In rocky digital advertising landscape, advertisers reconsider direct mail

For a long time, digital marketing was considered the darling of the ball, with granular metric reporting, hyper targeting capabilities and lower price points than its offline counterparts.

However, there’s been a shift on the digital front. Google’s third-party cookie (which is finally crumbling) and Apple’s App Tracking Transparency initiative has made targeting more challenging. At the same time, CPMs are up and users’ tolerance for digital ads is down, agency execs say.

“As with digital, the only constant is change,” said Laramey Lawson, evp and director of insights and engagement at GS&F, an independent ad agency. “Some of the fantastic targeting that we’ve grown accustomed to is not going to be as easily accessed as it has been in the past.”

Enter: Direct mail. 

Currently, the industry is facing rising digital ad costs along with more data privacy regulation, forcing marketers and advertisers to reconsider their digital strategies. Agency execs say they are suggesting diversification even beyond digital into traditional channels, like direct mail, to all clients.

Clients and their agency partners aren’t spending on direct mail — at least not yet — but that’s starting to change. Offline spending faces steep declines, but direct mail will steady itself increasing 1.5% to make up $38.2 billion of U.S. offline marketing spend this year, according to an annual U.S. spending report from Winterberry Group, a strategic consultancy. Agency execs say Google’s cookie deprivation has made it easier to convince clients to further diversify their media mix to include direct mail.

“As we keep just keep seeing response rates in digital go down, click through rates keep going down, even the cost-per-acquisition [increase] and conversion rates on digital keep going down, it’s making direct mail even more competitive versus digital,” said José Villa, president at Sensis Agency, a cultural marketing agency.

On average, clients are spending north of 60-70% of their ad budgets on digital ads, he added. But spend for traditional media is starting to increase, especially for brands looking to stand out and get in front of millennial shoppers. (He did not disclose specific spend figures.)

Per the five execs Digiday spoke with for this story, clients most interested in direct mail are those in the business-to-business space, along with big box retailers, home, fashion, financial services and insurance companies.

“There are lots of places where it’s becoming, especially in this digital landscape, where it can be very, very, very hard to actually get someone to notice,” said Ned Brown, chief creative officer at Bader Rutter agency. “Another way of putting it is, it’s easier to convince them of something like [direct mail] now than it would have been two years ago or three years ago.”

A person’s physical mailbox is valuable real estate, per the agency execs. Impressions from a direct mail campaign can be of better quality than a digital campaign as people are more likely to engage with mail in their home or business, instead scrolling past digital banners and social media sponsored posts. As the digital ad marketplace gets more crowded, online users may be less likely to engage with a digital banner or sponsored post, execs say. Direct mail campaigns are a way to break through the noise, per execs.

Advertisers can get anywhere from a 1% to 5% conversion rate with direct mail, per Villa. The average e-commerce conversion rates are around 2.5% to 3%, per Shopify.  Measurement and attribution is more readily measured by adding a digital component, like a QR code, per execs.

Historically, direct mail has had a bad PR reputation. Mailing lists haven’t always been easy to come by. It’s also been labeled as expensive, due to postage and printing costs, and its tracking and measurement capabilities pale in comparison to its digital counterpart.

A silver lining in the data signal loss is that first-party data has become like gold in the industry. (It’s led to an explosion in retail media networks as retailers stand to profit from peddling said data.) As brands build up their in-house data, direct mailing lists become easier to manage, per execs. 

Meanwhile, the resurgence of QR codes and innovations by the U.S. Postal Service to better track mail has made putting metrics to direct mail easier than in the past, adding a digital component to the traditionally offline channel. Once someone receives a direct mail piece, marketers can use that data to re-target them digitally. Marketers can surround a direct mail campaign with digital tactics to increase its effectiveness.

As for the costs, direct mail isn’t beating the allegations. Advertisers could expect to shell out $.50 per piece for a folded piece of direct mail with paper, printing and postage. Additionally it’s, $.80 per piece for a full-sized catalog with paper, printing and postage, said Polly Wong, president of Belardi Wong, marketing agency.

“The cost of a stand alone direct mail impression is 30 to 40 times more expensive than a Meta impression,” she said. “People are still turning to it because it’s very qualified and targeted.”

For reference, the average CPM rate for Meta this year is $7.62, according to Gupta Media. But as digital costs continue to creep up, the gap between direct mail costs and digital costs is diminishing, per execs. 

That said, the shift toward a more balanced media mix is a hard sell for agency execs, especially as marketing budgets remain under scrutiny, making return on investment metrics vital. Offline channels don’t provide the opportunity to track on the granular level that digital channels do, causing clients’ hesitancy to commit.

“[Clients] have a difficult time sometimes moving away from that [digital advertising] because they want that immediate satisfaction,” Lawson said. “They want to understand what the engagement was, what the reporting was, click-through rates, all those kinds of things.”

Still, there needs to be a balance, agency execs say. Even with the challenges in digital marketing, it won’t be rendered obsolete anytime soon, if ever. Meaning, marketers and advertisers will need to reconsider what role digital advertising plays in their media and marketing mix, letting online and offline channels work together — something they’ve been debating since at least last year. 

“Both online and offline channels will continue to the same modest levels of growth, just tempered by the economy, and just tempered by business overall and having a bigger marketing mix to spend dollars on,” said Wong. “I actually think we’re looking at single digit growth and spending across digital online and offline channels.”

https://digiday.com/?p=532920

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