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Could it soon be last post for direct mail?

06-Mar-08

Direct mail is in full retreat and direct marketing agency pitches have all but dried up. Is this a dreadful portent for a once-thriving sector, or simply a blip while it reorganises itself?

It has to be said the outlook does not look good. Most DM agencies would stoutly rebut the suggestion that they are all, or indeed anything, to do with what the public calls 'junk mail'. But while what's stuffed through the letter box scarcely represents the strategic high-ground of precision marketing, no one can deny that historically it has been the sector's bread and butter. Nor that the 7.4% volume decline recorded by Royal Mail for last year represents a serious setback.

The problem, in a word, has been the internet. If people can get more directly what they want through search, they are likely to be even less tolerant of the 'junk mail'. And so events seem to be proving.

But so what? In theory the advent of digital media is a huge opportunity for direct marketing agencies to reinvent themselves and build some added value in the process.

After all, in the kingdom of the blind, the one-eyed is king. Though clients are crying out for rapid mastery of the new digital communications medium, no one has an expertise that entirely fits the required template. But at least direct marketing agencies do, inherently, possess some important elements of that template. They understand the targeted response mechanism, they are at home with data extraction and management on a massive scale; and at their core is CRM. Seen from this perspective, 'digital' is simply a change of channel rather than a new medium.

Sadly, matters are not that simple. At a time when old-style creative advertising agencies are facing increasing difficulty in maintaining their role as the first port of call for communications-challenged senior clients, DM agencies have not been nearly as successful as they should be at making 'digital integration' the core of their offering and seeking out the strategic high-ground.
Why this should be so is puzzling. Possibly, DM agencies have an inferiority complex about their position in the agency pecking order that makes it difficult for them to rise to the occasion.

Certainly commentators have noted a creeping demoralisation and lack of entrepreneurial fibre within the sector of late. The talent, some say, is moving elsewhere.

That shouldn't be so as, managed correctly, direct and digital make good bedfellows. That aside, a major problem remains. The image of direct marketing (among some practitioners, let alone the client and consumer) has been befuddled by direct mail. Direct mail won't disappear, but it has to get smarter.

As EHS Brann chief Matt Atkinson puts it: "The key point now is it's quality over quantity…Consumers are not saying they don't want direct mail, they're saying they don't want junk mail. As an industry, we have to be more considered about what we do, and so do our clients."
Amen to that.

Expedia embraces the new generation of digital DM techniques
by Kim Benjamin Marketing Direct

05-Feb-08

Kim Benjamin talks to Matthew Walls, head of marketing at Expedia.co.uk and Hotels.com, about why behavioural targeting will be key to future success.

With hundreds of brands offering services such as flights, hotel bookings, insurance and car hire, the UK online travel industry is booming. But it's an area that is becoming increasingly crowded and fragmented and jostling for prime position is no easy task

Responsibility for the marketing communications across two online travel brands is an even tougher proposition, but it's a role that Matthew Walls appears to be more than qualified for. As head of marketing for online travel hub Expedia.co.uk and its worldwide accommodation sister site, Hotels.com, Walls is building on a background firmly established in travel marketing.

"I started my career as a creative marketer - now I'm more a data analyst than anything else," says Walls. "My role is about uncovering hard data on our customers and products and producing believable numbers to get the brand to where it is today and will be in the future, rather than conducting a straw poll. The online environment has given us the ability to harness data and to tailor products specifically to individual customers. Instead of saying: 'Here's the brochure, take it or leave it,' we can be much more targeted."

Maxed out

The data he refers to is considerable. As online brands, Expedia.co.uk and Hotels.com have invested heavily in search marketing. "Many of our potential and existing customers end up on search engines. Google is the filter for our business, but we are now almost maxed out on search marketing." He is now exploring other digital marketing channels such as behavioural targeting, mobile search and social media - all of which provide a wealth of user behaviour information.
Expedia has wasted little time in beefing up its agency credentials to this end. In July, it appointed Meteorite to handle its direct marketing activity, alongside retained agency Freud Communications.


"There are shortcomings with the amount of tracking that can be done online," says Walls. "It's easy to get hung up on what can and should be tracked and this changes all the time as digital is such a fast-moving area. But the ability to track affords us a great deal of certainty - we know what is and is not working. In the travel sector, for example, keywords can change every three hours, so we have to manage the data we collect effectively. We analyse what people are searching for, how many clicks there are, how much volume is being generated, the conversion rates and ultimately how much money this makes for us."

With the competitive nature of online travel, it's not difficult to see why it's a sector that can engender very low levels of customer loyalty. "Typical segmentation issues don't really apply as our customers tell us what they want. Yet regardless of the fact that someone has bought products from us three times, for example, they will invariably end up using search engines. This is why content, website functionality and usability are now vital. Travel is an emotive product - it's not about us saying, 'This is a good hotel', it's about peer reviews - both good and bad. We have to be clear about the product, because otherwise it achieves a short-term sale."

With hundreds of thousands of email addresses on its databases, the vast majority of which have been generated from the sites rather than through third-party activity, it's somewhat surprising that email marketing is an area that Walls admits is still in development. The database of Hotels.com, for example, is used more to generate electronic vouchers offering discounts to individuals after certain purchases. "Our definition of CRM is to solve customers' problems and generate loyalty this way. Email does play a role in this, but newsletters, for example, are not a major part of our marketing activity - the functionality of our sites is ultimately more important."

To this end, behavioural targeting is set to play an important role in terms of enriching the customer experience and it's an area Walls is considering for future investment. Expedia currently works with behavioural targeting provider Omniture and Walls says the brand has achieved "reasonable success" from trials so far.

"Rather than just serving banners out to people, we can do so based on their past behaviour," he says. "It's a trade-off between cheap distribution of banners, and low cost-per-thousand rates, to no degree of targeting. We've found some interesting middle ground and the medium is working for us as we are delivering content to the right person at the right time more often than most. The previous approach was wallpapering, blasting everyone and hoping for the best, and for those who don't want to receive the content, it can be a pretty bad experience."

In mid-January, statistics from online research service Hitwise revealed that Expedia.co.uk lost top spot to Thomson Holidays in terms of the number of weekly website hits achieved. With the online travel industry expected to be worth more than £33bn by 2011, according to figures from Euromonitor International, the stakes, and the rewards on offer, can only get higher.

POWER POINTS
- Expedia.co.uk and Hotels.com have invested heavily in search marketing
- Expedia is testing how offline DM can increase online activity
- Content and website usability are vital in an industry that often engenders low levels of customer loyalty

WALLS ON...

Behavioural targeting: "We'll develop our use of behavioural targeting. Rather than serving general banners, we can be more targeted and serve them based on past behaviour, whether in relationship to our site or another one."

Mobile search marketing: "There remains some doubt about the way the technology platforms will develop and deliver. The more there are, the more complicated it gets. It's at an acceptable stage, though, and offers another route to consumers."

Social media: "It's certainly an opportunity, but people use social media for reasons other than receiving our marketing messages. There's still an element of the unknown involved and it's an area we are treating with caution."

Digital direct: "I don't subscribe to the idea that digital and direct are separate. If DM means an engagement between a brand and its customers, then in our view that's what digital's about - we can respond to a customer's specific requirement."