Editorial: Service companies should take this time to focus
It's the dog days of summer and what we may look back on as the dog days of the recession as well. Hopes the economy would have begun its slow climb out of the hole by now are stalled. Many marketers are reacting by sitting tight — a dangerous decision. Every facet of the direct marketing industry is suffering. The domino effect of squeezing budgets means some businesses won't survive and others will require radical change. Direct marketers still need to sell products, get people to Web sites to plunk down the plastic and induce them to pick up the phone and order away.
Sara Cisler, director of CRM at The Limited, told me recently that getting customers into the store is her biggest concern now. Her company has an in-house database of more than seven million people, and she drops more than a million direct mail pieces every month to drive sales. So what is Cisler doing for the next three months? Going deeper into the house file to reactivate dormant customers and putting more money behind direct mail at a time when direct mail volume is down across the board.
"We haven't decreased the budgets," she said, calling direct mail "a growing channel." But, in this economy, her budget hasn't increased either. It wasn't easy, she said, but she was able to negotiate her cost per piece, getting better rates on paper and printing.
Negotiating is hardly a new concept, but direct marketers are particularly adept at running the numbers to closely track the ROI of each campaign. Analytics are the industry's forté. That's the good news.
The bad news? This strength obviously will not solve the problems plaguing service sectors in the direct industry. Consider list marketing: As list buyers continue to turn the screws on these suppliers along with the paper and printing providers — trying to get lots for as little as possible — it's going to hurt.
But this particular slice of the direct industry has bigger problems. Market entrants such as Jigsaw and ZoomInfo are peddling data and competing with the traditional list folks. Marketers can get the data from these types of sources at a higher price, but then they own the data vs. the one-shot rental typical of list companies.
Like Cisler, most marketers right now are focused on building out a prospect database over time to communicate with customers on an ongoing basis.
Smart list folks will continue to adapt their business to the new realities of the market. But they ought to take a page from the marketer playbook too. Just as The Limited does with its customers, service sectors within the direct industry should focus on building the relationship over time and partnering with the most promising clients. Sure, you're taking the hit right now. But if you can hang on, those relationships will be that much stronger when the economy rebounds. Pinpoint your best, most profitable clients and put the most energy toward serving them.