The future of Direct Marketing as seen from 1994
First a confession… I am a hoarder! I hate to throw anything out and in my archives are articles, magazines, journals and products that I have kept on the basis that they would be useful references. I have football records from the 1970’s, Harvard Business Review publications from the ‘80s and industry publications that span across three decades. And no, they have never been referenced again. Until now!
As I was attempting a massive cleanup the other day, I found myself flicking through the pages of old magazines (instead of turfing them) and chuckling to myself both at the articles and fashion sense of the contributors and notables of the times. It was great to see some old familiar faces as well, including a rather young looking Rob Edwards, then CEO of ADMA.
One Australian magazine I used to read was Database Marketing, the first edition of which came out in June 1994. Having worked in database marketing since the earlier ‘90s it remains an area I am passionate about and although it has been called many things over the years – the insights available through database marketing can make or break a campaign.
Database marketing was popularised in the ‘80s and ‘90s. The main distinction between direct and database marketing is the analysis of customer data and use of statistical techniques to develop models of customer behaviour, and preferences to improve the targeting of marketing communications to market to create a one to one relationship with the customer. Not just personalisation of communications, but the ability to predict the needs of customers and present offers at the optimum time to secure a positive response to an offer.
Technological advances made the mining and modelling of data and tracking customer buying patterns much easier which in turn lifted the effectiveness of direct marketing. It also drove the development of metrics such as lifetime value, Recency Frequency Monetary (RFM) and the emergence of econometrics.
Research suggests that the earliest recorded definition of database marketing was in 1988 in the book of the same name (Shaw and Stone 1988 Database Marketing): “…an interactive approach to marketing, which uses individually addressable marketing media and channels (such as mail, telephone, and the salesforce) to extend help to a company’s target audience, to stimulate their demand, to stay close to them by recording and keeping an electronic database of customer, prospect and all communication and commercial contacts, to help improve all future contacts and to ensure more realistic planning of all marketing”.
In the mid ‘90s Arthur Middleton Hughes book The Complete Database Marketer, stated the goal of database marketing was to enable marketers to replicate the relationship that existed between the local corner store owner and his regular customers, only on a larger scale across thousands, if not millions of customers. Knowing the customer intimately, understanding their needs and knowing what products they bought and what they would need in the future. In simple terms, creating a relationship that was mutually beneficial and would create loyalty.
These principles still stand firm today and using insights from customer data continues to enable the marketer’s ability to build a direct relationship with the customer.
Now let’s set the scene for 1994 – what else was happening in the world? One thing I know is that I was running queries for campaigns using Model 204 code on a database housed on an IBM mainframe. And believe it or not, I am not shuffling around the office in my Zimmer Frame chuntering away to all who will listen what it was like back in my day! Back then it was considered pretty awesome technology.
Every campaign I was involved with was targeted and the queries I ran were across databases of over 7 million accounts or customers, with access to over 400 fields of data for every account. Demographic profile, monthly spend, ethnicity, credit risk, life stage, disposable income, transactional history, length of relationship, propensity to churn, gender, preferred channel of communication, responses to previous campaigns and products purchased were all referenced to maximise campaign effectiveness.
Anyway, enough about what fun I was having, join me in the Tardis to see what else was happening in 1994.
This new “internet thingy” was really starting to grow with Hotwired.com running the first internet banner ad we’d ever seen. We also saw the birth of Yahoo and Amazon, and Java programming language was released from Sun Microsystems. Concurrently, Commodore filed for bankruptcy and Netscape Navigator was released, quickly becoming the market leader for web browsing. But where are they now? It’s worthwhile noting that Larry Page and Sergey Brin the founders of Google didn’t meet each other until one year later in 1995.
We were operating on DOS 6.22 and Microsoft was beta testing Microsoft 95 having just released Windows 3.11. Most people were using an IBM compatible with a 486 processor and IBM had just introduced the first Think-Pad with a built in CD-ROM – woohoo!
Lorena Bobbitt was acquitted of attempted malicious wounding after cutting off her then husband’s “manhood” due to temporary insanity (I should hope so! Not really the action of rational person you would think). I’m sure every male reading this just squirmed in their seat just a little!
