Canadian response rates rising

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WHITE PLAINS, NY - Canadian response rates are coming back strongly after a six year recession with the trend most visible in Ontario, where 55 percent of Canadian business is located.

Speaking at last month's Direct Media International's mailer CO-OP here, Tony Gilroy, the company's general manager for Canada, pointed out that the jobless rate had been as high as 15 percent, "not a good time to sell job training programs through the mails."

But right now the Canadian economy is growing at an annual rate of 3.4 percent, he noted, terming this "the best business economy we have had in 20 years."

He suggested that this year and next would be a good time for American companies not yet in Canada to enter that market, both for its own sake and as a stepping stone for global expansion.

"Companies are beginning to spend money on training again," he said, "and if a company mailed a million pieces last year it could easily mail 2 million this year."

With deregulation of financial markets, more US financial services companies are moving into Canada. Gilroy cited Wells Fargo, Capital One and MNBA as major new entrants fighting for market share. At the same time major Canadian banks are merging to meet growing competition.

In a wide ranging review of direct marketing prospects in Canada for this year and next Gilroy and Alison Durtnal, direct mail manager for NEBS Business Forms Ltd., also made these points:

*Canada is a small business market. Of the million plus Canadian companies 90 percent have fewer than 20 employees. The number of firms with more than 100 workers is relatively small.

*The Canadian dollar is a major problem. It has been falling against the US dollar despite a strong economy. It currently trades in the 65 cent range and Gilroy thinks it might move back to the mid seventies but is unlikely to rise higher than 80 cents.

The low Canadian dollar has hurt American sales that are converted back into US dollars, but has boosted the value of Canadian exports to the US.

US dollar offers used to be viable 8 years ago when the C$ was worth 89 cents but Gilroy believes they no longer are. "That's down 20 percent, so selling in US$s has become a hard sell." Newsletters and software are about the only products that still command US dollars.

*Canada Post is eager to help direct marketers but its economics are so bad that rates are sure to rise. Gilroy looks for a significant increase. "CP is looking at 20-30 percent hikes on the catalog side and 8-10 percent for regular mail."

When all the lobbying is done the increase should be held to half of what Canada Post has proposed with hikes in place sometimes in the first quarter of next year.

One added uncertainty is the unsettled postal contract that was forced on the union after last year's brief postal strike. Equally worrisome is the fact unit costs of employees is "still out of whack."

*Quebec is 27 percent of the Canadian market with four million French speakers and 1 million English speakers, almost mandating a bilingual approach.

It still pays to translate catalogs into French and bilingual call centers are mandatory. But Gilroy warned that catalogs and creatives crafted for Quebec cannot be rolled out into France although French campaigns can work in French Canada.

*Lists are a problem because Canada doesn't have enough of them and too many are not updated regularly enough. Daytimers updates its Canadian lists monthly, but some companies only do it every two years.

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