CADM: Budgets Are Back, But With an ROI Focus

CHICAGO — After years of holding back, Midwest marketers are relaxing their grip on budgets for customer acquisition and retention. That much seems evident chatting with executives last week at Chicago DM Days & Expo '06.

More use of interactive technology and a push toward greater measurement are among the trends in the Midwest, which is known for its strengths in the agency, print/production and database areas.

“I think companies may be more willing to experiment in terms of trying new media mixes, new channels, new techniques,” said Michelle Blechman, senior research manager at Abbott Laboratories, Abbott Park, IL, and immediate past president of the Chicago Association of Direct Marketing, host of the expo.

Blechman finds that blogs and podcasts have grown more mainstream in the past year. But judging this year's record number of CADM-run Tempo Awards entries, as she did, shows that direct mail is alive and well. However, she did think companies are doing more with less even with all the experimentation.

“We've seen growing frugality among companies who are scrutinizing their marketing ROI more closely, which just means cost efficiency is much more important than before,” she said.

Joe DeCosmo is this year's CADM president and also senior principal of analytic solutions at database services firm Allant Group Inc., Naperville, IL. He claims that members cite increasing work and budgets. One need only follow the money to see the year-over-year change in favor of DM.

“Clients continue to move dollars out of general ad budgets and into online, direct and other measurable media,” he said. “And they're increasingly looking to statistical models to help them do that. Not just response models, but marketing mix models and other techniques to help them optimize their spending.”

The Chicago-area market is tracking with the rest of the country. But the retail and insurance sectors are ramping up direct and database marketing.

“I'm a stats/modeling guy at heart, so I'm most excited about the increased visibility and reliance of C-level marketers on predictive modeling and insight,” DeCosmo said. “Modeling is definitely starting to move up the food chain from predicting, say, the likelihood of response, to more aggregate measures of performance and ROI. … Also, more and more clients are focusing on driving lifetime value among their customers, not just short-term response rates.

“Finally, I'm really excited about ways to optimize multichannel opportunities. Being able to harvest a lead over the Web, quickly assess the lead's value via predictive scores or segments and then distribute that lead for the most cost-effective follow-up is really exciting. Helping marketers understand who they should call or visit right away versus those that could be handled offline or via e-mail is a really exciting opportunity.”

Ronald K. Marsh, principal of Audience Identification Inc., Lisle, IL, is happy that this multichannel push is broadening the definition of direct marketing to include the Web.

“It's a natural progression because one of the defining characteristics of direct marketing is measurability, and the Internet lends itself to that sort of discipline,” he said.

Chicago agencies like Cramer-Krasselt, the city's largest independent and No. 4 nationwide, continue to get requests from clients for smarter thinking in this media-fragmented, consumer-controlled environment. Ask Phil May, the agency's retiring vice chairman and CADM's 2006 Charles S. Downs Chicago Direct Marketer of the Year.

“The work has to fit with the brand,” May said. “You can't do standalone stuff anymore. It's all got to be integrated. Clients all want results at a reasonable price.

“Clients want you to come up with 360-degree ideas: What are the touch points, how am I going to reach my target,” he said. “Don't just come up with television and print or the usual suspects. I think the role of technology, and technology itself, is changing so rapidly. Keeping up with that is just a major challenge.”

Diamond Marketing Solutions' Cyndi Greenglass sees this pent-up demand for marketing across the board in the Midwest. She is president of agency services at the Bloomingdale, IL, marketing services firm.

“Companies who significantly scaled back both their staff and marketing efforts have now restaffed,” she said. “Companies are looking to hire … and they're hiring experienced marketers and they're looking for direct marketing experience. Companies were very inwardly focused for a time, and now they're once again actively doing acquisition. Budgets are up. They're embracing multichannel.

“But for the most part, there are very few companies that have figured out how to do it yet. … Companies are still not aligned along the customer's line. They're still very much siloed, which makes it hard to have an integrated strategy to pull off.”

Neysa Bennett is president of Bennett Wheelless Group Ltd., a Chicago-based executive recruiting firm for DMers. She agrees that hiring is up in Chicago and the Midwest. The situation started improving in mid-2005.

“First we saw hiring within the direct marketing agencies, as new business was added and existing client assignments grew,” Bennett said. “Then hiring expanded to include the client side, as the economy grew and looked to direct marketing for improving the bottom line.”

Things may get better as the ROI concept is embraced by marketers as well as suppliers. From envelopes to paper and printing, it seems that costs are being weighed against the overall ROI of a campaign to justify the purchase, DeCosmo said.

“Even though overall marketing budgets are moving into the direct channel, that doesn't necessarily mean that more mail is being sent,” he said. “Again, online channels are seeing increases, while clients are using more analytics to tighten their communication strategies, which may translate into overall fewer items in the mail, but more targeted, higher-quality contacts.”

DM consultant Carol White of CL Associates, Chicago, sees what she calls a “recommitment to relevancy.” Direct marketers always have been committed to that concept, both in the nature of offers and the messages they deliver, she said. But there is a shift due mainly to technology.

“Now that consumers can often decide how, and if, they want to receive our messages, we need to refocus on providing truly relevant content,” she said. “A number of our speakers emphasized this at our conference. From sessions on permission-based e-mail to word-of-mouth marketing, as well as other traditional channels, we heard it loud and clear. As always, successful direct marketers will pay attention and deliver in ways our customers want.”

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