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My Message About The Mail Medium

Mark Thomson

Media Director

19 May 2011

The Strategic Mailing Partnership™ supported by Royal Mail

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Steve Aldridge– Partners Andrews AldridgeVideo 1

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“Tactility is a quality I envy in DM. We know that TV can stimulate physiological responses – people wanting to lick the telly or feeling thirsty, for instance – but it’s a bit of a tease. DM can satisfy those appetites that TV provokes”

Tess Alps, Chief Executive of Thinkbox

“As a component of experiential activity, direct mail has an enormous amount to offer when used well. If anything, it has more power to express a brand’s values than any other medium.

Jon Ingall ,managing partner of Archibald Ingall Stretton

“Good direct mail should be used in conjunction with intelligent and modern e-commerce. That should be on the agenda of every marketer who sees the internet as an increasingly important sales channel.”

Greg Grimmer, partner at Hurrell Moseley Dawson & Grimmer

And its not just Steve saying it…

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1. Large volume acquisition mailers, e.g. MBNA, Lloyds & Sky reducing volumes and using mail in a more refined way to greater effect.

2. Digital agencies are embracing DM like never before – They get its value with digital

3. The effectivenesseffectiveness of the communication is more important than the platform.

Our Media landscape

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MAIL IS EFFECTIVE

In 2010 an average of 91% of prospect direct mail was opened, including 96% for personal banking and 95% for stores mail.

Open rates for acquisition email 11%

% of prospect direct mail opened by sector 2010

89%

93%

95%

87%

93%

96%

80% 84% 88% 92% 96% 100%

TelecomServices

MedicalServices

Stores

Supermarket

RetailServices

PersonalBanking

(Ebiquity Rapport 2010)

(DMA)

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And It Is Getting More Effective

88%

90%

91%

85%

86%

87%

88%

89%

90%

91%

92%

93%

2006 2008 2010

Prospect Direct Mail Opening Rates

P

21%

15%

12%11%

0%

5%

10%

15%

20%

25%

2007 2008 Q2 2009 Q2 2010 Q2

Email Acquisition Open Rates

Direct Mail prospect opening rates have increased from 88% to 91% since 2007 (Ebiquity)

Email acquisition open rates have fallen from 21% to 11% since 2007 (DMA).

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£2.46£2.34

£3.69

£2.46

£3.74

£1.97£1.71

£3.40

£1.71

£2.31

£-

£0.50

£1.00

£1.50

£2.00

£2.50

£3.00

£3.50

£4.00

TOTAL TV PRESS OUTDOOR ONLINE

Advertisers using DM

Advertisers NOT using DM

£ revenue ROI by channel (based on econometric campaign evaluation)

Direct Mail helps other media work harder

Base: c500 studies, UK campaigns, 2005-2008 Source: OMD / Brand Science (2009)

• The TV component of campaigns pays back 37% more when direct mail is in the mix.

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Direct Mail has seen its ROI level rise steadily over the last three years, a trend credited to improved targeting

Source: OMD Brand Science (2010)

Analysis of average ROIs achieved by direct mail component of campaigns

(2006-2009)

£1.57

£2.90£3.18 £3.22

2006 2007 2008 2009

“Improved targeting and usage is benefiting the channel [Direct Mail].

•Accurate data on target audiences is almost instantly available

•Personalisation of the creative is becoming relatively easier too.

•The combination of these factors leads to a more effective media channel.”

Paul Sturgeon, OMD Brand Science

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While the efficiency of Direct Mail has been improving, Online has been moving in the opposite direction, with rising costs eroding levels of ROI

Source: OMD Brand Science (2010)

Analysis of average ROIs achieved by Online component of campaigns (2006-2009)

£5.01

£4.38

£3.36£3.12

2006 2007 2008 2009

Online

Mail is welcomed by Consumers

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e.g. BT

46% Mail

22% E-mail

e.g. Virgin Media

44% Mail

21% E-mail

e.g. Lloyds TSB

52% Mail

13% E-mail

e.g. Churchill

50% Mail

20% E-mail

Customers still prefer their service providers to contact them by Mail rather than E-mail.