A ticket to the movies was less than $5 and petrol in Australia was less than 70 cents a litre, while milk was just over a $1 a litre.
Tonya Harding won the national Figure Skating championship title but was stripped of her title following her infamous attack on her rival Nancy Kerrigan. Imagine her and Lorena Bobbitt at a party together. Now we’re all squirming.
Ninety-five million viewers watched O. J. Simpson lead the LA Police Department on a merry chase in his white Ford bronco in what is surely history’s most exciting low-speed chase.
Lisa Marie Presley married Michael Jackson – I think we all guessed that wasn’t going to last.
The legendary Kurt Cobain committed suicide, such a waste.
The most popular movies were Forrest Gump, The Lion King, the cult classic Pulp Fiction and True Lies featuring an Austrian ex-pat and the future Governor of California in the starring role.
In politics Bill Clinton was President of the US (there was no sign of Monica Lewinsky yet) and Paul Keating was the Prime Minister of Australia.
It was a time of new fashion as we moved away from grunge and upped the ante on how we looked and dressed. Although from the photos in the magazines in my time capsule, bad ties and brown suits seemed to be the order of the day.
Now I could wax lyrically about the old days, but of more interest to me were some of the subjects in these magazines and the proposed challenges facing marketers of the time.
In the first edition of Database Marketing, there was an article on how Telecom Australia (you would know them as Telstra now) was getting tough on protecting the copyright of the telephone directories. A little ironic as there were a multitude of advertisements selling versions of the telephone directory in the same issue.
For those of you who have been following this long drawn out saga, you would have heard that in September 2011 the High Court made a determination that officially ended Telstra’s ability to assert copyright in its directories. This move will change the shape of data licensing in Australia. But what a fight – some 17 years on from this article first being published a decision has finally been made.
There were also articles predicting how retailers were going to move away from mass marketing into direct one to one communications. Hmmm… it’s taken a while but this prediction appears close to becoming reality. Although, mass marketing works and will continue to work, just talk to the big retailers in town. Catalogues are still filling the letterboxes of consumers and delivering good ROI.
Database marketing was going to be critically important to creative directors looking to capture insights into customer drivers to be able to better tailor campaigns. Totally logical, but not as prevalent as it should be given the volumes of data available to us today.
Loyalty programs were seen as the future…. and to a large extent still are. Remember 1994 was about the same time FlyBuys was launched.
One other article was titled “Database marketing – the ethical salesman.” Oh I hear the snorts of derision and the question “Isn’t ethical salesman an oxymoron?” Whilst the title does make you wonder, effective use of information gained from customer data can play a critical role in maximising the effectiveness of the sales process. And yes, there are ethical sales ”people” out there – but unfortunately the bad ones tarnish that particular profession.
The article that piqued my interest the most was “The future of Direct Marketing: Ten predictions from Drayton Bird”. I’m sure you all know who Drayton Bird is, but just in case let me refresh your memory. Drayton Bird is one of the undisputed experts in direct marketing and a doyen of the industry. Coincidentally, in 1994 Bird was named one of the first six Fellows of the Institute of Direct Marketing. In 2003 the Chartered Institute of Marketing named Drayton Bird one of 50 living individuals who have shaped today’s marketing, other names included Kotler, Peters and Levitt.
Bird has worked with many of the world’s leading brands, including American Express, British Airways, Deutsche Post, Ford, Microsoft, Nestlé, Procter & Gamble, Philips, The Royal Mail, Unilever and Visa, and has also worked with major advertising agency groups, including Y & R, JWT, FCB and Leo Burnett. In short, Drayton Bird knows direct marketing!
So here are the 10 predictions and my brief assessment of how accurate they were.
1. Direct marketing will become pervasive. No doubt about this one. In reality, it has become more the case with the digital evolution and improved access to customers. To be successful in the digital channels the principles of direct marketing apply.
2. Companies will start to exploit the full range of possibilities direct marketing offers. I think this one has partially come true. Certainly direct marketing and its principles are being exploited more, and improvements in technology enable marketers to mine their data have supported this.
