Marketing Rules!

Is direct mail dead?
Judging from the cover of “Mail” magazine pictured above, gross expenditures by advertisers are spiraling downward. The causes for this slowdown in direct mail are a weak economy, high costs, long response times, and competition from other advertising alternatives.
Direct mail has followed the trajectory of newspaper and TV advertising expenditures: these traditional media are all experiencing an unprecedented weakness. Some of this weakness is structural and unrelated to the current economy. Classified newspaper advertising, for example, may never rebound even if there is a sharp upturn in the economy. The ability of free online classified advertising (i.e., “Craig’s List”) has greatly reduced the number of classified newspaper ads.
Similarly, online advertising is making a sharp dent in direct mail advertising. Consider some of the advantages of Internet advertising over direct mail:
• Internet advertising can go from idea conception to execution to delivery in a few hours to a few days. Planning and producing materials for a direct mail campaign can take from a week to several months.
• Feedback is almost instantaneous for an Internet campaign. Send out emails and within a couple of days you’ll see your response. Put up a Google Adwords campaign and you may have your first results in a day or two. You can see who is responding to your banner ad in minutes or hours. If your response is not what you want, change your ad! Change your offer! It can all be done with a few clicks of the mouse. In contrast, you have to wait weeks to check the results of a direct mail campaign. Then, changing the campaign can be a lengthy and costly process.
• Costs are probably also lower for Internet advertising. Because feedback is so fast, if an Internet campaign is not working, it can be modified or discontinued on a dime. In contrast, a mail campaign cannot be modified so readily. Sure, you can test direct mail ideas (and we’re a big advocate of testing). But testing does slow down the whole mechanism of getting a campaign in working order. And what if competitive pricings or competitive offerings change while you’re in the midst of planning and designing your creative campaign? It’s not clear how to react to a competitive challenge in the midst of testing or rolling out a direct mail campaign. But on the Internet, a competitor’s offer can be matched right away. A competitor’s new creative thrust can be countered swiftly. If time is money, direct mail is costly.
• The success or failure of a direct mail campaign is based on three factors: the list, the offer, and the creative. Of these three factors, the list is the most important. A responsive direct mail list of current customers is the golden standard. If you send a good offer to that sort of list you will usually have a very profitable mailing. Similar factors apply to Internet marketing to a good email list. If you have a house email list that you advertise to judiciously, that you share information and give good offers to, you will probably achieve the same type of positive response that a good direct mail list brings. Even though Internet advertising does not have an advantage when it comes to customer lists, it can pretty much hold its own with direct mail.
Given these advantages of Internet advertising, are there instances when it is more appropriate or even better to consider direct mail advertising? Yes, but… There is a vicious cycle at work here for direct mail advocates. As Internet advertising becomes more important, consumers and business people tend to rely on it more for making purchasing decisions. However, consider:
• Internet advertising comes with its own set of problems. For instance, we are big fans of Google and Yahoo advertising to reach an audience that cares about your product. However, popular categories can be prohibitively expensive to advertise in. Competitors can try to sabotage your advertising by clicking on your adwords (yes, I know there are built in safeguards, but they don’t always work). The whole process of executing advertising on the Internet (except for large advertisers) can be frustrating: it’s often difficult to talk to a human on the Internet advertising side.
• Competition may be lessening on the mailing side of things. As mailings go down, readership of your direct mail ad may go up. Today, there is not as much clutter in the mailbox: your catalog, your direct mail piece, your postcard, has a much better chance of standing out. And we know from surveys that most mail (85%) is opened. Email marketers salivate at those numbers. How many email ads do people really click and read?
We do have a sense of the answer to this question. Our email newsletter is opened by 70% of people we sent it to on average (because we have weeded out bounced emails, this percentage is now closer to 90%). Yet our emails are sent to a an opt-in list of people who say they want to be contacted by us. We have worked for other companies who have purchased email lists and have open rates of 3 or 4 percent. The bounced rates for some purchased lists (“bounced” means the email never reached the mail box of the intended recipient) can be greater than 35% on some widely distributed purchased lists. From personal experience and my reading of the literature, open rates vary enormously, but a good starting point is around 30 percent. (If any readers have better information, please let me know). This compares unfavorably with direct mail’s 85% penetration.
For those of you who want more information about how direct mail compares with online per click advertising, please click on this interesting article from Todd Butler or Butler Mailing Services.
• Finally, a well-written direct mail article can capture your attention and imagination. It is a tactile sensation: you can hold direct mail in your hands and take it with you. It doesn’t have to compete on a computer screen with other applications, news, mail, work, and projects waiting to be done. Creative copy, art, design, and photography can communicate in a holistic way to enchant, delight, encourage, and convince a reader that he or she wants to buy a particular product or service.
At Raphel Marketing, we still recommend direct mail as one of a number of advertising solutions for our clients. However, we think all our clients should have Internet marketing as part of their marketing mix. What may be more important than the exact percentage of media mix is to make sure the business’ image and brand is consistent: that the customer know the best qualities of the business.
We’d be interested in hearing your perspective on direct mail versus Internet advertising. Send us your comments at neil@raphel.com
Thanks!

