Direct Mail

Direct mail is a type of advertising medium in which messages are sent to target customers through the mail. The terms "direct mail" and "mail order" are often used interchangeably. The best way to distinguish these similar, yet different, terms is to remember that direct mail is simply an advertising medium, like print or broadcast media. Print media messages are delivered through the printed word, usually in newspapers or magazines, while broadcast media messages are delivered through the airwaves, on television or radio. In direct mail, advertising and other types of messages are delivered through the mail.

Mail order is a particular way of doing business, like retail or personal selling. A mail order business delivers its products through the mail. It may also use direct mail to send out advertising messages or catalogs. Direct mail is simply one advertising medium that direct marketers employ, although it is among the most frequently used.

Direct mail is a particularly attractive option for small business owners, as it can communicate complete information about a product or service and reach almost any conceivable target group, all for a relatively low cost. Direct mail can provide the basis for a business, or it can be used to supplement a company's traditional sales efforts. For example, a small business could use direct mail to inform potential customers about its offerings, then follow up with a phone call or a visit from a salesperson. Owners of start-up businesses may find direct mail an effective method of creating awareness and interest in a new product, while owners of existing companies may find it useful in generating new business outside of their usual customers or geographic area. Another advantage of direct mail is that it is testable, so that entrepreneurs can try out different sales messages on various audiences in order to find the most profitable market for a new product or service.

USES OF DIRECT MAIL

Direct mail is the most heavily used direct marketing medium, and its popularity continues to grow despite postage increases. While most advertisers use third class mail, a significant number of mailings are sent first class, making it difficult to arrive at accurate statistics about the volume of advertising mail being sent.

The primary application of direct mail is to reach consumers with offers of traditional goods and services. Some of the earliest examples of direct mail were seed catalogs sent to American colonists before the Revolutionary War. More recently, direct mail has been used to offer consumers a range of financial services, coupons for discounts on packaged goods, and requests for donations to a variety of nonprofit organizations.

Direct mail is also an effective medium in business-to-business marketing. Since business orders are usually of larger value than consumer purchases, it often takes more than one mailing to make a sale. Imaginative packages are often used to get through to hard-to-reach executives whose mail is screened by their secretaries. In addition to making sales, business-to-business direct mail can be used to generate sales leads and reinforce the personal selling effort.

ELEMENTS OF DIRECT MAIL

The Offer

There are three key elements of successful direct mail: making an offer, selecting the target audience among customer lists and databases, and creating the direct mail package. Making an offer is one element that distinguishes direct marketing from general advertising and other types of marketing. Offers are designed to motivate the reader to take action: place an order, request more information, etc. Writing in Successful Direct Marketing Methods, Bob Stone gave the following example of how the same offer could be presented in three different ways: 1) Half-price! 2) Buy one—get one free! 3) 50% off! All three convey the same offer, but statement number two pulled a 40 percent higher response than statements one or three because consumers perceived it to be the most attractive offer.

In direct mail the offer can be tailored to fit the characteristics of the individual recipients. Direct mail allows marketers to target individuals with known purchase histories or particular psychographic or demographic characteristics, all of which affect how an offer should be made. Some basic types of offers include: optional features; a special introductory price or quantity discount; free trial or bill me later; order by mail, phone, or fax; premiums or sweepstakes; and special conditions of sale and types of guarantees.

Mailing Lists and Databases

Mailing lists and databases offer direct mail marketers the opportunity for more selectivity and personalization than any other advertising medium. The two basic types of lists are in-house lists and external lists. In-house lists—sometimes called response lists—are those compiled by the company based on responses to its previous mailings or to its advertising in other media. These lists, which represent prime repeat business opportunities, are among a small business's most important assets. They are usually not available to competitors for rental, though they are sometimes exchanged with other companies that offer similar products. In contrast, external lists are typically compiled for rental by sources outside the company. There are thousands of different lists available that classify consumers according to a variety of demographic criteria. External lists may be rented by competitors as well.

Depending on the product being sold through direct mail, lists may consist of the names of consumers or businesses. Some examples of compiled consumer lists available for rental include: buyers of certain vehicle models, collectors of different items, subscribers to various periodicals, organic gardeners, or golf enthusiasts. Business lists are typically categorized according to the North American Industry Classification System (NAICS), which assigns code numbers to different types of businesses.

