Neil O’Keefe is DMA’s SVP of Content & Marketing.
A Big Comeback or Apocalypse?
As we enter the New Year, we look forward toward the possibilities of what can be and look back on what was and what could have been. Looking at the 4th quarter of 2017 we see an overall strong quarter for retail sales (+4.9% YOY, the best since 2011). According to a recent article in Fortune, the pendulum has swung from a “retail apocalypse” to “the start of retail’s big comeback.”
In the run up to the holiday sales season marketers step up their spending and there is a notable increase in marketing across all channels especially catalogs and email. However, seemingly every year since Cyber Monday made an impact on retail sales, the trade press writes about the resurgence of catalog marketing. In fact, I was asked to comment on this, as a representative of the Data & Marketing Association, in two news stories in the LA Times and on CNBC. Each story focused solely on catalog marketing with CNBC highlighting the need for improved segmentation for effective catalog marketing, contrasting that against inefficiency in email.
Profitable Does Not Equal Efficient
While neither “Apocalypse” nor “Big Comeback” are likely accurate for either retail or catalog, the need to improve personalization and relevance is of the utmost importance for all marketing channels in an omnichannel strategy. In every interview or speaking engagement I do, I stress the importance of an omnichannel strategy coupled with elevated personalization and relevance in order to increase value. In the case of catalogs, increased costs of paper and postage forced marketers to be more selective in who catalogs were mailed to. Along with the advent of additional channels to acquire new customers, the DMA Statistical Fact Book (SFB) cites that catalog distribution was decreased by ~50% over the past 10 years to 9.8B in 2016 according to USPS.
With the decrease in catalog volume driven by increased costs, there has been an increase in email driven by relative lower costs. While email ROI is exceptionally high, shown in some surveys as high as 4,000%, I contend that email is still inherently inefficient. Not just compared to catalog, but in general. Despite an email ROI of 124% (DMA’s Response Rate Report) email response is just 0.6% from existing customers, in line with all digital methods at less than 1%. However, direct mail (including catalogs) drives in excess of 5% response. Think about it…according to the SFB, of 100 emails sent:
- ~97% deliver
- ~25% open
- 25% click/open
- 10% convert / clicks.
Yes – just 0.6% convert.
— Nielsen (@Nielsen) December 18, 2017
Catalog is not Dead – Neither is Email
Despite all of this, the strong ROI of 124% attributed to email is due to the relative low cost. Not because of efficiency. This type of disregard for efficiency and relevance creates an overstuffed inbox and apathy among customers. Not unlike the reactions to overstuffed mailboxes and demands for do-not-mail lists in the 1990s and early 2000s. Here is where my comments stirred some sentiment among my colleagues, peers, media, and social sphere. One called out that email is only inefficient “if you SUCK at it.” Another felt I was creating a “turf war” between catalog and email marketers. My intention couldn’t be more different. In fact, my intention is to encourage an elevation of personalization and relevance that fuels a true omnichannel strategy utilizing both print and digital tactics.
Let me reiterate. I recognize the difference between profitable and efficient. Yes, if you lose money at email, you are likely doing something wrong. However, marketers are adding (yes, adding) costs to email in order to improve personalization and relevance. In fact, according to Winterberry Group and featured in DMA’s SFB, marketers invested $1.4B, a 3x increase over the past five years. As costs are added, email circulation will likely decline to some degree (though unlikely to match the decline experienced by print). This is a good thing! In return, relevance and value will increase along with conversion. This is similar to the increase in response being experienced by catalog and direct mail marketing. However, the costs are controlled by marketers themselves as opposed to third party players not driven by a desire to elevate the customer experience.
Segmentation vs Personalization
Is it worth breaking out engagement by large demographic groups like millennials or Gen Z? Perhaps. Segmentation needs to begin somewhere, but segments do not equal personalization. That’s a topic for a future post.
Recent Blog Posts from Neil O’Keefe: