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Leverage 2020 Trends With Direct Mail Push

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For direct marketers hesitating over direct mail campaign investments, 2020 is the year to strike while the iron is hot—with a good economy, high response rates and flat costs. That’s especially true because the 2021 road may be a bit bumpier.

Economy, Response and Costs Give 2020 Mail Green Signals

The U.S. consumer is confident, the economy is projected to continue growing in 2020, and mailing cost inflation is minimal. Per the December 2019 Federal Open Market Committee, U.S. GDP growth is forecast to average 2%, lower than 2019’s 2.2% but far from recession. Meanwhile, consumer buying power should remain strong with an average unemployment rate of 3.5% in 2020 and a core inflation rate (stripping out volatile fuel and food prices) projected to average just 1.9% in 2020, while the Federal Reserve’s eased interest rates continue to buoy growth. So it’s no surprise that consumers are entering 2020 with positive outlooks: The University of Michigan’s consumer sentiment for the U.S. was 99.3 for December of 2019, the highest reading since May of last year. And direct mail offers unique advantages for reaching those consumers, starting with high response rates. The last ANA/DMA data pegged average direct mail response at historic highs of 4.9% for prospect lists and 9% for house lists, way ahead of the 1% response rates of e-mail, social media and paid search. Meanwhile, low projected increases in key costs are clearing the way for ROI on mail investment as well.  For example, 2020 coated paper prices are projected to be held down by reduced demand, caused by a continued growth of electronic media use by advertising and publication printing, coupled with oversupply from new production capacity, especially in Asia. A strong U.S. dollar adds to downward price pressure. Meanwhile, postal rates for marketing mail in 2020 are expected to remain close to the average as enhanced carrier route letters go up less than average, with five-digit automation letter rates, entered at the SCF, projected to increase by 2.2%, and the high-density walk sequence carrier route letter rate, entered at the SCF, increasing only 1.1%.

After 2020, Mail Faces Rougher Economic Seas

Those who fail to take advantage of 2020’s positive direct-mail climate may soon regret the missed opportunity if costs rise and the aging economic growth cycle slips into recession. Potential postal rate increases are an especially dark cloud. In December, the Postal Rate Commission (PRC) proposed new rules for USPS rate-making that, if implemented for all classes of mail would increase rates by a massive 30%-50% over the following five years. Mailers and their organizations will want to join The Nonprofit Alliance and the Alliance of Nonprofit Mailers in fighting such huge increases. At the same time, the economy, even if it stays out of recession, is projected to slow. The Federal Open Market Committee forecasts U.S. GDP growth to slow to 1.9% in 2021 and 1.8% in 2022, as a side effect of trade-war drags. Meanwhile, new data security and privacy legislation could pose significant challenges for data-driven marketing.

Data-Driven Efforts Face Privacy Legislation Challenges

The shift to more targeted, personalized and timely direct-mail campaigns is one reason that direct mail continues to turn in high responses at acceptable ROI. But using digital print technology, coupled with audience selection and segmentation, to personalize and target every component of a mail piece relies on data, and privacy laws are coming in to regulate the previously wide-open data market. Of course, there is the GDPR (EU General Data Protection Regulation), but most marketers are going to be more affected by new U.S. state and federal privacy law pushes. For example, California’s CCPA (California Consumer Privacy Act) went into effect January 1 of this year. It applies to for-profit businesses operating in California and collecting personal data if they have annual gross revenues over $25 million; annually buy, receive, sell, or share personal information of over 50,000 California consumers, households, or devices; and derive at least 50% of annual revenue from selling California consumers’ personal information. The regulation offers consumers the right to access information (including categories of data collected, shared or sold; categories of sources from which this personal information was collected, with whom it was shared, and to whom it was sold; specific pieces of personal information collected; and why the personal information was collected). Consumers also gain a right to deletion (the ability to request that a company delete personal information collected) and a right to opt out (the ability to direct a company to not sell personal information to third parties). Now The Nonprofit Alliance is alerting mailers that new data privacy and financial disclosure bills are in the offing. California, for one, isn’t done legislating in this area, and other states (such as Virginia) are following in California’s footsteps. Plus, the Senate is continuing an effort to draft a bipartisan national privacy statute led by the “Gang of Six”—Republicans Roger Wicker (MS), John Thune (SD), and Jerry Moran (KS); and Democrats Maria Cantwell (WA), Richard Blumenthal (CT), and Brian Schatz (HI)—and most Republican Senators appear to support legislation which would preempt state privacy statutes with a uniform national standard. For marketers, the hope must be that a national “rules of the road” for data privacy will be less onerous than a patchwork of state laws.

All these potential challenges ahead are making 2020 look like a good year to profit from direct mail and targeted lists! For more inspiring direct mail statistics, see this compilation from mail automation provider Inkit.

 

Promotional Products Market Faces New Challenges

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Many of AccuList’s promotional products marketing clients have been able to ride corporate buyers’ profits to an average 1.3% annual growth rate in the last five years through 2019, reaching $17 billion in U.S. revenues this year, per IBISWorld market research. But a number of challenges, requiring innovative solutions, lie ahead.

Tariffs, Amazon, Economy May Challenge Growth

Continuation of the tariffs imposed in the U.S.-China trade war are likely to have a direct impact on the promotional products market, where the vast majority of products come from China, creating rising product prices and uncertainty, even though most suppliers and distributors have continued to post sales gains this year. One of the options that some companies are already taking is a shift to sourcing from countries outside of China, such as Vietnam, per the Advertising Specialty Institute (ASI). Meanwhile, the promotional products market is facing competitive challenges from the entry of big online competitors such as behemoth Amazon. Market execs have told ASI that they believe the entry of the e-commerce power threatens to potentially cut out suppliers and distributors by positioning itself as the lowest-cost provider from a product and freight perspective. Their worries include Amazon opting to partner with only select suppliers and distributors; selling direct through its platform; and/or using its search presence for rankings that create winners and losers, and force up advertising expenses for all. Web-based distributors and large online stores are on the front lines, but all promo products firms fear competing with the e-commerce giant’s buyer expectations and immediate delivery and return services. Finally, the potential of an economic slowdown or even recession has some nervous, too. To prep for that possibility, promo product pros say they are putting more stress on prospecting and networking, distributor-supplier partnering to reduce costs, and lower-ticket items with good repeat business.

E-commerce and Technology Will Be Key Drivers

ASI recently interviewed 10 leading suppliers and distributors in the promotional products market for their visions on handling such challenges over the next 5-10 years. The good news is that all foresaw continued growth, albeit with increasing consolidation and online dominance. For example, Mark Simon, president/CEO of distributor HALO Branded Solutions, forecast: “Technology will drive every aspect of the industry in the next 10 years. Buyers will require more robust and more diverse methods to select and purchase products, and follow their orders throughout the order life cycle… Our industry must keep pace with the enhanced buying experience other channels are providing to stay relevant.” E-commerce will be the standard, benefiting big players but leaving room for niche firms as Mark Freed, President/CEO of distributor Genumark, predicts: “I see continuous growth from the large online players that provide a fast, painless, accessible solution for clients looking for simple, inexpensive drop-shipping. I also see continuous growth and consolidation for multifaceted large distributors providing a suite of features that meet a variety of complex requirements for sophisticated clients, which could be related to logistics and fulfillment, quality and compliance, off-the-charts creativity and relentless customer service. There will still be a place for smaller, boutique-size distributors, but they better have a niche like specialized knowledge of the client’s industry or unbelievably innovative ideas.”

Bigger Roles for Data Analytics, Personalized Service, and Creative Marketing

Meanwhile, in the expanded digital environment, data management will loom large; Sharon Eyal, CEO/owner of supplier ETS Express, asserts that “in the next five years, a reliance on data will be more important than ever… We look at how many orders we have in production, which materials are being used, which items are being ordered, which types of decoration, etc. and then we expand and contract in departments as needed.” Up against Amazon, personalized customer experience will be key, too; Jana Schmidt, CEO of distributor Harland Clarke, stresses the “need to provide a personalized, frictionless experience to businesses as clients seek to promote their brands. There’s separation between having an e-commerce presence and truly building the online buying experience.” And creativity will count for even more; Debbie Abergel, chief strategic officer of Jack Nadel International, says, “There will also be a growth of creative promotional agencies – the rise and marriage of creativity and custom. Think about corporate clients that invest in giving their clients and employees a true brand product experience; not price-focused, but looking to build their brand name.” She cites the interest in reusable straws as an example. Read more predictions for the promotional products industry.