In direct mail, lists are often rented from a list source for one-time use. When multiple lists are rented, a technique known as merge/purge is used to eliminate duplications. The transaction between a direct mailer hoping to obtain a list and a compiler hoping to rent a list may be facilitated by a list broker or list manager. The list broker's job is to match the list buyer with the most appropriate list for its offerings. Although brokers technically represent both the list buyer and the list owner, they are usually paid by the list owner. Whereas a list broker helps a direct mailer find the right list, a list manager is more like an agent who represents one or more specific lists. List managers handle the rental and billing procedures for the list owners, and also work with list brokers and list compilers as well as with direct mailers to arrange usage for the list.

Another place to find list data is on the Internet. There are a variety of online sources for marketing data, many of which allow small businesses to rent customized lists to fit their limited budgets. List costs tend to vary with specificity. That is, a list of subscribers to a particular magazine may rent for $50 per thousand (lists are typically rented on a "per thousand" basis), while a list of women subscribers who live in certain zip codes may rent for $100 per thousand.

Direct mailers employ a variety of selectivity techniques to better target their mailings. Traditional segmentation techniques look at past behavior, including time since most recent purchase, frequency of purchase, and amounts of purchases. More advanced segmentation techniques employ formulas that help predict future behavior. One such technique is list enhancement, or the process of overlaying social, economic, demographic, or psychographic data obtained from other sources on a mailing list. Adding such data to an in-house list allows mailers to develop a customer profile based on such factors as age, gender, car ownership, dwelling type, and lifestyle factors. Once that process is undertaken, the in-house list becomes an in-house database, or a collection of information about customers and prospects that can be used for marketing purposes. Modeling techniques can then be applied to the in-house database to help predict response rates from externally compiled lists whose individuals share some of the characteristics of the company's customer profile.

The Direct Mail Package

Direct mail packages come in all shapes and sizes, which makes direct mail one of the most flexible of the direct marketing media. A standard direct mail package includes an envelope, a letter, a brochure, and a response device. A variation on the classic format is the multi-mailer—a package with a number of flyers each selling a different product. Another popular format is the self-mailer, or any piece that is mailed without an outer envelope. More complex direct mail packages are three-dimensional; that is, they include an object such as a gift or product sample. These three-dimensional mailings can be effective in reaching top executives whose mail is screened by a secretary, and they are practically guaranteed to be opened by consumers at home.

Catalogs ranging from six to more than 100 pages are used to sell a variety of goods. They are also used to sell services, such as seminars. A variation of the catalog is called a magalog, which combines a certain amount of editorial content along with sales content to give the catalog the appearance of a magazine. A specialized field of direct marketing, catalog marketing is a discipline unto itself and accounts for a significant part of all direct mail activity.

Looking more closely at the classic direct mail package, the envelope's job is to motivate the recipient to open the package. The recipient's decision whether to open, set aside, or discard the mailing piece takes just one or two seconds. Regardless of the volume of mail a person receives, whether at home or a place of business, the envelope must distinguish itself from other mail by its size, appearance, and any copy that might be written on it. Envelopes that take on the appearance of an invitation or telegram might grab someone's attention faster than a plain envelope, for example. Other choices that are made concerning envelopes include color and texture, window or closed face, and whether to use a preprinted indicia or a postage stamp.

The letter is a sales letter and provides the opportunity to directly address the interests and concerns of the recipient. In a sense the letter replaces the salesperson in face-to-face selling. The letter typically spells out the benefits of the offer in detail. The more personal the sales letter, the more effective it generally is. The letter writer must be intimately familiar with not only the product or service and its benefits, but also the concerns and needs of the person to whom the letter is addressed. While the letter tells the recipient about the benefits of the offer, the brochure illustrates them. Illustrated brochures are used to sell services as well as products. Brochures come in a range of sizes and different folds. While the use of color may increase response, the brochure's look should fit the product or service it is selling.

Finally, the package must include a response device, such as a business reply card or coupon, that the recipient can send back. Response rates are generally higher when the response device is separate from, rather than part of, the brochure or letter. Toll-free numbers are often prominently displayed to allow the recipient to respond via telephone. However, since some customers will not use the phone to place an order, a response device should be included in addition to a toll-free number. The key to a successful response device is to keep it simple and easy to fill out. A "lift letter" is often added to the package to "lift" the response rate. The lift letter usually carries a message such as, "Read this only if you've decided not to accept our offer," to grab the recipient's attention one more time.

Other enclosures that may be added to the direct mail package include gift or premium slips, article reprints, a business reply envelope, and a variety of involvement devices. Involvement devices such as stamps, stickers, pencils, and rub-off messages motivate the recipient to become involved with the response device and, hopefully, continue to take the action required to make a purchase.

