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Article from Printing Impressions:

January 12, 2023

Direct Mail Printing Outlook: About Data, Targeting, Triggers

By Toni McQuilken

People are tired of looking at screens. Since February 2020, the number of weekly virtual meetings has risen around 150%, with the amount of time people spend in those meetings up around 252% — that is a lot of time staring at screens all day long. For marketers looking to reach that same audience, online or mobile ads are losing their effectiveness as people seek to step away from the digital world when they end their workday. This is where direct mail comes in — a medium that has never gone away, but is seeing a resurgence post-pandemic.

“There has been a permanent change in how mail is being used as a marketing channel,” Gary Masse, CEO of IWCO Direct, points out. “Now mail is the channel that breaks through the digital clutter to gain your prospects’ attention, while being coordinated with online channels to drive greater response in all channels.”

Deloitte’s “2021 Connectivity and Mobile Trends Survey” found that the average household now has an average of 25 connected devices, with 38% of households connecting additional devices in the past few years. Deloitte also found that 32% of consumers are feeling overwhelmed by technology. On the flip side, according to the “2022 Direct Mail Advertising Global Market Report,” the average response rate of direct mail is around 2.7% to 4.4%, while email is around 0.6%. The average open rate varies between 57.5% to 85%, and the direct mail industry is expected to reach $73.57 billion in CAGR by 2026, compared to $71.57 billion in 2021.

But what trends are truly driving these numbers? And how can direct mail printers best capitalize on the trends to help grow business in 2023 and beyond?

‘Going Postal’ Over Ongoing Rate Increases

There are a few trends that are driving more innovative and creative direct mail campaigns. First — and with no surprise — is the rising cost of postal rates, which is something all direct mail printers should be paying close attention to.

As postal rate increases continue to eat into margins, investing in newer, more efficient equipment will be critical for long-term success in the direct mail printing space.

“Certainly, the postage increases are a trend, and the pressure will lead to greater adoption of postage and other cost optimization strategies,” Melanie De Caprio, VP of marketing at SG360°, says. “Our research shows adoption of the many tactics available is surprisingly low.”

In October of this year, the U.S. Postal Service announced another rate hike— the third this year — that will take effect in January 2023, impacting a number of different classes of mail:

“With successive postage rate case increases, there is a lot of pressure on mail owners to maintain an acceptable ROI,” De Caprio adds. “It is incumbent upon mail providers like us to mitigate the impact by using available technologies to get mail deeper, and take advantage of the larger discounts associated with that deeper entry. We haven’t seen any noticeable impact due to postage increases on our business at this point. However, given the increases expected over the next two years, to control costs and avoid such a result, we are working strategically to improve our postal optimization solution, and working closely with logistics partners to optimize routing and cadence of delivery to USPS facilities.”

That said, Masse says IWCO Direct is optimistic that USPS network changes will drive efficiency and lower costs for mailers. “Our logistics partner, King Solutions, keeps us aware of changes in the logistics marketplace and helps us plan appropriately to accommodate those changes. Supply chain disruptions have been challenging, but through partnering with our clients and vendors to ensure adequate lead times, we’ve been able to overcome those challenges to provide a high-quality product on time to meet our clients’ needs.”

Increasing mail costs, according to Stefanie Cortes, RRD’s director of marketing and communications, have not necessarily led to a decrease in the interest in direct mail, but rather a different approach to it. “One trend that is really pushing forward and escalating is being more targeted with direct mail, and really understanding if the audience has any intent to connect with you, or if you have a history with them. That more targeted approach — what can we do to help increase the performance of direct mail instead of abandon it — will help offset [some of the postal rate increases.]”

Rate increases aren’t the only trend impacting the USPS, however. In Spring 2022, Congress passed the Postal Service Reform Act (PSRA), which President Biden then signed into law. The bill is designed to ease the financial burden the USPS has been laboring under for the last decade, paving the way for it to modernize its operations. In fact, the bill was one of the reasons the organization is now free to raise rates at the pace we’ve seen this year, to try and bring the service back into profitability.

