The move emerged at this week's party conference, at which Tony Blair attempted to unite Labour ahead of the next election.
Matt Carter, the Labour general secretary, told the party conference in Brighton: "The era of the one-size-fits-all campaign is over. Our strategy is now focused on the individualised, personalised, targeted campaign."
Although no final decision has been taken on the ad budget Labour's agency, TBWA\London, will employ, it is likely to be less than the £5 million the party spent on ads at the 2001 election.
Instead, Labour will spend much more heavily on direct mail, starting with a blitz of one million voters in marginal seats across the country this week. The letters were produced in-house and Labour has made no decision on whether to recruit a direct marketing agency before the election expected next May.
Labour has opened a national communications centre in Newcastle, which will identify issues of concern to local communities and then communicate with key groups of voters.
Carter said traditional methods such as advertising and party political broadcasts will still have a role to play and Labour would build on its successful 1997 and 2001 campaigns. But he added: "We need to be aware that the world has changed since. At a time of lower turnouts, we need to do more to communicate with people on a one-to-one basis."
The 1997 election is likely to prove the high water mark for ad spending.
Labour's budget was £7.3 million and the Tories' £13.1 million. Officials in both main parties believe the traditional heavyweight campaigns at elections are less effective at a time when voters are sceptical about politicians' claims.
They think tactical ads are more effective in the current political climate.
Another reason for a squeeze on ad budgets is a legal spending limit of £15 million for each party at general elections, which took effect in 1997.