Don't stop the press
Precision Marketing Magazine, 19 May 2008
How much would it cost you not to use digital print for your next direct mail campaign? Reversing the usual way of looking at things is important when talking about this new production method. Until about 18 months ago, cost per item seemed to be an impossible obstacle for digitally-produced mailings to overcome.
Compared to the conventional methods of litho printing with laser personalisation, digital carried a cost premium. In the context of direct marketing based on tight cost per response and cost per acquisition targets, this was often too much for marketers to afford.
Things have changed, not least in the current climate. The emphasis now is on cost-effectiveness and return on investment.
Digitally-printed direct mail carries its head high in such discussions because of the unarguable uplift which customised communications have on behaviour. The challenge now is whether marketers can persuade procurement departments to front-weight production budgets to reflect this greater impact.
"We have more conversations around this than any other subject," notes Andy Bailey, sales direct of production house Inc Direct. "Our opening gambit is to ignore the fact that we are a printer."
Rather than resisting the inevitable, this is an important strategy to move the debate away from cost and towards value. "We approach it from a marketing consultancy point of view and talk about how we can help improve return on investment," says Bailey.
As well as digital production, his company offers database management and email broadcasting. By focusing on what the client is trying to achieve, it can suggest the most appropriate solution.
Fully-customised mailings have an important place in this spectrum. As an example, Bailey suggests a wine retailer might drop its bi-monthly 24-page brochure in favour of a segmented mailing that reflected known buying attributes. "If somebody spends £100 a month on Italian reds, don't tell them about French whites," he says.
One travel agency has recognised the value of this approach in its mailings to customers. Where it used to send summer holiday promotions in spring to customers who had taken a winter break, it now uses data triggers to send those same promotions one week after the traveller has just returned. Timing is key.
It might come as a shock to some direct marketers that the correct digital solution might mean print. But there is undeniable value to consumers of having something to hold and look at when they choose.
This is where the debate around how much digital print costs compares to litho has become sterile. What matters is how much extra revenue a customised, data-driven pack might deliver.
Gurdev Singh, managing director of Howitt, agrees: "Obviously, it is moving away from cost per item to ROI. But there are still a lot of volume mailings where it is about cost per item." If a client company is expecting a pre-determined level of revenue to be generated by its direct mail, it is hard to change the thinking away from overall cost per item towards a more segmented view.
"Even there we are able to prove that you can do smaller, targeted mailings. The difficulty everybody has, if a company is going to spend a certain amount on data, analysis and modelling, if you say they can get the same response without using all that volume, they ask why they shouldn't mail the lot?" he notes.
Spending less to get more does not appeal to marketers for whom only more is more. Instead of saving money, they might prefer to spend all their available budget.
Even so, in a growing number of cases, marketing budgets are being segmented to break campaigns up across competing channels and types of approach. If this is a new idea for marketers, then getting it accepted might require new thinking by printers.
"One of the things we are doing for clients is risk-reward. We say, give us the data, we will analyse it and look at where we can get an uplift in the ROI. If the client is spending £1 to get £3, we'll have 50p of that," says Singh.
Digital print may not be able to rely on such radical solutions to get widespread adoption. But this sort of thinking is a long way from cost per item - which is exactly where digital printers want to be.
"The challenge we face is procurement departments. Their job is to say, we want to commoditise this. If they are buying toothpicks and are being offered 1 million at 1p each, they want to buy them at 0.5p. If we can say that they only need 500,000 - but at 1p each - it is the same outcome," he says.
Across the supply chain, this type of shift seems to have become mainstream. As Steve Williams, sales director at Adare, says: "We tend to talk to the client in a consultancy way, rather than a buyer-supplier relationship."
Print on its own is not an enabler of this shift. But driving up response rates so that ROI is optimised certainly is. That means being able to consider alternatives to print, from email to SMS and online.
"If you are just looking at digital colour in comparison to traditional litho, it may be more expensive. But there are soft and brand-related benefits," says Williams. These can only be accounted for within that broad perspective of the whole set of marketing objectives, rather than the narrow perspective which standalone direct mail has historically inhabited.
That may be the way digital print breaks out. If it is seen as being more aligned with one-to-one marketing than with the old model of direct marketing, it can frame the argument about cost in a different way.
As well as requiring a change in the marketing process, this does demand a different approach to how the finance department deals with marketing budgets.
"Clients often have a line in their annual budget for print," acknowledges Lucy Edwards, marketing director of Howard Hunt Group. "With that, they have to meet certain targets, either pounds of revenue or numbers of customers or customers retained."
If a client has got its data in the right condition to enable one-to-one marketing, then the chances are it will also have recognised that higher-value communications have a role with higher-value customers. "You should be looking at the long-term results, not just ROI on one campaign," says Edwards.
If lifetime value calculations are being made as part of customer segmentations, then they should also be applied to the way budget is assigned. "The more you do that, the less important cost per item becomes," she says.
Mike Coveny, consultant director at specialist print management and business communications company AccessPlus, makes a similar point: "A more widespread industry adoption of one-to-one marketing requires more than just technology advances. It also requires a cultural shift in the way some customers approach ROI on direct mail".
"If the total printed volume is less due to the strength of the data mining/segmentation and the response rates rise considerably as a result of a highly-personalised message, then the cost-benefit analysis becomes considerably more attractive for both digital printing and true one-to-one marketing," he says.
The stumbling block he identifies is in the leap of faith this requires. Upfront costs may seem considerable, such as the need to invest in getting data into shape, paying a higher unit cost for digitally-printed items, and the greater human resource involved in managing multi-segment and multi-channel campaigns.
What is striking is that across the supply chain, the argument is about value against cost, rather than quality. Not so long ago, digital print struggled to achieve parity with offset and litho in terms of reproduction values. Not only have presses improved, production houses have also learned a lot about the right way to put together items.
Darren Lowe, operations director at St Ives Direct, says the question is where the crossover point lies. Digital print has a reverse economy of scale where higher volumes make it more expensive. "The crossover point has moved with the advances in the technology and digital should no longer be thought of as just short runs. It provides the opportunity to achieve much more than simply putting a name on something," he says.
His company is breaking current crossover points with its HP Indigo presses.The calculation of where this lies tends to vary according to a client's requirements. "This figure varies from job to job, dependant on run length, colours, amount of variable data, the format and the specific job. Ultimately, the driver is the data and the potential return from a targeted and meaningful campaign," says Lowe.
More than anything else, this is the shift in mindset digital print is bringing about. Direct mail has not been seen as having anything to do with data. Instead, it has been bought as a manufactured product in volumes to fit a pre-determined size of mailing file.
By flipping this around digital print assumes a strong position. If it can deliver better revenue streams, then what each item costs is far less important.