“The Postal Reform Act of 2022 is, at its heart, a law to modernize USPS finances in order to provide for the long-term viability of a critical print delivery partner,” says Lisbeth Lyons, director, Women in Print Alliance at PRINTING United Alliance, who served as the VP, Government & Political Affairs, for many years. “It does so by creating a more accurate financial baseline the Postal Regulatory Commission (PRC) will use when determining future postal rates.”

In practice, what this means is that printers should anticipate more postal rate increases in the months to come. Don’t expect the January 2023 increase to be the last, and start planning now with customers on ways to maximize value for every mailing.

Data Is a Critical Component

Data-driven direct mail campaigns that feature personalized elements are key to driving up overall response rates.

Data continues to play a major role in getting the most out of direct mail campaigns, and can be a make-or-break element that determines the success or failure of a direct mail piece. “Campaigns that get the best responses are less about the mail piece format — although having an intriguing mail piece that engages the recipient is important — than they are about leveraging consumer data and insights to target mail pieces to receptive audiences who are likely to engage with your brand,” Masse says.

“Using data-driven strategies and insights to integrate direct mail with digital channels in multichannel marketing campaigns leads to better results, conversions, and stronger ROI from each campaign. We know our clients are looking for a true partner who offers the right mix of data, analytics, and creative to drive success in all their marketing channels,” he adds.

Cortes notes that the use of data in direct mail campaigns is the single biggest trend she’s watching right now. “We’re seeing a shift from the more traditional direct mail cadence of ‘here’s my campaign and what I’m promoting,’ to set schedules a year out, with a more programmatic approach, leveraging behavioral data, instead of third-party data.”

In particular, Cortes stresses that more brands are pulling away from using aggregated data that comes from various sources, and instead trying to leverage what they already know about their current customer base and prospects. “It’s more about what have you already purchased, etc. — it’s trigger-based,” she says. “I see this as the biggest fundamental shift in direct mail. It really started with the direct-to-consumer technology companies that were adopting direct mail and using sophisticated ways to leverage it. But we’re seeing it with every client now.”

De Caprio believes data will continue to play heavily into the direct mail space, saying, “The sophistication and availability of data for use with direct mail — especially when compared to privacy limitations in digital advertising — is unprecedented. Direct marketers will continue to become savvier with zero- and first-party data, and more educated on how to best leverage third-party data.”

It’s one thing to talk about the trends driving direct mail, it’s another to actually see how they bring marketing ideas and dreams to life. De Caprio continues, “The best responses come from data-driven campaigns with creative audited by direct mail strategy experts. What is evolving in that equation is that marketers are becoming more data savvy, both with their own data practices, and with use of third-party data. Relevancy is the biggest needle mover. We also expect marketers to realize the impact on their results that identifying channel preference can make. Building the intelligence to unearth the channel through which a potential customer wishes to be communicated is a game-changer.”

Cortes notes that she is also seeing a “significant jump” in the ROI of direct mail campaigns based on data, rather than just a promotion. “Targeting and speaking to an audience that has already shown an interest in the brand,” she says, is powerful, since it means engaging with consumers that have already expressed an intent to purchase on some level. As an example, she explains, “If I go to a website and click on a pair of shoes but don’t purchase, then a few days later a postcard comes in the mail with that same pair of shoes I’m considering, that might be the nudge I need. Everything surrounds understanding the audience better, and how to use both direct mail and online portals to stay in front of the customer and make the experience more engaging.”

Other Trends to Watch

Of course, the evolution of data and the challenges around postal rates aren’t the only trends impacting the direct mail space today. Here are a few other trends to pay attention to.

1. Paper supply. It’s been on the mind of everyone for the past several years now, but fortunately, many are starting to see the proverbial light at the end of the tunnel. “A tight paper market will continue to bring challenges into 2023, although paper market tightness should ease as we go through the year,” Masse believes. Printers are reporting that while paper still isn’t as available as it might have been pre-pandemic, it is getting easier to find.

2. Recession is looming. “With current and impending economic conditions, there’s potential for depressed response rates given a perceived drop in discretionary income,” De Caprio warns. If inflation continues to rise rapidly, consumers will spend less, and brands will have no choice but to pull back on their direct mail campaigns.

