With their budgets slashed and added pressure to turn in positive results, marketing departments everywhere shifted expenditures in search of higher ROI in 2009. The trend was decidedly towards online media. Especially email.
Surveys indicate this trend will continue in 2010. A DMA benchmarking survey found 70% of marketers plan to increase use of email this year. Of those, 51% said they would do so at the expense of other media.
But that strong shift appears to be setting up a big opportunity for savvy tech marketers this year – in one “old school” marketing channel that has fallen out of favor.
Of the media cited as likely to lose budget to email in 2010, the DMA found “direct mail will be the biggest ‘loser’, especially in B2B environments: over half of marketers investing more in email will take money from the direct mail budget.”
But that might not be a wise move.
“Yes, email is cheaper, but that doesn’t mean it’s always better,” says Kevin Miller, president of Frost Miller Group, an integrated marketing communications firm. “Email is particularly effective when the recipient knows the sender. When emails are sent unsolicited, though, their open rates drop dramatically.”
In fact, a recent survey published in DM Bulletin showed email open rates dropping by more than 25% a year. As it is, the open rate in the technology sector is only 15%, according to Constant Contact’s analysis of more than 200 million customer emails. So 17 out of 20 email recipients in high tech aren’t even looking at the emails they get. “This is less a symptom of ineffectiveness as it is of overuse,” says Miller. “As more marketers buy email lists and use them for prospecting, more people choose to hit delete since they don't know the sender.”
As a result, email ROI is dropping. According to the DMA’s latest “Power of Direct” economic impact study, email ROI was $43.62 on the dollar in 2009, down from $44.93 in 2008. It’s expected to dip again in 2010, to $42.08.
And while that’s nearly three times the ROI delivered by non-catalog direct mail – $15.22 in 2009 – direct mail continues to drive far more sales. Commercial e-mail drove $26 billion in sales in 2009 – down from $26.4 billion in 2008 – and is projected to drive $27.9 billion in 2010, according to the DMA. In contrast, direct mail drove more than $675 billion in 2009. So the ROI advantage in email comes entirely from its low cost, not greater sales.
And because email marketing is so cheap, any significant shift in funding toward email creates an exponentially greater increase in volume. So as long as this trend continues, we can expect to see email open rates and ROI drop with increasing velocity.
With this explosion of email at the expense of direct mail, some see more opportunity in the latter.
Because of the huge drop in direct mail (down 27% in Q3 2009, according to direct mail tracking firm Mintel Comperemedia), prospects are much more likely to read the physical mail they do receive. “With fewer direct mailers crossing prospects' desks, those that are created can really stand out,” says Miller.
“Although much B2B lead gen has moved online, direct mail is still very effective,” says Ed Gandia, a copywriter serving the software industry. “In fact, in working with clients on lead generation strategy and campaigns, I’ve found that response to direct mail campaigns can sometimes be higher than that of e-mail. Also, I find direct mail to be extremely effective in lead nurturing efforts – often much more so than e-mail.”
“Lately, direct mail has been in a bit of a decline, partly because of the economy and partly because email marketing has made inroads,” says legendary software copywriter Ivan Levinson. “My own feeling is that direct mail will be making a huge comeback as spammers continue to destroy a legitimate marketing channel.”
The greatest gains, however, will most likely be made by astute marketers who successfully integrate direct mail – and other channels, like print advertising – with email. As noted in the DMA study mentioned earlier, “some 95% of those marketers who measured the outcome from using email together with direct mail reported this integration as a success.”
So to increase sales and market share, perhaps the best strategy right now is to use direct mail where email is weak – in reaching new prospects – while everyone else is trying to use it for everything, just to save money. As Bob Bly, author of The Complete Idiot’s Guide to Direct Marketing, says, “When you’re doing the opposite of your competitors, you stand out more.”