If you’re not familiar with LinkedIn yet, it’s a social networking site with the overt business purpose of helping businesspeople meet and communicate online.   The very popular Facebook was developed to make more purely social connections, but recently, it has begun to be used for some business purposes, too. We’ll examine Facebook in an upcoming issue of the Raphel Report.
You probably have received an invitation from me to join my LinkedIn network (sorry if you didn’t – if you want to be part of my LinkedIn network, email me and I’ll add you to my LinkedIn contact list).
Signing up is a simple process. It becomes more time–consuming as you fill out more LinkedIn forms. Giving more information seems desirable at this site because you are letting other people know about your business. While I probably wouldn’t be bothered filling out my favorite musical selections at Facebook, I took the time to put in some more detailed information about our company on LinkedIn because I knew other businesspeople would be seeing my profile.
For a long time I resisted sending LinkedIn messages to my contact list, thinking that people may view the invitation negatively. When I finally invited everyone on my contact list (which I imported to LinkedIn from my Address Book on my computer – a very fast process), the replies were very encouraging.
Many people actually thanked me for inviting them to be connected with them on LinkedIn (“invitation” is a really nice phrase – sounds like a party). A couple asked how I knew them, and several started business conversations with me. Nobody seemed offended for the invitation. Out of 500 invitations, a little over 90 accepted the invitation to become connected on LinkedIn. I don’t know how a 18% acceptance rate compares with other people’s experience, but I was happy to have so many new LinkedIn contacts.
Another feature of LinkedIn is a place for recommendations, the cyberspace equivalent of testimonials. I received an unsolicited very nice recommendation from Jill Ojserkis (thanks Jill!).
You can also send invitations out to members of groups that have some connection to you. I’m going to try some of my college and law school classmates (Swarthmore 1973, University of Texas Law School 1978) to see if I can drum up some more LinkedIn connections. Other people you can contact include colleagues at companies you’re working at or have worked for.
Another LinkedIn feature is LinkedIn Answers, which is basically a business forum where members help other members with business questions. There are a other applications that work with LinkedIn, including Polls, which lets you ask questions of your connections, a blog link, a way to add a PowerPoint presentation to your profile, and even a way to find job listings in your area.
Right now I just have a basic account at LinkedIn. An advanced account that gives more opportunities to form a network costs about $30 per month for the first upgrade from the free account. An advanced account lets you review profiles of people not in your network and has more features. Because my experience with LinkedIn has been so positive so far, I am considering trying a paid account.
If any of you has more information about LinkedIn that you’d like to share with our readers, please let me know. I’d be especially interested about hearing ways you have used LinkedIn to increase your business.

We love working with business authors. In recent years, we have published or distributed books by Harold Lloyd, Don Gallegos, Rich George and John Stanton, Feargal Quinn, Al Norman, Brian Woolf, and several other business people.

We have been involved in book projects in many different ways. Some projects are already done and we just help the authors market, warehouse, and ship their books. Other times, we become deeply involved in the cover design, layout, writing, editing, and all the other aspects of making a book come to life.

These days, digital printing gives authors new opportunities to cut the costs of their books by having shorter printing runs. In addition, digital printing lets you have final copies of your books less than two weeks after you finish the editing process.

Please contact Neil Raphel at 802–751-8802 if you want more information about how we can work with you to produce or market your own business book.

The web is changing. Instead of being a grouping of “information” sites, it’s starting to become a grouping of “participation” sites, where people can express their comments or opinions about a wide variety of topics.

