25th Anniversary Issue: Direct Agencies Come of Age
ratings. In theaters, "Superman" took flight. In stores, Walkmans flew off the shelves. In discos, people danced to "My Sharona" and "I Will Survive." In our world, DM News and Grey Direct were launched.
Now, 25 years later, direct marketing not only has survived, it has thrived. The industry is stronger than ever. Keyword search, mobile commerce and e-mail - all direct marketing techniques - are today's hot mediums. More than 50 percent of all marketing is spent in the direct realm, and the future continues to move our way. How did we get here?
Let's start 25 years ago. It was a different world. Direct marketing agencies were a tiny part of the advertising business. It was a mass marketing world. Network TV dominated the media landscape. Databases were expensive to build and maintain.
Packaged-goods and automotive companies were huge drivers of ad spending, and they focused on moving mass quantities of product efficiently. They had no patience for our micro-targeting techniques. In 1979, most DM agencies were helping classic direct selling organizations: Columbia House, BMG, Book-of-the-Month Club, collectibles and so on. Direct mail was our specialty. Letters were painstakingly crafted. All package components were methodically tested.
The world changed in the 1980s. Cable television came into its own. Channels proliferated. More women entered the workforce, making them harder to reach. The mass market was eroding faster. But the good news was that the cost of gathering and storing data had dropped drastically. Banks, credit card and telecommunications companies capitalized on their data access and became huge users of DM agency services.
The 1980s also were important for another reason. This was when general advertising agencies committed to DM. They bought us, merged us or integrated us. The smartest ones developed us as companies that could work independently from them or synergistically with them.
In the 1990s, the digital revolution was upon us, and the Internet was redefining business. Unsurprisingly, conventional businesses were worried. They ran to newly created interactive agencies, firms often run by young techies, not marketers. These new agencies built Web sites and tried to pioneer the online world. Traditional and direct marketing agencies scrambled to compete.
Yet the agency landscape had changed. Suddenly, clients were using general, direct and interactive agencies. Direct marketing agencies no longer were the new kids on the block. This was happening while postage rates continued to rise and direct mail was losing importance. Many DM agencies renamed themselves and worked to reinvent themselves.
Branding also became important in the 1990s. DM creative now built brands and business at the same time. Auto insurer Geico's advertising is a great example. Business-to-business and high-tech DM also expanded drastically.
By 2001, the party was over. America was moving into recession. Many dot-coms and interactive agencies disappeared. Traditional marketers cut spending. Most DM agencies struggled. They had, in their zealousness to win in the new world, changed their business models. Many suddenly were no longer great direct marketing agencies, but hybrids.
In this new century, the entire ad industry is undergoing a transformation. Consumers don't embrace advertising as before. They use TiVo recorders to skip TV commercials. More than 62 million Americans signed up for the do-not-call list to avoid telemarketers. They subscribe to satellite radio to be free of radio spots. These new dynamics force clients to rethink advertising strategies and find new, more accountable communication methods that drive ROI. More are looking to direct marketing. Even industries that once shunned DM are embracing it with new fervor.
Our Moment Has Arrived
After 25 years, our moment has arrived. But how do we capitalize fully? First, we should redefine what we do. Lester Wunderman reportedly coined the term "direct marketing" more than 25 years ago. Let me suggest a new term to define our work: communications optimization.
We are in the business of maximizing profit through accountable communications. Yet too many people define DM by the techniques for which we are best known: direct mail, e-mail, DRTV, banner ads and direct response print. Moving forward, those techniques will be some of the ways we communicate, but we will do much more.
DM agencies will lead more client engagements. We will use a broader range of techniques to optimize ROI including natural search optimization, customizing bill messaging, leveraging Web logs, pioneering text messaging - any communication technique that can be tracked and optimized.
In this century, I expect lower-margin, mass-marketed products will be led by branding specialists. Everyone else eventually will be led by direct marketers.