TESTING DIRECT MAIL

Since large expenditures are involved in mailing to lists of thousands, most direct mailers take advantage of the medium's testing capabilities. Every element of direct mail—the offer, the list, and the package—can easily be tested to avoid committing major resources to unproductive mailings. In Successful Direct Marketing Methods, Bob Stone recommended testing in six major areas: products and services, media, propositions made, copy platforms, formats, and timing. The point is that tests should concentrate on meaningful components.

For products and services being sold by mail, pricing and payment options are often tested. A test may reveal that a higher price actually produces a better response. While the product and the price are considered the main offer, premiums and other incentives that enhance the offer are also subject to testing.

List testing is basic to direct mail. Experts recommend testing different segments of a particular list, preferably testing the best segment first. The appropriate size of a test sample is dependent on the anticipated response. The smaller the anticipated response rate, the larger the necessary list sample should be. A rule of thumb is that the list sample should be large enough to generate thirty to forty anticipated responses. While list testing may clearly identify winners and losers, it will also reveal that some lists are marginal, or near break-even. In that case, the list may be discarded, or another test may be conducted using different selection criteria on the list to make it pay out better.

The direct mail package is subject to a variety of tests focusing on format and copy. If the mailer has established a control package, then one element at a time is tested to see if it lifts the response to the package. Another type of creative testing is sometimes called breakthrough testing, where an entirely new approach is developed to sell a product or service.

Lists, offers, and packages can all be tested in one mailing when done properly. A test matrix consisting of individual test cells is constructed. Each test cell contains a unique combination of elements being tested and makes up a portion of the overall mailing. After the entire mailing is dropped, responses from each test cell are tracked to determine the performance of the tested elements.

WHEN DIRECT MAIL WORKS BEST

Direct mail offers marketers several advantages over other advertising media. It provides a high degree of measurability, for example, which in turn allows for extensive testing. Of course, for direct mail to work well the direct marketer must be able to identify the target audience and create or rent the appropriate mailing lists to reach them. Direct mail also gives marketers control over the sales message and allows them to present a great deal of information about a product or service in the sales letter and brochure. Repeat mailings can be done to take advantage of the product's or service's potential for repeat sales as well as to sell related goods and services to the same lists. While direct marketing has grown over the years to employ a variety of advertising media as they became available, such as the telephone, broadcast media, and print media, it is direct mail that remains the most heavily used medium in direct marketing today.

In the late 1990s and early 2000s, some analysts predicted that the growth of Internet retailing and advertising could lead to a decline in the usefulness of direct mail. But a study reported by Debora Toth in Graphic Arts Monthly predicted that direct mail expenditures would grow at an estimated rate of 6 percent per year from 1998 to 2008. In addition, the study predicted that direct mail's share of total advertising expenditures would remain stable at 11 percent during this period. "The Internet is only enhancing direct mail," printing company president Rick Powell told Toth. "Corporations still need to send a campaign based on direct mail in order to drive consumers to their Web sites. After the consumer receives a beautifully printed piece, the firm then can follow up with an e-mail message." In fact, the Internet offers some benefits to direct mail marketers, including easy access to database lists and Web sites that automate the direct-mail production process.

BIBLIOGRAPHY

Hudson, Adams. "The Dos and Don'ts of Direct Mail Marketing." Air Conditioning, Heating, and Refrigeration News. 23 October 2000.

Hudson, Adams. "How to Select the Most Profitable Direct Mail List." Air Conditioning, Heating, and Refrigeration News. 20 November 2000.

Jones, Susan K. Creative Strategy in Direct Marketing. NTC Business Books, 1991.

Kleinman, Mark. "Why the Future of Media Is Direct." Marketing. 16 November 2000.

Kobs, Jim. Profitable Direct Marketing. Second Editon. NTC Business Books, 1992.

Lewis, Herschell Gordon. Direct Marketing Strategies and Tactics. Dartnell, 1992.

Miller, Rachel. "Getting Big Results from a Small Spend." Marketing. 7 September 2000.

Scott, Howard. "Targeting Prospects with Direct Mail." Nation's Business. September 1997.

Stone, Bob. Successful Direct Marketing Methods. Fourth Editon. NTC Business Books, 1989.

"Survey Finds Offers in Envelopes Receive More Attention." Direct. 7 February 2006.

Toth, Debora. "Direct Mail: Still Marketing's Darling." Graphic Arts Monthly. September 2000.

