Route to the customer

30th Nov 2005

The ability for consumers to switch suppliers has never been easier. As the balance of power has shifted in favour of the consumer and customer churn rates plague many an industry, marketers are constantly looking for new ways to connect with the customer and hold their attention. The idea of the "Attention Economy" was first introduced by Thomas H. Davenport and John C. Beck who stated that "understanding and managing attention is now the single most important determinant in business success."

The notion of the consumer as a passive, mono-mediac is extremely outdated and nowadays, each customer will have a preferred communication medium, which may even vary between the different products or services that an organisation may offer. So where should marketers and Customer Relationship Management (CRM) professionals devote their activities and budgets?

Over the past decade, there has been a gradual decline in traditional brand advertising and a corresponding rise in spend on direct marketing and responsive advertising. Most of the discussion around this phase change in the advertising industry cites the success of sponsored search results on Google or the latest example of interactive TV.

Yet the reality is that direct mail, too, continues to grow and resists being removed from media schedules. Figures from the Direct Mail Information Service reveal that in the last 13 years, the overall volume of direct mail has increased by 139% and direct mail expenditure has risen by 165%.

This more general trend, however, masks a quieter but far more pervasive revolution that is happening in the world of consumer communications – namely, the use of existing channels to the customer for advertising and marketing purposes.

It is all too easy for businesses to disregard standard and statutory correspondence as an administrative chore, rather than an opportunity to communicate with the customer. Research commissioned by Group 1 Software into the importance of different customer/prospect 'touchpoints' across a number of industries, highlights that the customer pays far more attention to standard and statutory information, such as letters and statements, than is generally supposed. This surprising finding is also corroborated by research carried out in 2003 which revealed that consumers pay almost twice as much attention to statements and correspondence than they do to direct mail or TV advertising.

Nonetheless, above the line advertising commands greater resources. The World Advertising Research Centre indicates that approximately £14,159 million was spent on TV, press, outdoor, radio and cinema advertising in 2002, whereas £2,378 million was spent on direct mail – a mere 17% of the above the line budget – and even less was dedicated to communicating via customer correspondence such as bills, statements and service letters. It has often been suggested that UK businesses become increasingly committed to developing relationships with existing customers. It is about time, therefore, that they reassess the disparity between above-the-line and below-the-line media – especially since touchpoints such as personalised customer service letters have a greater impact on individual customers than television advertisements, which are designed to appeal to the masses.

With the latest Bellwether reports indicating that 2005 advertising budgets remain steady and on the whole, unchanged, this news represents a relief from the downward revisions recorded over the last three years. By contrast, direct marketing spend has risen significantly during the last four years as companies realise the cost effectiveness and measurability of this technique. The recent EU Directive on Privacy and Electronic Communications, restricted electoral register and the telephone preference service, all place increasing limitations on unsolicited prospecting, whereas direct mail is seen as the non-intrusive touchpoint by customers. TV advertising, however, has been forced to transform itself. It is no longer just about absorbing the viewer but involving the audience and coaxing them to interact with the brand. The advertising industry is having to develop interactive brand experiences to replace traditional ads, stretching from interactive games to entire advertorial shows or channels – such as Tesco TV.

By using existing communications channels to insert a marketing message such, as bills, statements and customer service letters, the cost of design, print and mail can be reduced. Every household in the UK receives bills and statements, whether it is a monthly bank statement, a quarterly phone bill or a bi-annual water bill. Moreover, due to the critical and personal nature of these documents, customers will open and retain them at either a household or individual level.

Recent technological advances in the production of bills and statements have enabled highly personalised advertisements to be printed on the fly, and the integration of marketing systems with statementing systems. Marketers are now able to automatically trigger the printing of personalised marketing messages and offers on a statement or a piece of correspondence.

Responsiveness to this ‘advertising’ will vary, depending on whether the advert references a telephone number, an insert in the same envelope, or a website link. Overall responsiveness seems to sit around the 5.5% levels, only a little lower than typical direct mail campaigns.

Increasing pressure from new regulation to invest in financial reporting standards compliance is encouraging companies to look for additional return on investment from this spend. As a result, company financial reports are being used to convey key marketing messages, particularly important as shareholder groups can include customers and employees. Our research indicates that on average, 27% of UK top 1000 companies are effective in using their annual and quarterly statements as key marketing documents, and the industries traditionally strong in direct marketing are most developed in bringing financial reporting and marketing together (such as retail, telecoms, automotive and banks). Data-driven marketing methods are being employed to segment shareholders, shareholder-customers and shareholder employees into different groups and address their differing concerns with distinctive creative, presentation, documentation and mailing content.

In conclusion, the array of communication channels on offer to the consumer has meant that marketers are increasingly looking to adopt a multi-channel approach, particularly as consumers become more tech savvy. Gaining an insight into customer preferences, therefore, is central to this approach and will allow businesses to engage in a continuous dialogue with their customers and develop a relationship with the individual.

By Yolanda Noble, Chief Executive, Corporate Mailing Matters

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Replies (1)

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By Tomcogswell
05th Dec 2005 09:34

I agree that multi-channel marketing should have a major role to play in any company's marketing strategy, but it must be as one element of a wider strategy - and given the weighting that is deserved compared to other forms of advertising.

However, this article has confused me. Firstly it keeps switching between direct mail and below-the-line-advertising. If you look at the definitions on the web of Direct Mail (here) nearly all relate to prospecting for new customers - not interacting with existing customers. The article does not seem to make a clear enough distinction with regards to which element is being considered.

The other element of direct mail that will have a major effect on the increase in spend in DM is electronic. Email has not even been mentioned in the article, and yet this is probably the single most important factor re this increase. Online advertising is the fastest growing media - outstripping outdoor since 2003, and in 2005 overtaking radio for the first time. The article seems to ignore this factor.

You could also argue that by using the current point of contact as a vehicle to deliver brand, response and leads is making that vehicle more interactive. It would then follow that this is a replication of the changes appearing across all forms of marketing.

Online is the root cause of the need to create interactive delivery of marketing messages. The internet has moved the choice of time/method of engagement to the consumer (both in B2B and B2C) and from the vehicle (be it a publisher, DM campaign, Google etc).

Fundamentally I agree with the opening statement of the article, the balance of power has definitely switched to the consumer. However, for better or worse this is largely down to 2 key reasons – mature markets and the internet, and these cannot be ignored when looking at any form of customer interaction.

“The old argument about online and offline will become obsolete,” said Bill Gates yesterday, “because all print-based media will eventually be screen-based.”

- Bill gates - the future of advertising is online.

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