Roger Trapp: Why direct mail will never end up on the junk heap

Banks are abandoning blanket mailing, but small businesses know the value of cheap advertising
Click to follow
The Independent Online

There is a general assumption that when it comes to adopting a new business technique, small and medium-sized businesses must lag behind their larger counterparts. Consultants and other so-called experts talk of developments or practices "filtering down" to smaller organisations as if there is something inevitable about big business having the best ideas first and then either consciously passing them on to other less fortunate folk, or at least seeing them adopted by the more perceptive smaller businesses.

The truth, of course, is that there is nothing at all inevitable about big business having the best ideas. Indeed, many smaller businesses thrive because big businesses fail to see opportunities. Moreover, at a time when there is plenty of evidence to suggest that many smaller businesses are established by people who have spent part of their working lives in large organisations, it must be even less likely that new businesses will wait for cutting-edge approaches to emerge from bigger enterprises before having a go themselves.

Take direct mail, for example. For almost a quarter of a century this - at its best - targeted form of promotion has been making inroads into traditional advertising spend. And, to be fair, historically, some of the heaviest users of what many of us refer to as "junk mail" have been the household name financial services organisations, retailers and travel companies. But small and medium-sized enterprises arguably have more reason to go down this route. As is pointed out in research from Pitney Bowes, the supplier of postal franking machines and related equipment, "SMEs have to sell on service, locality, availability and knowledge." This is most acute on the high street, where they have to respond to or better-anticipate the threat from larger players, such as retail chains or international mail order specialists.

But it can apply just as readily in the business-to-business environment, where concern over a small company's capacity to do the job or just plain nervousness about breaking the mould helps to keep alive the old adage that "nobody ever got fired for buying IBM".

Given these factors, it is perhaps not surprising that it is generally reckoned that only a third of business start-ups make it to their third year. Nevertheless, many entrepreneurs fancy their chances and have a sufficiently compelling proposition to succeed. And such people are increasingly sophisticated about how they go about starting up.

Couple this with the fact that the cost of the databases on which proper direct mail depends is, like that of much technology, plummeting and you have the reason why a larger proportion of SMEs is employing a concept traditionally associated with large organisations.

Pitney Bowes, which is interested in the SME market (because the third of start-ups that make it to the third year have the potential to become large players, and hence big customers) says a quarter of all the UK's SMEs currently conduct "best-practice" direct marketing (this is, direct mailing that uses a customer or prospect database, captures customer characteristics, sends personalised messages to customers, logs responses to each initiative and takes account of national and EU regulations and restrictions). By 2007, it reckons, the figure will be two-fifths.

Those who receive endless invitations to take out pensions may not be that enthusiastic about the concept. But the appeal for the sender is not hard to fathom. While traditional advertising is expensive and its impact is hard to quantify, direct mail is cheaper and its effectiveness can be measured on a customer-by-customer basis. This is obviously attractive to smaller companies, which will often have limited resources and want to know as much as possible about the effectiveness of their marketing. Those that are run by people who are comfortable with information technology and savvy about marketing will be even more ready to embrace the concept.

In fact, it is this accountability that has helped it through periods of economic downturn. When times are tough, executives realise they need to keep their businesses' marketing profile up but are wary of spending too much in the process.

Accordingly, although the current year has seen a dip in overall direct mail expenditure because banks and credit card companies have abandoned their "blanket" mailing policies, the industry is still seeing annual growth, with UK spending on the medium reaching £2.5bn last year.

When it is realised that such promotions prompted UK consumers to purchase nearly £27bn-worth of goods last year, according to DMIS Direct Mail Response Rates figures from March of this year, the attraction is even easier to see.

Of course, the only real risk for a small business is the not inconsiderable one of irritating the very people it wants to impress - its prospective customers.