                                Hillstrom, Northern Lights

                               updated by Magee, ECDI

RETAIL INDUSTRY

The major trend in the history of the retail industry has been the transfer of sales from individual, independent, single-product merchants to chain stores, department stores, supermarkets, malls, and catalogs. (The chain store actually dates back as early as 700 b.c. in China.) Modern retailing began in the United States in 1859, when The Great Atlantic and Pacific Tea Company (A&P) became the first chain store in the country, selling tea in New York City. Soon afterward department stores and catalog stores appeared, the latter making use of the first direct mail lists to reach customers in rural areas. By the early 1900s the beginnings of retail industry in the United States were well established.

The A&P tea emporiums were typical of early food stores which specialized in one type of item. A&P purchased tea in New York dockyards and sold it at substantially lower prices (50 percent) than competitors. A&P was sophisticated in promoting its single product. Their tea emporiums were unlike the typical general store of the nineteenth century, for they tried to create the atmosphere of an oriental palace, evoking the Asian origins of their product. A&P also brought a new concept into food trade when it assigned brand names to bulk teas. It popularized these teas even further by organizing tea clubs in various cities. Tea club members received special discount rates on A&P products. The stores also printed colorful advertising pamphlets listing tea prices and delivery dates along with literary flourishes like poetry and essays. A&P offered money-back guarantees and it advertised in big national publications like Harper's Weekly as well as smaller religious publications, hoping to win the teetotaler market. When coffee became popular in the 1880s, A&P offered its own brand, Eight O'Clock breakfast coffee, which was sold in signature red bags. Though A&P would eventually expand into a chain of supermarkets, its tea emporium beginnings contributed much to the basic understanding of how a successful chain store should promote itself and its product.

During the same period early versions of department stores (Woolworths, 1879) and catalog retail stores (Sears, Roebuck & Company, and Montgomery Ward and Company, in the late 1800s) radically changed the look of sales for non-food products. These stores became institutions virtually synonymous with U.S. culture. Woolworths had great success with over 1,000 stores only 40 years after its founding. Sears, Roebuck & Company and Montgomery Ward grew to be the largest catalog retailers in the world. They began by selling only by mail order and they thus helped people in more rural areas keep up with home improvements.

The catalog sales were no doubt helped by direct mailing lists, which appeared as early as 1903. Multi-Mailing Company of New York gathered lists from phone books around the region—from New England to Ohio—with a total of 600,000 names. This was valuable information because farmers in rural areas installed their own telephone lines which were used by entire communities with as many as 100 people serviced by one line. Companies like Multi-Mailing sought out these telephone-line owners, believing that the rural telephone system identified prominent community members who held influence over their fellow villagers.

Around 1900 retailers owned either small general stores or grand downtown department stores. By World War I (1914–1918) the department stores were prominent. In the 1920s Sears, Roebuck & Company and Montgomery Ward opted to add retail stores to their catalog operations. As the number of stores spread, reaching even the more rural areas that had come to rely on catalog shopping, people increasingly opted to shop in the department stores themselves. A century after their beginnings, Sears and Montgomery Ward earned over three-fourths of their profits in their retail stores.

In the 1930s supermarkets appeared, imitating the department stores by offering the customer one-stop shopping. They quickly dampened business for individual merchants or single-item shops like A&P's tea emporiums. It was far easier to go to one place and pay once, than to make individual trips to the butcher, various produce stands, the bakery, and dry goods store. In 1930 the King Kullen supermarket was founded in New York City. Boasting that it was the first U.S. supermarket (a claim viewed skeptically by some industry historians), it was nevertheless a pioneer in that type of store. Its decision to outsource, or hire out, warehouse work led to a three-month labor strike. But the company maintained that the outsourcing decision was good because it allowed King Kullen to be more competitive by opening more new stores and by selling more products. In the years after World War II (1939–1945), the supermarket growth rate had peaked and small independent food retailers were driven out of business by tens of thousands of newly-opened super-markets. Many remaining independent, individual, or small-chain retailers survived by pulling together into retail cooperatives.

For two decades after World War II, discount warehouses were the new trend in retail. These companies offered substantial discounts and they often managed to sell below manufacturer listed prices. Products were pushed out in high numbers with little overhead cost. This was possible because the stores greatly reduced services, and because they were usually located in the unfashionable shopping districts, which meant that they paid low rent for their retail space. These stores focused particularly on household electrical appliances. Later, the concept changed for discount stores—they became scaled-down department stores with lower prices and minimal services.

In the later part of the twentieth century the retail industry continued to experiment with new ways of reaching customers. Catalogs experienced a revival, especially for smaller companies that focused on a single product line with limited appeal such as Victoria's Secret's lingerie catalogs or Crate & Barrel's household items. These new-look catalogs were sized like magazines and introduced with high-quality design and paper. Other trends in the same period included shopping via television (viewing products on the screen and then purchasing over the phone with a credit card) and shopping over the Internet.

