Politics Pushes DM in New Directions

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PLANO, TX - The direct marketing industry is evolving fast in Brazil and Mexico, largely due to changing economic and political environments.


Mexico is the second most sophisticated direct marketing country in Latin America after Brazil and, as in Brazil, politics has dominated the DM climate.


This politicized climate is not only a factor of Mexico's traditional six-year cycle of economic recessions, which if followed would produce the next crash in 2000, but also because Mexico's deregulation of the telephone marketing industry has had many far-reaching and unforeseen repercussions.


Mexico's cycle of crashes since 1976 looks likely to be broken for several reasons, including that the lower house of Mexico's congress has been controlled by the opposition since 1997, creating a more balanced control of government spending.


Greater fiscal discipline and more transparent financial reporting were also conditions of the IMF loan after the 1994 crash, assuring greater stability.


Finally, international money managers are more skeptical of Mexico than before 1994. The only danger seems to be that the expectations of a crash are so great that it may become a self-fulfilling prophecy.


The outcome of telephone marketing deregulation is less easy to predict. Due to entries into the market by US giants such as MCI and AT&T, Mexico's telmex has allegedly resorted to mass telephone number changes that have gone unpublicized. Only telmex seems to know about them, clearly an effort to protect its market share. Such changes have dire consequences for the telephone marketing sector, the list business, computer bur-eaus, merge and purge houses and any other business with a database.


Brazil is a much sturdier story. From 1992 to 1997 Brazil's direct mail volume increased more than 250 percent for printed direct mail and more than 230 percent for regular letters.


However, recent figures put out by the Brazilian Direct Marketing Association (ABEMD) estimated that direct mail did not grow at all last year.


What happened? Direct mail is losing ground to new media as the thriving DM industry, with annual sales of more than US$1.5 billion, quietly migrates from traditional direct mail to other less expensive media, such as inserts, the Internet and innovative forms of advertising such as those recently offered by Bombril-Cirio.


Bombril manufactures steel wool that is reportedly used in 98 percent of Brazilian households. The firm is moving over to a high-quality plastic packaging that allows high-resolution images to be printed on it. With an investment of R$600,000, companies can buy advertising on the packaging with exposure to more than 60 million items per month.


Some expect the program to be the most successful direct marketing program ever conducted in Brazil. The first advertiser is Globe Publishers, which is offering magazine discounts with each package bought.


As more such innovative programs become available, use of direct mail will continue to decline. An across-the-board hike of 30 percent in postal rates last year didn't help. Direct mail's share of the R$1.5-billion DM budget dropped from 90 percent to 55 percent during the last decade.


What's more, pending privacy legislation threatens to restrict access to data much as recently adopted European legislation does already. Unless ABEMD lobbies successfully for self-regulation, direct mail will suffer even further.


Facing this double threat, some Brazilian list suppliers have cut prices for lists in US dollars by up to 40 percent, assuring them of the same real income they would have had before the recent devaluation. US mailers can pocket the difference and hopefully help stimulate the direct mail market in turn.


While politics and the economic environment are shaping the direct marketing industries in Brazil and Mexico, a stronger industry will emerge as advertisers seek new forms of media that have a greater return on investment.
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