the moment that anyone working on mid-market brands will suffer. The bigger agencies who have already sacrificed margin for scale in their client contracts will find it very tough as those same clients demand further fee reductions. I feel sorry for the client teams trying to maintain service levels with less people.
"Mature, pure digital agencies should be least affected, particularly if they're also experienced practitioners of the direct marketing discipline - they'll be able to demonstrate ROI to their clients and encourage them to spend more. Personally I'm simultaneously scared and motivated by the climate - of course I don't know what's going to happen, but I do know my own business needs to and will change to adapt to it, and I thrive on change."
JON EPSTEIN
Managing director, r-cubed
"It's a boom time for analytics, as marketers are under pressure to deliver more for less - focus is shifting from acquisition to retention and many companies are finally waking up to the fact that their data has the power to save both their customers and their jobs. But many companies are slow to realize this.
"Now is the time to work smarter not harder - now is the time to harness the synergy of off and on line data - now is the time to invest in the smart use of customer data.
It's the old adage: know your customer. Many companies are sitting on an untapped gold mine."
BEN LANGDON
Chief executive, Digital Marketing Group
"My view is that the 'direct marketing' in its widest sense will grow through recession in the same way it did in previous climates where clients demanded better ROI, and measurability from their marketing.
"Those direct agencies that are still dependent on traditional and paper-based direct marketing will inevitably suffer. But this is a trend that has been going on for some time now and is simply likely to be accelerated as a result of recession as clients opt for digital channels as the means to directly target consumers."
DAVID MURRAY
Sales director, The Software Bureau
"So far, from a technology perspective, we have not been affected by the downturn. In fact, the reverse seems to be the case as companies seek new ways of adding value to their clients. By investing in technology, they are able to fine-tune their offer and create clear differentiation. The benefits are not only felt by their clients, but such companies are also ultimately saving on costs and increasing their competitive edge. Whilst mailing volumes are inevitably decreasing, the challenge is to manage data and maximize databases via investment in either external resources or new in-house technology. Which is where we come in. People investing in our technology are not just mailing houses but also multi channel agencies and charities."
MIKE COLLING
Managing director, Mike Colling & Co
"Any area that requires an investment of more than £5,000 has seen marked decline in results, so campaigns associated with things like cars, lump sum investments, and travel have all seen declines in both response and conversion. But, if anything there is a general benefit arising from the lower media rates available. Rates across many media are at their lowest in over a decade. In some media they're lower than even twenty years ago. Particular bargains can be found in television, inserts and online. The period immediately after Christmas and in the first week of January looks particularly juicy. The annual two week Christmas closedown will see a far higher proportion of the population at home than usual, so the cost of reaching high cover levels of any audience will drop still further."
MATTHEW TOD
Chief executive, Logan Tod & Co.
"This recession is going to drive long overdue change - and we will come to thank it. Companies that have a true cross-channel view of campaigns and customer interaction are few and far between.
"Winners will think and behave differently, they will engage in customer-centric marketing based on a total view of the 21st century consumer. Losers will continue with their 'spray and pray' strategies and still wonder why it no longer works.
"Those agencies and clients who see the coming recession as an opportunity to re-structure their whole marketing approach to make it properly integrated across all marketing channels will prosper. They will need to change their internal structures, to invest in even better customer databases, incorporating online behavioural data and with traditional offline data, provide even sharper insight and deliver relevant and engaging communications programs in a channel neutral manner. As belts tighten the traditional approaches will suffer as finally 21st Century customer centric DM gets the upper hand."
ROBERT KEITCH
Director of media channel development and environmental affairs
"The fact there's a credit crunch, doesn't mean that the commercial imperative has suddenly left the building. Job cuts will be across the board, not necessarily in direct marketing. DM tends to be at the sharp end of the business. As for charities, I've had feedback that times are ‘damn tough.' This isn't really a surprise. If retail sales are in trouble, consumers are being much more discriminate. Charities will need a really compelling argument for consumers to part with their cash."
ROSEMARY SMITH
Managing director, RSA Direct
"DM does better in a recession - that's the old adage. The digital part will sustain its growth. That's a no brainer. There's a danger that if people cut direct mail, the physical media, they could be storing up trouble for later. This could cause a churn issue. People who respond to direct mail tend to be more loyal than online-generated buyers. Of course, the cost of acquisition may be less in online, so you can afford to lose more customers. Royal Mail has limited scope for offering discounts, but it should tell people how to get the most out of mail activity and to how to use it in conjunction with other channels. And banks will need more borrowers but they'll want to attract the right people, those who aren't too risky. For that they'll need geo-demographic targeting and associated expertise. We've seen a number of brokers fold or be absorbed in some way. Broking is totally volume related, a margin business. Commodity data suppliers will suffer too - it will be even more of a price war. Mailing and fulfilment and printers are also fighting over volume."