This new use of the Internet is called web 2.0. It comprises blogs (like the one you are now on!), podcasts, videos, wikis (such as wikipedia, where users can add their own entries).

This month’s Raphel Report discusses a project we are working on for our hometown of St. Johnsbury, VT. We’re trying in our small way to bring web 2.0 to our town. We’re including blogs and videos on our site. We’re going to cover local events with photographs and videos. If we’re successful, we think maybe other towns in Vermont will join web 2.0. Then we can all link up and provide another level of “participation” for locals and visitors to Vermont.

When you are a writer of advertising or marketing material, it’s always worthwhile to see research into how people actually “read” your copy.

Some of the best research into “eye tracking” has been done by Siegfried Vogele, Dean of the Institute for Direct Marketing in Munich, West Germany. His groundbreaking study on how the eye actually reads advertising material was first presented in 1986 at the Montreux International Direct Marketing Symposium.

His conclusions, shown in this visual, are quite interesting and show that people want to know who the letter is from and what the PS contains before they read the body of the letter.

More recently, one of the world’s best usability experts, Jakob Nielsen, showed how the eye takes in copy and visuals on the Internet. This article presents Nielsen’s interesting research, and some of the comments that accompany the article are quite amusing.

In early February, Kroger, one of the nation’s leading supermarket companies, began offering personal finance offerings. According to the Lexington Herald-Leader, “customers can now sign up for a mortgage on a home equity loan, sign up for identity theft protection, purchase pet insurance or get a credit card.”

The chain has recently offered gasoline, DVD rentals, and health clinics. Merchandise offers include toys, furniture, and lawn and garden products.I have a couple of reactions to Kroger’s latest forays.

The Good: Using customer information gathered from frequent buyer cards is an excellent way for a supermarket to expand its offerings from grocery items. Tesco in Great Britain and Costco in the United States are great examples of using consumer information in novel ways.

Also, because of Wal-Mart’s incursion into the grocery industry, supermarkets have to learn how to fight back. One way: to use customer information to sell items (such as financial services) that Wal-Mart might have a tough time imitating. Wal-Mart just recently failed in their efforts to offer more banking services. Also, by selling items such as toys and furniture, supermarkets have less dependence on grocery items as their sole source of bottom line income.

The Bad:

1. Privacy: Supermarkets have to be careful about not using frequent buyer card information without customer permission. Supermarkets must recognize that consumers are starting to take privacy scares to heart. Supermarkets must not give information to third parties without their cardholders’ permission. I don’t know if Kroger will be giving financial information to third parties, but they should only give information with customer approval.

2. Loss of focus: Supermarkets are food experts. They can compete in other areas, but they have to make sure that their food quality or focus does not suffer. If customers lose faith in a supermarket’s food selection or pricing, then they will stop going to that supermarket. All the variety in the world will not save a supermarket with poor food quality or selection.

What are your thoughts?

I enjoyed the premise and execution of “The Truman Show,” the 1998 Jim Carrey film in which an innocent Carrey is the unknowing subject of a 24/7 TV show which an adoring public watches with unabated curiosity.

In the latest version of life imitating art, I woke up with the “Today” show this morning doing a feature on Justin.TV, the brainchild of a San Francisco group of twentysomethings that puts Justin up live up on the web 24/7 for a fascinated group of voyeurs. Technology companies and others are waiting in the wings for the birth of a new expose-your-navel fad to be the next YouTube.

I guess there are marketing possibilities both online and elsewhere (can you imagine a cereal company paying Justin for product placement – why not if he can get on the “Today” show?)

The best thing about this spectacle being on the Internet is that people can decide for themselves whether to watch it. But for me, this sort of spectacle has something distinctly unappealing about it. It is a parody of “reality” TV, which in turn is a parody of real life. It makes me feel a kinship to the Luddites, a social movement which disapprove of advances in technology. To riff on Timothy Leary, it makes me want to tune out, turn off, and, especially, drop out. At this point in my life, a blog is enough public exposure.

Stan Golomb died a few ago but his ideas, energy, enthusiasm, and stubbornness still inspire me. Stan worked with drycleaners for many years, helping them through incentive programs, games, postcard mailings, and innovative marketing techniques to “Find, Capture, and Keep Customers” (the title of one of Stan’s books).

I was reminded of Stan recently while watching Elizabeth Edwards describe how she would continue to campaign with her husband despite stage 4 breast cancer. Stan Golomb battled heart disease much of his adult life (he even had a heart transplant at age 63!) but despite poor health he always made business fun, exciting, and profitable.