The retail industry grew up with the grandchildren of the Industrial Revolution, whose lives were increasingly complicated by work schedules and the urban pace, and who sought as much convenience as could be found in all aspects of living. This, and the highly competitive race for the biggest share of the market, pushed retailers to be ever more creative in finding ways to reach customers and dazzle them with store interiors, new products, or shockingly low prices. It made economic sense to put as much as possible under one roof because the customers seemed to want it and overhead costs were greatly minimized in relation to profit. But the retail giants—supermarkets, department stores, and malls alike—were not entirely invulnerable to the whims of the market, as seen in 1998, when the last of the once-mammoth Woolworth empire of general stores was slated to be closed.

See also: Chain Stores, Department Stores, Mail Order House, Montgomery Ward and Company, Richard Warren Sears, Sears Roebuck and Company

FURTHER READING

"A&P Homepage," [cited April 14, 1999] available from the World Wide Web @ www.aptea.com/.

Benson, John and Gareth Shaw, eds. The Retailing Industry. MA: IB Taurus & Co., Ltd., 1999.

Schultz, Ray. "History Lesson." Direct, February 1998.

"Sears: About Our Company," [cited April 14, 1999] available from the World Wide Web @ www.sears.com/company/pubaff/history1.htm/.

Wholesale and Retail Trade USA: Industry Analyses, Statistics, and Leading Companies. Detroit: The Gale Group, 1998.

DIRECT MAIL

DIRECT MAIL is a Marketing method for targeting prospective customers or contributors using personalized postal mailings. Like mail order, direct mail entails a two way exchange: an organization sends a promotional mailing to a recipient who responds with a contribution or an

order for products or services. But while the mail-order process generally begins with the mass, anonymous distribution of catalogs, advertisements, coupons, and/or samples of products, users of direct mail carefully choose the recipients of their marketing material, usually on the basis of some characteristic that indicates a high likelihood of interest in the promoter's business or cause. In the 1950s, for example, magazines seeking increased circulation often generated new business by pinpointing people who subscribed to other periodicals on similar topics.

Successful direct-mail campaigns require the composition or acquisition of an initial mailing list and the creation of an overall marketing approach—beginning with a personally addressed envelope and letter—that will arouse the reader's interest and generate a high degree of response. Many users of direct mail consider the method a cost-effective way to do business because buyers or donors can be targeted on the basis of memberships, interests, or previous purchases or donations and addressed with solicitations designed specifically to tap these affinities, often through emotional or psychological appeals. The maintenance and development of the mailing list is vital to continued success in repeat mailings, for new names can be added, unresponsive individuals deleted, and responsive customers and donors "upgraded," or offered new products or tapped for higher sum donations. Since the 1960s, computers and database software have allowed the management of the kinds of information necessary for sophisticated direct-mail targeting, and the development of affordable personal computers since the 1980s has made this marketing method available to the smallest of businesses and organizations. The widespread use of credit cards for payments and donations has also made direct mail more viable.

Direct mail has also become an important fundraising technique for political candidates, advocacy groups, and nonprofit organizations. In the 1960s and 1970s direct mail business owner Richard A. Viguerie was critical in raising money for conservative political causes and candidates, including approximately $7 million for Alabama governor George Wallace's presidential campaigns in the 1970s. The post-Watergate federal election reforms also contributed to the growth of direct-mail political appeals and the professionalization of the direct-mail industry. Candidates often turned to businesses specializing in direct mail appeals in order to reach many donors for relatively small contributions (to the $1,000 legal maximum), while Political Action Committees and nonprofit organizations similarly used professional direct mail services to solicit unrestricted donations on behalf of particular issues or causes.

Critics charge that direct mail fuels public frustrations with unwanted and wasteful junk mail and that the exchange or sale of mailing lists and customer/donor information raises concerns about privacy. As a marketing method, it also faces increased competition from home-shopping television programs, Internet businesses, and electronic mail.

BIBLIOGRAPHY

Fraser-Robinson, John. The Secrets of Effective Direct Mail. New York: McGraw-Hill, 1989.

Hodgson, Richard S. The Dartnell Direct Mail and Mail Order Handbook. 3d ed. Chicago: Dartnell, 1980.

Sabato, Larry J. "How Direct Mail Works." In Campaigns and Elections: A Reader in Modern American Politics. Glenview, Ill.: Scott, Foresman, 1989.

Jeffrey T.Coster

See alsoAdvertising ; Campaign Financing and Resources ; Mail-Order Houses .