DM Innovation: 2006 and Beyond
This is part two of a two-part article. Part one appeared in the April 10 issue.
The evolution of the direct marketing industry in the past 20 years can be attributed partly to technological advancements. Technology has increased the speed at which we work, improved the methods we use to produce DM material and altered the channels we use to communicate with consumers.
These technological changes have presented challenges for our industry in terms of adapting to a multichannel environment and keeping up with savvy consumers. Today's most successful marketers are seeking out data service providers who offer superior data, list processing and innovative analytic capabilities that streamline time-to-mail, make the best use of marketing resources and budget, and capitalize on the most up-to-date information on customer buying behaviors.
Selecting the right data provider and implementing the best data processes will remain a crucial element of direct marketing. But there are elements of change that, like technology in the past, will affect our industry. These elements include a shift in U.S. demographics, increased access to information, more demand placed on personalization and customization, an increased emphasis on privacy and multichannel convergence.
The demographic shifts are fairly easy to predict. In the next decade, the overall U.S. population will grow 10.8 percent, from 297 million to 329 million. Major changes in age group distribution also will occur, affecting spending trends. For example, spending power will shift to the older population as boomers enter retirement. Meanwhile, younger generations - who communicate and buy differently than previous generations - will become increasingly powerful spenders and grow as an overall percentage of the population.
Shifts in age will be matched by shifts in ethnicity. For example, Hispanics will account for 45 percent of the population growth to 2010 and will double by 2020. The Asian population also will double by 2020, but on a much smaller base. Marketers will need to tailor offers and communications to reach the changing profile of our consumer population.
A continued increase in consumer access to information is another trend that will affect our industry. Nearly unlimited access to information is putting the consumer in control. Podcasting, Really Simple Syndication, blogs, viral e-mail and instant and text messaging let consumers gather information from sources other than the marketer. These emerging technologies provide both challenges and opportunities.
Along with increased access to information, consumer preferences are varied and changing. Personalization and customization will be the norm rather than the exception in the future, and sales will be determined by how well we know the customer. Experienced shoppers, brand shoppers, "laser" shoppers and price comparison shoppers ... how do we market best to each segment?
The challenge with personalization and customization is that both require information, which is increasingly difficult to acquire. Consumers have rightfully renewed their awareness regarding personal information. As such, direct marketers have a huge responsibility for self-regulation and investing in learning customers' preferences and letting them update their own preferences. With this knowledge, marketers can tailor offers to the right audiences for distribution through the most appropriate channels.
Another element related to privacy is "transparency," meaning opening the DM process to customers so that it's not a mystery. Transparency can lessen consumers' mistrust of the direct selling process by putting more power in their hands.
With all these trends considered, it's important to note that multichannel convergence will continue, and soon the vast majority of consumers will be tri-channel shoppers. Steadily, customers are pulling retailers into direct marketing, and traditional catalogers are developing a retail store and/or online presence. Even traditional Internet pure-plays have adopted catalogs and direct response as a channel to market.
As can be seen, the elements of change we face will revolve largely around consumers. What are their ages and ethnicities? How do they access information about companies and products? What are their feelings about privacy? As direct marketers focus on building preference, loyalty and an emotional attachment, it will be crucial to implement ways to keep up with a diversifying universe of customers.
Many ways exist to approach the development of long-term customer relationships, including maintaining transparency, differentiating the customer experience and tailoring offers by age, ethnicity and preferences. One of the best ways to facilitate these approaches is through a marketing database with strong analytical capabilities. The extra dimension provided by a cooperative data source provides a more complete buying profile of current and potential customers and yields better contact strategies. The right data will enhance other keys to marketing success such as differentiation, customer experience, relevance and efficiency.
Keeping an ear to the ground and a finger on the pulse of change can be telling. By looking back at the past 20 years and considering the trends we can expect going forward, it's clear that change is one of the few constants in direct marketing.