Source- Ebiquity Rapport 2010

The customers of 60 of the top 61 Direct mailing companies would prefer to be contacted by mail than e-mail.

12Base: c2,000 UK adults Source: BMRB 2010

75%

61%

68%

76%

Agree

I welcome mail that gives me useful information

I welcome mail that rewards my loyalty

I welcome receiving direct mail from companies I’m already a customer of

I like being informed of special offers or promotions by post

Mail is welcomed, particularly when it is relevant and rewarding

13Base sizes: All product holders (by market) Source: GfK FRS, 6 months ending December 2009

Customers recruited by Direct Mail are more loyal • Comparing customers with savings accounts, 32% recruited via

the internet and 18% by direct mail are considering switching in the next 12 months.

• For credit cards, 20% of those recruited via the internet and

16% via direct mail are looking to switch.

New product holders considering switching – by information used to choose provider

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Waitrose case study B2C• The approach was to tell the most vocal members of MyWaitrose

about the new weekly recipes and encourage them to try the first one for themselves – then share it with the rest of the MyWaitrose community online.• They were sent a special hamper explaining Waitrose’s reasons for choosing Delia and Heston. Included were all the ingredients for the first recipe (a rhubarb and ginger brulée).

Results The hamper was warmly welcomed by all recipients. More importantly, 50% of them chose to feed back to the MyWaitrose community

Waitrose sold 14 weeks’ worth of Waitrose sold 14 weeks’ worth of rhubarb in four days.rhubarb in four days.

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Mercedes case study B2B-18 April 2011

Mercedes-Benz created a piece of direct mail in the form of a job application to promote its Sprinter van to businesses.

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Mercedes sprinter videoVideo 2

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Mercedes case study B2B-18 April 2011

Results

400 prospects have been identified. So far 120 letters have been mailed out.

The campaign is still in its early days.

Editor’s Comment

This is a great example of direct mail and digital media working together to be more effective than either could on its own. The idea of the van writing its own letter is ingenious enough. But then the way it gets fleet managers to go online to watch a demo of the van at work writing it is the key to what I am sure will be a great business success.

Mail and digital are very effective partners

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Digital companies are discovering mailEvidence from a digital marketing agency which offers integrated digital approach. Agency clients include:

Digital contact: 15-39% Vs Postal contact: 55-94%

Special postal contact:

(e.g. product and literature in oversize/ unique/ innovative packaging) = 70-94%

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Caroline Marshall, Haymarket Brand Media, 11-Apr-2011 • The ratio of effort in writing (very low, cost of entry a pen

and sheet of paper) to pleasure in receiving (very high) must make this one of the most effective business tools there is.

• So it is puzzling to me that my inbox continues to flood while my file grows by only one or two letters a week.

• Has everybody forgotten the strange human truth that almost anyone will do almost anything if the request is written by hand and on paper?

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Mail to Digital in ActionVideo 3

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Direct Mail is the most successful partner for email

When using email marketing in conjunction with other channels, which channels have you experienced most success with?

34%

38%

43%

45%

47%

47%

55%

62%

63%

73%

74%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Outdoor

Door-to-door

SMS

Inserts

Field marketing

TV/Radio/Cinema

Print/press ads

Telemarketing

Database marketing

Social

Direct Mail

DMA 2010 Annual Client Email Report

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Direct Mail is best for explaining your message in more detail

4

6

15

20

30

36

37

37

41

43

43

46

47

48

49

53

87

82

68

64

53

32

12

43

20

17

7

14

19

20

14

8Gives me better impression of the company

More professional means of communication

Easy to take in information

Likely to really grab my attention

I’m likely to spend a lot of time reading it

It makes me feel more valued

I am more likely to do something as a result

Appropriate if I’m not already a customer

Better for sending reminders

I enjoy receiving and reading it

More appropriate if a customer already

Easy to file so I can go back to it later

Better for confirmation / follow-up messages

Easier to respond to

Better at communicating brief messages

Better for the environment

Direct Mail % E-Mail %

Source: Quadrangle: DM & Email 2007. DM & Online 2007

• Direct mail to potential customers enables you to explain your message in more detail as they are free to read and absorb the information at a time and location they choose.