3. Direct mail is “trendy.” Cortes notes that while “direct mail is one of the most traditional forms of marketing, for the new generation it’s trendy. They are so used to the digital atmosphere, it is breaking through, and Gen Z is excited to receive direct mail pieces.”

In fact, she notes that in the “Macro Marketing Report” RRD released earlier this year, 63% of Gen Z, and 62% of millennials were more excited about direct mail today than they were even a year ago. If the recession and inflation deepen in 2023, expect brands to take a hard look the types of marketing mediums most likely to break through the clutter — and direct mail will be at the top of that list.

4. Convergence will continue. Whether you’re tired of hearing about convergence yet or not, the reality is that it is having a profound impact on the industry — a trend that isn’t going to slow down. Commercial and direct mail printers should expect increased competition, both from traditional competitors, as well as from new faces, including wide-format, signage, transactional, and even package printers all looking to capture more market share.

5. Direct mail helps brands address privacy concerns. In the “Macro Marketing Report,” another interesting statistic to emerge is that 85% of marketers have changed their go-to-market strategy as consumer privacy concerns have risen and third-party cookies on websites have been phased out. 76% have reallocated funds from digital platforms back to direct mail as a response. Expect that trend to continue into 2023 and beyond.

And perhaps the single biggest trend to pay attention to is a combination of all of the above — direct mail is changing. “There are always stories about direct mail going away, but it will constantly be evolving,” Cortes says. “Digital is [actually] enhancing how we use it and to be more efficient. We are learning new tricks and ways to enhance the overall experience.”

Using Scent to Enhance Response Rates

When it comes to making direct mail stand out from the crowd, there are a few common go-to’s that many printers use, such as foil or embossing effects. One option that isn’t new, but that many forget about, is using scent to capture the attention of recipients.

“The use of fragrance and flavor marketing tactics within direct mail in various mail formats using branded, experiential, seasonal, holiday, or campaign-oriented scents is one of the biggest trends in the industry,” notes Mark Bernstein, president of Scentisphere, which produces a wide range of scented coatings for the direct mail space.

“Scented varnishes, coatings, and labels within direct mail are a stop-and-hold mechanism, inviting the consumer to trial a fragrance, trigger emotions, awaken fond memories, and transport consumers to an aspirational destination. Scented tactics increase dwell time, driving response rates.”

He notes that while the use of scent has traditionally been used for brands that center around scent — perfumes, for example — that is changing. “Specifically in 2023, the trend will be new industries integrating scent marketing into direct mail including airlines, hotels, banks and credit unions, insurance, and media verticals,” he adds.

Bernstein points out that scent can be used on a wide range of direct mail pieces, inserts, envelopes, postcards, or even an “ambient fragrance delivery within envelopes.” He goes on to note that using scent in all the elements is gaining traction. “With the recent approval by the USPS for Rub’nSmell on the outside of mailers, this is a big opportunity for mailers to drive open rates.”

How does it work? Scentisphere’s Rub’nSmell varnishes and coatings are an in-line application within the offset and flexo printing environment, so there are no finishing or post-press concerns. “Being an in-line application, including Rub’nSmell is incredibly economical and, in combination with the TSI Promotions, offers mailers a significant net savings to drive both ROI and response rates,” he says.

That TSI Promotion is a partnership with the USPS, where mailers using the technology can receive a 5% postage discount February 1, 2023 – July 31, 2023, making it a great way to not only add value to the finished piece, but also help bring the overall costs down.

He continues, “We strongly encourage all printers and mailers to review the USPS TSI Promotions for 2023 and integrate scented technologies in various formats, using different scents to capture strong open and response rates, and ROI. Consumers are looking for experiences, and brands for interactive innovations — scented varnishes and coatings are the most economical way to achieve these objectives.”

Toni McQuilken

Toni McQuilken has been writing and editing for more than a decade. Her work includes B2B publications – both in print and online – in a range of industries, such as print and graphics, technology, hospitality and automotive; as well as behind the scenes writing and editing for multiple companies, helping them craft marketing materials, write press releases and more. She is a self-proclaimed “tech geek” who loves all things technology, and she knows that she is one of a select group of people who get to do what they love for a living.