Ruth P. Stevens Articles and Columns: IM Press (Interactive Marketing Press)
World Direct Marketing
USA
Level of DM
Direct marketing is huge in the U.S., and, thanks to the Internet, still growing as both a sales channel and a marketing communications tool. According to the Direct Marketing Association (DMA), direct marketing driven sales reached $2,058 billion in 2008, and should grow 6.8% annually through 2012. U.S. firms spent $177 billion on direct marketing to promote their products and services, which amounted to 52% of total U.S. advertising spend. As a whole, direct marketing activity represented 7.8% of U.S. employment, and 9.9% of GDP (gross domestic product).
DM associations
The grand-daddy trade group in the U.S. is the DMA, founded in 1917, and now with 3,600 members from the U.S. and 48 other countries. But there are other important organizations supporting direct marketing, among them:
- Association for Postal Commerce www.postcom.org
- Regional trade groups like New England Mail Order Association www.nemoa.org
- Supplier groups like Mailing & Fulfillment Services Association www.mfsanet.org and Envelope Manufacturers Association www.envelope.org
- Local professional associations in over 20 areas, such as the Direct Marketing Club of New York www.dmcny.org and Chicago Association of Direct Marketing www.cadm.org
Media
Direct marketers use every conceivable medium to communicate and sell. In the U.S., the top communications channels for direct marketers are telephone ($43 billion invested in 2008), direct mail ($35.2), non-email Internet marketing ($24), DRTV ($23), and catalog ($21).
The top DM sales channel in 2008 was direct mail ($548 billion in sales), followed by Internet ($482), telephone ($363), newspapers ($166), DRTV ($155) and catalog ($155).
Industries
Regulation
The direct marketing industry in the U.S. is under intense pressure on several fronts, the most critical being
- Privacy concerns. The “Do Not Call” legislation passed in 2003 has resulted in more than 145 million phone numbers that may not be called for commercial purposes, unless a pre-existing relationship exists. The list grew 19% from 2007. Now the DMA is actively fighting 15 “Do Not Mail” bills that have been introduced in 12 state legislatures.
- Postal rate hikes. The USPS continues to persuade Congress to permit price hikes, which adds a debilitating layer of expense to mailers.
- Data security. As consumers worry about identity theft and fraud, direct marketers are trying to influence legislation so that it does not impede the efficient flow of data for marketing purposes.
Keyman in Direct US Marketing: Bill Williams, Harry & David
Professional background:
Bill Williams began his career right out of Oklahoma State University at Neiman Marcus, where he rose over an 18-year career to become head of the Direct Marketing Division.
Current occupation:
Williams joined Harry & David as CEO and President in 1988. During his 20 years of management, the company has grown organically 5 or 6 fold. Williams also managed their diversification strategy, including the shift to e-commerce, which now takes in more than 50% of Harry & David order volume. Bill and his wife of 33 years, Brenda, have 3 children, and live in Medford OR.
What’s new, and challenging, in direct marketing today
Q: What are the top problems facing U.S. direct marketers?
A: Two points. 1) In these economic conditions, how can direct marketers improve the price/value relationship for the consumer, especially as compared to brick and mortar retailers? Free delivery helps, but in some categories, like apparel, direct marketers are still at a substantial disadvantage. 2) Finding the most efficient mix of catalog, Internet and media advertising has been very difficult for traditional direct marketers. Right now, we are overspending on Internet advertising.
Q: And the top opportunities?
A: The number one strategic opportunity for direct marketers is developing stronger personal relationships with their customers. Amazon is the best at this today. But writing an online product review can’t compare to the depth of the relationship customers have with their favorite salesperson in a store. Another area of opportunity for direct marketers is to reduce the uncertainties surrounding delivery, specifically backorders, substitutions and early or late receipt. Here, too, retail stores have a clear advantage.
Q: What has changed, or not, in direct marketing over the years?
A: As I look back on 38 years in DM I’ve seen the business evolve from black-and-white catalogs, and payments made with checks and coupons, to today’s Internet and credit model. Much has changed, but the commitment to the customer’s satisfaction as the first requirement for success remains the same.
Company Profile: Harry & David
Harry & David is a well-respected brand in the U.S., selling premium fruit, baked goods and gift baskets to over 3 million active buyers. Founded in Medford, Oregon, in 1934, by two sons of an orchard owner, the company now reports revenue of $545.1 million, and ranks #62 on Multichannel Merchant’s list of the top 100 mail-order companies in the U.S. The direct marketing division’s revenues in 2008 were $372.6 million
The company’s mail-order buyers are 80% female, well-educated, and with household incomes of over $100,000. According to Bill Williams, president and CEO, these core customer are in their “key gift-giving years,” ranging in age between 35 and 65. While they are mainly buying gifts, 27% of customers also place an order for themselves. The average order size is $150.
Why has Harry & David been such a success over the years? “Our customers appreciate our high quality,” says Williams. “They also value the convenience of ordering for everyone on their gift lists. And, they find that their friends and family welcome fruit as a gift.” Customer loyalty drives the business, with 70% of sales coming from previous buyers.
Harry & David’s flagship product is the famous “Royal Riviera” pear, grown in their own orchards near company headquarters in Medford. One of their most successful programs is the Fruit-of-the-Month club, launched in 1936, which automatically ships a different variety of seasonal fruit to recipients at regular intervals.
The company has diversified into the retail channel, having opened 130 stores, with revenues of $138.1 million. The stores help reduce the extreme seasonality typical of mail-order gift companies. Further diversification was achieved with the purchase of two other mail-order businesses, Wolferman’s baked goods and Cushman’s citrus fruit.
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© Ruth
P. Stevens
155 East 34th St., New York, NY, 10016
212-679-6486 / ruth@ruthstevens.com