Taking the long view
David Reed, Precision Marketing, 27 June 2008
Could the reduction in direct mail volumes be the best thing that's happened to mailing houses? It may sound perverse but there is a logic to it.
Comment from Steve Williams, sales direct at Adare
As long as most direct mail activity has been carried out using long runs of single message packs, the focus for lettershops has been on how to mass produce at lowest cost. In reaction to increasing costs and falling response rates, advertisers are finally starting to segment and make data drive campaigns. The result is lower volume, differentiated messages at higher frequency.
What that should mean for mailing houses is a realisation of their value. After all, somebody has to ensure the right data is being used, that it is properly formatted to drive digital presses, that litho and digital print elements tie up - and get the whole lot into an envelope and then the mailstream at the right price.
To do this, changes are going to be necessary. Prime among these is having the breadth of technology in place to create segmented mailings. On top of this, new working practices are required to cope with the increased number of set-ups and breakdowns involved.
As Darren Lowe, operations director at St Ives Direct, says: "The whole ethos of customer service is based on flexibility and responsiveness to our clients' changing needs. Lead times are constantly being reduced as target markets and sectors need a more reactive and focused approach."
The historical model of direct mail production was based on a company's pre-planned marketing schedule which factored in month-long mailing cycles.
Competitive forces and consumer behavioural shifts have changed this. Increasingly, companies need to mail in reaction to market trends, competitor actions or customer interactions. That means rapid turn around, rather than scheduled activity.
Lowe notes that specifications are also changing. "The incidence of non-standard mechanical enclosing has risen within our business considerably over the last six months as mailings become varied in design. Our clients are looking for something different, eye-catching or even radical in their approach to mailings," he says.
He adds: "While pricing in proportion (PIP) has most certainly had a significant effect on the industry and the thought process behind the mailing designs, our diversified client base still actively pursues opportunities to deliver a product away from the norm. This invariably reduces the opportunity to enclose via conventional mechanical methods."
Standout may be an important factor in getting an item opened, but it increases the amount of non-standard work involved for the production house. Any unusual paper formats require changes to existing processes.
While that may take time for the lettershop, there is unlikely to be any spare time available in the schedule to allow for it. So suppliers are having to work faster, harder and often for less than they are used to getting from old school direct mail.
That is becoming evident in the demands placed on suppliers by clients. "While the emphasis on cost reduction remains unchanged, there has been increasing pressure on timelines over the past few years, with speed to market becoming a key campaign success factor," acknowledges Nathan Fryer-Jones, business development director at print management house Brightsource.
"The overall schedules for ad-hoc mailings have been gradually reduced, driven by modern working practices and shifting marketing trends. The most common approach to dealing with this issue is to exert increasing pressure on end suppliers to reduce their schedules," he says.
To step out of this ever-reducing cycle, his company has adopted a "lean service" philosophy. With a focus on continuous improvement, waste reduction and process simplification, the goal is to maintain standards while still meeting tight mail dates.
"The old adage of 'speed, quality and price - choose any two' doesn't cut it in today's market. A lean service approach ensures that clients can benefit from rapid speed to market without compromising quality or cost competitiveness." he says.
Brightsource is able to seek out best-in-class partners who have made the necessary technology investments. On top of this, it brings process management knowledge to identify bottlenecks. These have seen ISO standards applied to pre-press, data handling and two-day postage services.
"We were the first print management company to introduce certified pdf workflows and ISO 12647 colour management. Clients receive digital proofs of unprecedented accuracy and colour fidelity that they can trust, and these can be signed off quickly with confidence. This is an example of a smart process that strips time out of the production process," says Fryer-Jones.
With in-house data processing and document composition, outputs are standardised, saving time on reformatting. For one financial services provider with a 1.8 million item monthly mailing, this brought the cycle time down from 17 to five working days.
Downstream access means a two-day delivery can now be provided at Mailsort 3 prices. "This means that many clients can find that their schedules can be reduced with no cost or effort and without threatening the integrity of the production process," he says.
So how are the other 150-plus mailing houses in the UK coping? Lucy Edwards, marketing director at Howard Hunt Group, says: "While the change in direct mail campaigns may have caused difficulties for some mail houses, those with robust systems and procedures should not be badly affected in operational terms. They may, however, need to invest in the technology to accommodate the new trend."
Digital presses are likely to top that list, since they are essential for personalisation. Only with this in place can the front-end work being done be realised into the messaging.
As Edwards says: "With the increase in segmentation techniques to create more targeted communications, mailing houses will need front end software that can cope with complex look-up tables, variable letter text and the technology to personalise a greater area than simply name and address."
That in turn puts pressure on account managers and customer service teams, since their conversations with clients will involve more technical issues than before. Production teams are also having to become more technology-minded, rather than manufacturing-oriented.
That could be seen as threatening, but equally, as Edwards says, "these changes could be viewed as a positive by mailing houses. The quicker turnaround times will require more automated technology, as opposed to human intervention and, after the initial investment, this could be a far more economical solution".
A more fundamental change might be occurring which brings together all of a client's mailing activity into a single stream. Historically, marketing and transaction mailings have been originated, produced and mailed as entirely standalone processes.
With the liberalisation of the postal services market, clients have started to look at total postage costs because of approaches by new licence holders. From this, it is logical that these processes should be considered together.
"We have seen a gradual migration from larger run, single message campaigns into greater data use, relevance and shorter runs," says Steve Williams, sales director at Adare. "We have been supporting that around cross-media and digital output as well as the emergence of TransPromo mailings."
An American term derived from Transactional and Promotional mailing, the simplest form of this technique is the addition of marketing messages in existing white space on bills and statements.
"It is very technology-based, underpinned by front end data analysis and planning to understand what the customer looks like, their transactions and whether they are likely to buy more products and services," says Williams.
One of the pressures TransPromo creates for production houses is around the degree of tolerance to which they can create a mailing. Direct mail can cope with a proportion of items to be spoiled during the production process. Financial mailings cannot.
Williams says his company has no concerns about this transference of standards. "In direct marketing, there has been a tightening of expectations from clients in terms of tolerance. We have been running direct mail campaigns at 100 per cent," he says.
Adare is one of a handful of production houses which operates across transactional and marketing mailstreams. To bring the two together is as much about knowledge transfer between these areas as it is about technology.
Even simple direct mail campaigns can not ignore such developments. The future is undoubtedly in data-driven, customised messages sent at times more appropriate to the customer than to the business. Mailing houses need to figure out how this fits in to their processes and timescales.
