Special Report: Direct Marketing - Client Champions

Its ability to precision target potential converts segmented by age, income or geography has inspired some clients to spend most of their budget on direct marketing, Glen Mutel reports.

When times are hard, advertisers have to justify every penny they spend and pressurised marketing directors become reluctant to use their money merely to remind the public of their brand's existence.

They instead turn to direct marketing, which offers them accountability.

But, whereas once advertisers would divert their budgets back into brand activity once the recession retreated, today the issue isn't so simple.

During the past decade, the rise of response marketing has changed the culture of UK advertising. Accountability is becoming a permanent aspiration of an ad community harried into caution by fear of recession.

It's no surprise, therefore, to see many clients keeping faith with response marketing, often at the expense of pure branding executions.

Often, the need for response-driven marketing is dictated by sector.

For example, no matter what the climate, DM will only ever play a small part in the marketing strategies of FMCG brands or retailers. But, for financial services advertisers under pressure to hit sales targets, precision-marketing techniques are an absolute necessity.

Since its £10 million launch in 1999, the credit card company Morgan Stanley has relied on a combination of DM and the internet. And, between 2002 and 2003, the company increased its DM spend by a third, according to Thomson Intermedia.

But, overshadowed as it is by its big-name rivals, shouldn't the company be more worried about awareness?

No, Patrick Muir, Morgan Stanley's head of marketing, says. "With DM, we're able to target only those who have an affinity with our product. This cuts wastage, something that you can't really do with broadcast media."

Like Morgan Stanley, many advertisers are attracted to DM because, through increasingly sophisticated data segmentation techniques, it allows them to focus on likely converts.

This fact is invaluable when budgets are stretched and the market is crowded. It's also useful to advertisers such as Telewest and ntl who need to play to their geographical strengths. The cable operators are only able to service households in certain areas of the country, so segmentation is crucial.

"DM is our best tool for getting the right message to the right person," Sarah Wood, the head of marketing for Telewest Broadband's consumer division, says. "In a rapidly changing market, you need to reach people who you think will be responsive. DM also helps us to talk to these people at a time when our product is going to be most relevant to them."

In 2003, Telewest more than doubled its DM spend to almost £12 million.

During the same period, ntl tripled its outlay to more than £17 million, although it claims that its current DM spend is actually around £30 million, half of which goes on direct mail.

Ntl does have a history of brand- awareness marketing. It most recently went in for football sponsorship - Aston Villa, Newcastle, Rangers and Celtic have all competed with the ntl logo on their jerseys.

However, ntl's marketing director, David Meadows, no longer feels there's a place for this strategy. "Think of the millions it costs to sponsor football teams in areas that can't even receive my service," he explains. "What does that do for my business?

Similarly, national TV and press are not effective for us as a business.

When I spend a pound, I need it to generate interest. We've put a lot of investment into data segmentation and we're seeing better results because of it."

Like ntl, the car insurer Green Flag, part of the Royal Bank of Scotland, has made the decision to focus solely on DM. When it launched in the mid-90s, the company concentrated on raising awareness and was the first sponsor of the England team. The company has now re-emerged as a response-driven brand.

"There's still a latent awareness that Green Flag sponsored the England team," the marketing manager, Justin Skinner, says. "But now we're going to make sure we've ticked all the DM boxes. We need to build our profitability before we can identify a market opportunity to push the brand. We're cautious and we're not going out with a massive brand spend just to get a couple of extra customers."

During the past few years, Lexus and its direct agency, Partners Andrews Aldridge, have specialised in the type of high-value acquisition and retention mail-packs that awards show judges seem to like. The company has recently increased its marketing budget and, encouraged by its experiences with the medium, has committed a large percentage of it to DM.

However, it hasn't abandoned brand awareness. Lexus believes that above- and below-the-line executions should work in tandem. The company's CRM and database marketing manager, Matt Button, feels that his direct executions should also fulfill a brand awareness function.

"Our agency is able to do all that advanced and clever data stuff," he explains. "But it also keeps true to our brand values, which is absolutely essential as we don't enjoy the heritage and residual knowledge our rivals do. All of our communications have to reflect what our brand is about."

Large-volume blanket mailings are out of the question for Lexus, because of the expense. But high-volume cold mailing still goes on, much to the disgust of the British public.

Would this ever dissuade an advertiser from turning to direct?

"People who respond to our mailings don't consider them junk," Skinner asserts. "It's only the stuff they don't respond to that's junk."

"Some businesses have clearly found an economic model that allows them to send these huge mailings, otherwise they just wouldn't do it," Button adds. "We never use direct mail as a straight form of acquisition. We get our leads from elsewhere and then build on them with mail."

Lexus is one of many brands that have proved that DM need not be bland and intrusive. And as newspaper circulations dwindle and TV audiences get stretched over more channels, targeted techniques such as this will seem more like a worthwhile use of a marketing budget.

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