FMCG brand marketers have historically struggled to see a role for direct marketing in their communications mix. Most have little experience of DM and believe that it is best used on high-ticket items such as cars, holidays and financial products. Their argument has invariably been: "How can I make it pay on a high-turnover, low-margin product?" Things haven't been helped by Heinz's much publicised and disastrous foray into direct marketing in the 90s, when it switched its above-the-line expenditure into a consumer magazine with tailored coupons. At the time it was heralded as a new dawn in DM. But shortly after it was lambasted as a dreadful mistake that proved that DM and FMCG were incompatible.
More recently, marketers have been forced to revisit their attitudes.
One big challenge is that, as media fragments, it becomes harder to get your message across. This is compounded by the ever-increasing power of the major multiple grocers, who control every aspect of a brand's message at point of purchase. What's more, the amazing success of Tesco Clubcard has awakened interest in DM among FMCG marketers. Indeed, it could be argued that Clubcard is one of the most successful marketing tools of the past decade. But perhaps, most importantly, a number of important developments mean that FMCG brand marketers can now see a pay-out proposition from direct marketing.
First, FMCG direct marketing has proven cut-through. Research we have commissioned from Information by Design clearly indicates that FMCG direct mail has much higher awareness rates among recipients than traditional DM; in some instances as high as 60 to 90 per cent. Likewise, we can show from a five-year tracking study that recipients of direct mail not only buy more of the specified product, but that the product's brand equity scores improve dramatically. So not only is DM doing an effective selling job for FMCG brands, it is also delivering on information and image enhancement.
Second, everyone is becoming cleverer with targeting. A few years ago, the favoured argument was that you should concentrate on your most loyal consumers. However, a number of recent papers (such as Reinhartz and Kumar on Customer Loyalty) have questioned this. These thinkers believe that you should instead investigate consumers who have the propensity to significantly increase their purchase level of your brand. That may well not be your most loyal consumers. Of course, you cannot take loyal consumers for granted and you still have to consider how you are going to prevent them lapsing.
Third, there's a growing recognition that direct marketing is not necessarily a lifelong commitment. Perhaps you can get your best return by concentrating your activity on a lifestage such as the birth of a child or a house move.
Direct communication at this time, when people are often susceptible to re-appraising their brand relationships, can yield spectacular results - as indeed Colgate could testify. The brand had undertaken a lot of work in targeting pregnant women who are interested in both extra dental care during pregnancy and appropriate tooth-brushing for their new baby. The comparative low cost of one or two mailings can lead to a brand switch and the resultant lifetime value benefits for a brand.
In addition, we are no longer limited to high-cost routes such as direct mail. The advent of e-mail and SMS has attracted even greater attention from FMCG marketers who, thanks to low unit costs, can see yet more ways of generating a return on direct marketing investment with the added benefits of interaction and immediacy. Sadly, e-marketing has rapidly become associated with spamming but, used properly, it need not be intrusive and unwelcome.
Drinks brands such as Jack Daniel's have tested e-marketing with spectacular returns. Likewise SMS messaging is used extensively as a competition entry route by numerous brands, especially at the more youthful end of the market.
And both of these channels have yet more untapped potential for the intelligent brand marketer outside the realm of promotions.
Unfortunately, not all FMCG sectors can make the most of the new-media opportunities. Brand owners in product categories such as household cleaning argue, quite rightly, that consumers are not interested in having a relationship with them. But even if consumers don't want relationships with them, they are still happy to receive the occasional mailing if it's relevant to their life. It's all about timing. For example, when someone is moving house, a mailing on cleaning products is bound to be of interest. It's pretty obvious stuff, but seems to escape many.
So FMCG marketers are seeing DM in a new light and many such as Diageo have made a serious commitment to it in terms of expenditure. The true attraction, of course, is that DM is a way to collect more information on consumers. In the past, the cost of collecting, holding and using data on low-ticket items couldn't be justified but, as database build and maintenance costs have fallen, information gathering can also generate a return. As a result, we can communicate with segments of our consumer base in the most appropriate and effective ways such as purchase incentives, coupons or information at appropriate times. The potential for DM is endless.
Or is it? Clever marketers ensure that consumers get only the information they want and no more. To do otherwise is to turn them off and transform Permission Marketing into Submission Marketing. Some of the traditional and high-volume direct mail users, especially the credit card companies who repeatedly send consumers untargeted offers without any real understanding of their motivators, could learn a trick or two from the new generation of FMCG mailers.