3. Companies will not only build databases: they will use them properly. Oh Mr. Bird – I so wish this was the case! Whilst this prediction is based on sound logic that all companies should be building databases and then using them properly, there are many, many who do not. So much insight is not uncovered due to poorly constructed and administered marketing databases and a failure to understand the value it can deliver.
4. Marketers will take direct control over their own databases. Interesting prediction and one that continues to gain traction. There are companies creating specific marketing databases or datamarts to support their campaigns and tools available make it much easier for some of the tech challenged marketers to access data and manage it themselves. The next few years will see this become a reality.
5. Increasingly , direct marketing will be integrated with other disciplines. Once again, Mr Bird is on the money. Larry Kilmer, CEO of the DMA further reinforced this prediction with his presentation at the 2010 DMA conference in San Francisco. Kilmer claimed that it was clear that there was a merging of the disciplines of direct marketing across all marketing. An ever increasing demand for ROI on marketing spend has meant that all marketers need to be able to think like direct marketers.
6. Just as marketers have had to rethink their world around the customer, so agencies will have to reconfigure or perish.
There’s no doubt we have seen the odd agency or two perish since this article was published and there is a stronger focus on being customer led. The good agencies, or should I say the progressive agencies, are rethinking their world and ensuring they remain relevant and add value across all disciplines.
7. Direct marketers will teach ordinary marketers the importance of the value of a customer. Ouch! Ordinary marketers… what the? While I have met a few “ordinary” marketers I’m not sure that is what Mr. Bird was implying. Let’s reframe the statement to be “traditional” marketers. As outlined in some of the earlier commentary, there is no doubt that there is a strong alignment between what was once purely the domain of direct marketers and that of the traditional or above the line marketer.
8. Marketers will begin to realise all customers are not created equal – and act accordingly. Good call again Mr Bird. Segmentation of customers by geodemographics, lifestyle, lifestage, socioeconomic profiles and purchasing behaviours is a lot more prevalent today than it was before. Ease of access to data and improved two way communication between the customer and the supplier are key to this prediction being reality. Increasingly companies will have the opportunity to truly understand each and every customer and treat them differently. Sad thing is that many companies aren’t prepared to make the effort.
9. Marketers will discover that direct marketing adds value to the relationship with customers. This is a prediction that cuts both ways. Whilst direct marketing certainly creates the opportunity to build a stronger relationship, if you stuff it up, it can destroy the relationship forever. This is further exacerbated as a consequence of social networking and the significant power that the customer has taken in the relationship with the companies they buy from. If you don’t understand your customer intimately – don’t get into the conversation.
10. Direct marketers will think more about quality and less about quantity. I agree this is the case and will continue to be. Direct marketers are more about ROI and diving deeper into the relationship than lifting brand. A strong desire to be able to measure and report on the success of a campaign will drive smaller or more diversified campaigns leveraging channels that will deliver the best outcome, by customer segment.
In summary, Drayton Bird’s predictions were pretty solid – and why wouldn’t they be as one of our industry's experts. But not even Drayton Bird could have predicted the explosion in communications about to occur.
In 1994 there were no iPads, no Smartphones (in fact there were only about 1 million analogue mobile phone subscribers and the digital network was just being launched), the world wide web was only just starting to be commercialised and disk space and tools for processing data were expensive. My, my how things have changed.
I mentioned in a blog for Marketing Magazine last month that in marketing the only certainty is uncertainty. The space we operate is moving so quickly that it is difficult to predict exactly what challenges we will be facing next year let alone in three years.
In general terms I believe many marketers have not fully leveraged the power of customer data and subsequently not capitalised on the opportunities to improve the relevance and impact of marketing communications with customers. Much of what you need is contained within the customer data you have or can acquire. The tools are cheap and the channels to connect with customers greatly enhanced. So database marketing is alive and well and will continue to grow, although it is now just part of effective marketing. I hope prediction number 8 from Drayton Bird that Marketers will begin to realise all customers are not created equal – and act accordingly becomes more and more a reality.
Now, back in the archives I’ve just seen the August 1995 issue of Database Marketing, the headline article is “What the Internet means for Marketers”, now that sounds like an interesting read!
A post of mine first published at Marketingmag.com on November 4, 2011.