• 48% of customers felt that information received by direct mail was easy to take in compared with 20% by email. (Quadrangle DM & Email )

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But Don’t forget the digitally disenfranchised

•10.9m Adults have not used the internet in the past 12 months

Have you used the Internet in the past 12 months?

94% 92% 91%82%

70%

42%

6.49% 7.85% 8.56%18%

30%

58%

0%

20%

40%

60%

80%

100%

15-24 25-34 35-44 45-54 55-64 65+

Yes

No

Source: TGI 2010

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But Don’t forget the digitally disenfranchised

•The people with all the money

Have you used the Internet in the past 12 months?

94% 92% 91%82%

70%

42%

6.49% 7.85% 8.56%18%

30%

58%

0%

20%

40%

60%

80%

100%

15-24 25-34 35-44 45-54 55-64 65+

Yes

No

Source: TGI 2010

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Major UK Online Bank Case Study: DM is a clear ROI champion

• The greatest driver of the business was the DM campaign that prove effective in drive both off-line and on-line applications. With an ROI over double that of search.

• DM was found to be the most efficient channel with a ROI of £4.60. Affiliates and Search are a distant second and third with ROIs of £2.15 and £2.00 respectively

• The key recommendation There was no evidence of diminishing returns to DM spend suggesting that there was room to increase spend on the channel without compromising efficiency

Findings Recommendations

OMD Brand Science

Savvy advertisers recognise all of this and are reacting accordingly

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Direct Mail industry spend has started to increase again

Source: AA/WARC Media Spend Summary

Total adspend Total TV RadioOut of home

National newspapers

Regional newspapers

Consumer magazines

B2B magazines

Cinema Internet Direct Mail

2008 16589.1 3921.8 454.5 938.7 1816.2 2313.3 744.8 839.0 171.1 3349.8 2040.2

2009 14502.9 3525.0 404.1 782.2 1536.0 1708.3 588.9 552.5 179.5 3540.8 1685.9

2010 15505.4 4082.5 420.0 879.9 1628.4 1599.0 602.2 472.1 182.3 3927.3 1711.5

Direct Mail Spend by year £ms

2040.2

1685.9 1711.5

1000.0

1200.0

1400.0

1600.0

1800.0

2000.0

2200.0

2008 2009 2010

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There is still strong usage of Direct Mail in the media mix

•464 companies have increased their direct mail spend by more than £100k in the past 12 months

•682 companies carried out direct mail campaigns in the past 12 months who did not use direct mail in the previous year

•88 Large advertiser started to use Direct Mail for the first time last year thanks to Royal Mail consultancy

Source: Nielsen April 10-Mar 11

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Why are we bullish about DM?• DM is already considered in the advertising mix• We recognise price is one of many considerations in using DM – So we

have launched Advertising mail• Mail is critical in a digital world • DM has a financial benefit supporting other media• Moving up or working more closely with the value chain, offers more

opportunities• Customers buy the medium first and the postage second• Email is saturated, mail is no longer the default channel, but is now the

value channel• New Brands are testing and using Mail • Royal Mail is continuing to champion the value of mail as a medium.

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1. Talk of us entering “the digital age” and leaving ‘the print age’ is dated

2. The effectivenesseffectiveness of the communication is more important than the platform.

3. We all need to embrace this concept

“The best way to predict the future is to create it”

Abraham Lincoln (and many others)

Our landscape