Here are a few of the marketing lessons I learned from Stan Golomb:

• If you have a bricks and mortar business, think of your market area the way a farmer thinks of his fields:

1. Calculate your yield (of customers) per acre. Find out how many people live in the neighborhoods surrounding your business and how many of those people are potential customers.

2. Do some test marketing to decide which fields best support your product.

3, Use mapping and demographics to find your best customers and continue to advertise to those customers.

• People love games and gimmicks. For drycleaners, Sam ran “jackpot” programs, “blackjack” programs, and “silver eagle” programs. In the blackjack program, when you went to the drycleaner, you rubbed off a spot on a postcard you received in the mail to see what hand you had. Various hands had different discounts. An 18 received 10% discount, a blackjack a whopping 40% discount.

• Stan counseled drycleaners to collect birthday information on all their customers…and then reward their customers on their birthdays.
Stan constantly would find new ways for his clients (and drycleaners throughout the country signed up for Stan’s programs) to keep in contact with their customers through direct mail and in-store advertising.

The incident that most touched me was a plan Stan concocted for keeping in touch with people after his death. About a week after Stan died, I received a letter. The one line letter said simply, “Thank you for being my friend.” It was signed “Stan Golomb.”

For direct marketers like us, mass media advertising on TV has always seemed mysterious. Why would a marketer pour a lot of money into TV if there is no way of selecting your audience? Isn’t there an alternative way to price TV spots other than the rate cards of networks and cable companies?

The pricing and distribution of TV commercials could change dramatically in the near future, and Google (yes, that Google) could change it.

Google has already changed the marketing paradigm of the Internet. Google’s AdWords (and similar programs by Yahoo and other search engines) have outpaced pop-up and banner advertising in popularity. Firms are spending countless hours figuring out which keywords to bid for to achieve prime placement in Google’s search results advertising space.

Now, Google is seeking to crack the $74 billion TV advertising world with programs that offer “mass personalization.” The Wall Street Journal says that Google is working with a California cable provider to offer commercials that have been sold to advertisers by Google. According to ZDNet, Google is also recruiting software engineers for television applications.

What would a world of Googlized television advertising bring?

• More personalization. Google’s data capabilities may lead to ads being personalized by subscriber demographics. So if your household is in a high income zone or subscribes to the tennis channel, you may see more ads for tennis racquets or tennis vacations than your downscale neighbors.

• More bidding for ads: Google is experimenting with an auction based system for selling its advertising (similar to how it sells AdWords on the Internet). Ad space may go to the highest bidder. An auction system would bring a new element of flexibility (and perhaps more instability) into TV commercial pricing models.

We find these developments exciting. The one downside is that we have to find a way to satisfy people’s notions of privacy while still using demographics to target ads. I don’t want to turn a TV on in the morning and when it’s time for a commercial hear the announcer say,

“Neil, because you have a wife and two children you should seriously consider our accident insurance program.”But I like to play card games, especially bridge. I might not mind a commercial for a duplicate bridge instructional camp to improve my spotty defensive play. It’s a fine line between targeting and intrusion. Let’s hope that Google will get it right.

What do you think of Google jumping into the TV advertising medium? Is this a new advertising arena for direct marketers, or will the coming of Google make more money for Google and less for traditional advertising companies?

Take a look at coca-cola’s web site when you have a chance (http://www.coca-cola.com/).

It may be me, but I think something’s going wrong here. It’s like some deranged 20 something year olds started playing around with web development tools and tried to create a site. The graphics are interesting, but the site doesn’t make any sense.

To give just one small example, when you finally get into the site (which takes a while to enter even on my fast connection), you’re connected to The Coke Show. I clicked on “See the entries” even though I didn’t know what the entries were for. Then I clicked on the mini-challenge, “The Coca-Cola Company Theme Song” and I clicked on “See the entries” again. It first told me I had 54 days to enter my original theme song and then it said 53 days. There were no entries to see. I tried some other categories and they didn’t make much sense either.

I thought it was just me until I showed the site to 10 college students. None of them could make heads or tails of it and all expressed frustration with the site.

Where is Coke going with this. Shouldn’t the #1 brand in the world be able to create a functional website?

For a contrast, visit the www.toyota.com site. A functional site that is anything but dull.