REPORT ON GERMANY: The importance of being direct - For direct marketers, Germany is a nation of restrictive laws and suspicious consumers. So why is the discipline thriving? Robert Gray investigates

Germany is saddled with some of the most stringent legislation related to direct marketing of anywhere in Europe. Despite that, it’s the largest market for direct mail in the European Union with more than DM12.74 billion (pounds 4.3 billion) spent on direct mail in 1998 - over a quarter of the total spend monitored across Europe by the Federation of European Direct Marketing.

Germany is saddled with some of the most stringent legislation

related to direct marketing of anywhere in Europe. Despite that, it’s

the largest market for direct mail in the European Union with more than

DM12.74 billion (pounds 4.3 billion) spent on direct mail in 1998 - over

a quarter of the total spend monitored across Europe by the Federation

of European Direct Marketing.



Germany’s restrictions include strict data protection rules and onerous

competition laws which make it illegal to put psychological pressure on

consumers to buy a product. Under the Rabattgesetz dating back to 1933,

advertisers are prohibited from offering discounts of more than 3 per

cent on goods. This makes price-slashing direct marketing campaigns a

near impossibility, open only to those companies prepared to circumvent

the rules by offering products with different specifications from

normal.



Although that might be an option for car manufacturers, it is hardly

practicable for fmcg brands hoping to stimulate sampling. But there is a

possibility that some of these restrictions will soon be lifted.



’Top companies in the marketplace no longer accept this legislation.



I think the crash of these historic laws is close,’ Johnny Limba, a

managing partner of the direct marketing agency, LPP, says.



Companies such as PolyGram, which is looking to establish a CD music

club in Germany, have complained to the European Commission - which, of

course, is pushing for greater regulatory harmonisation across the EU.

The UK’s Advertising Association has also campaigned against the

restrictions.



But the indications are that change may not come as quickly as Limba

would like and some agencies say the lobby for reform has lost momentum.

However, a group of client companies spearheaded by Visa International

is understood to be making preparations to revive the lobby.



Yet the many restrictions in the German market have not hampered direct

marketing growth.



According to the German direct marketing association, the DDV, direct

marketing has grown at more than 10 per cent for each of the last four

years. DDV’s figures for 1998 put direct marketing spend at DM36 billion

(pounds 12.4 billion), which would suggest that half the adspend in

Germany is now on direct media. This is up from a direct marketing spend

of just DM12.8 billion a decade before.



But to take the 1998 total at face value would be misleading. The DDV

figures embrace press ads with direct response mechanisms and also cover

catalogue marketing - a sizeable element in Germany, which is the

largest home-shopping market in Europe. ’There is a long tradition of

distance selling and mail order in Germany,’ Holger Albers, the DDV’s

general manager, says.



That tradition is now being translated into more direct marketing

campaigns by agencies. Monica Beuners, chairman of the Munich agency,

BAS Direct, says that one factor behind this is that clients are

demanding ever more information on the effectiveness of their

communication. Direct marketing, with its quantifiable response rates,

is well placed in this regard.



Another stimulus to growth is that direct marketing has, in real terms,

become less expensive over the past five years. Germany has always had

relatively high postal costs, but these are proving less of a hindrance

because falling technology costs for database modelling are making

direct mail a more financially attractive proposition. An upsurge in

customer loyalty schemes is also fuelling growth.



’Customer relationship marketing is becoming more of a reality,’

Christoph Stadeler, the president and CEO of Wunderman Cato Johnson

Germany, says.



’More and more sectors are moving from an above-the-line dominated

approach to a more integrated approach.’



Frequent traveller programmes blazed the trail, but other sectors such

as retail, financial services and automotive have followed this

lead.



Kaufhof, Germany’s biggest department store chain, is a good

example.



In November 1998 it launched a customer relationship programme featuring

a store card, supported by OgilvyOne.



’When the task is to attract customers into a relationship programme, I

think the UK might have an edge over Germany,’ Rolf-Dieter Hoelzel,

OgilvyOne Germany’s chairman, says. ’But when it comes to running

customer relationship programmes, where you have the profile of the

people in them, I would say the levels of sophistication are more or

less equal.’



Dieter Zorn, general manager of MSBK Team, believes that despite the

rules on price cutting, fmcg clients are increasingly turning to direct

marketing. MSBK Team is a Hamburg-based agency owned by BBDO and is one

of Germany’s top three direct marketing specialists. Its clients include

Mars Effem, the German petfood division of the US giant. ’The law makes

it difficult for fmcg clients, but a lot of them are coming to direct

marketing now,’ Zorn says. ’They really feel that they can’t win using

only above-the-line budgets.’



There also appears to be a trend towards cross-border campaigns. The

launch of the Euro currency and other moves towards enhancing European

integration are persuading some clients to take a regional view with

their marketing communications. Clients whose European headquarters are

in Germany tend to favour cross-border campaigns controlled by

German-based agencies.



’More and more clients are using below-the-line companies as lead

agencies in the Euro zone,’ Ottfried Fritsch, a managing partner of

Fritsch Heine Rapp Collins, says. By way of example he cites his

agency’s own clients, Electrolux and Sony.



Internet penetration in Germany is, by European standards, fairly

advanced.



In the case of those consumers who consent to supply personal

information, the data collected is proving very useful for

marketers.



However, companies using this data still have to tread carefully, not

just because of the privacy legislation but also because of the

attitudes of German consumers. ’If you overdo the data capture and then

feed back to the consumer what you know, Germans, because of their

national character, get quite suspicious,’ Stadeler points out.



Yet despite consumer wariness and restrictive legislation, the prognosis

for direct marketing in Germany is for the steady growth of the last few

years to continue. And should the Rabattgesetz finally be repealed,

there is certain to be a surge in activity, particularly from fmcg

clients looking to engineer consumer brand switching through enticing,

cut-price introductory offers.



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