PMMAO 2008 Review : Direct Marketing : Hitting the right Spot

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The advertising industry has another cousin—direct marketing, but it does not take the popular mass media route to talk to its audience. Though relatively a new tool  in the domestic market and it is yet to become a force to reckon with, it has been making steady inroads into the marketer’s list and snatching a share from his advertising money. Though not regulated as the mass media advertising is, it is on a high as an increasing number of marketers are ready to dabble with this medium in this era of increased media fragmentation and the resultant clutter. The higher degree of flexibility in designing communication message is also luring marketers to use this medium increasingly.

Estimated to be around Rs 250 crore in terms of agency revenues, the domestic direct marketing (DM) industry has always got thumps up from studious marketers, if the two current trends are any indication. The first trend that explains the upward movement is that all major creative shops in the country have a dedicated mechanism to churn out DM solutions. The second testimony to the rising acceptance of DM is seen in the growth figure itself that stands somewhere between 25 and 30 percent annually based on industry estimates.

RMGConnect president and national creative director Meera Sharath Chandra explains it well. “We live in a world of pluralistic media and direct marketing must go to where the customer is. By that logic, this specialisation is finding a wider canvas in its expansion to cover the digital and activation spaces. So, you could technically find unexpected consumer touch-points via interactive interfaces, promos and events.” Chandra also feels media fragmentation is a major factor that pushes more marketers towards the direct marketing option with a greater interest.

Mudra Marketing Services chief executive R Laxminarayan, who also heads Rapp Collins India, adds another perspective to it. “The DM industry is growing leaps and bounds because of the increasing relevance for personalised and technologically verified data base that marketers need today,” he says.  Wunderman India chief executive Satish Sathyanarayan also backs this notion. “Today marketers are interested in spending their rupees on the audiences who are relevant for their products and services. That’s where DM has made strong inroads. Marketers are looking at actions over awareness from their end-consumers that would mean selling their products and services as well,” notes Sathyanarayan.

Solutions co-founder and managing director Srikant Sastri also chips in with his ideas to the fragmentation theory, saying, “mass media is losing battle due to fragmentation of markets and media options, while direct marketing is set to play a complementary role rather than a competitor’s role.” Bringing in also the RoMI issue to drive home his point, Sastri says that it is also because of intense competition which forces marketers to opt for a medium like this to reach out to their consumers.

Even as talks of high growth fill the air, there are still some in the industry who choose to play it down. UCP Integral Marketing Solutions managing director Raj Bhatia is one among them. “I don’t think much growth has actually happened in direct marketing agencies’ business. However, BTL has grown as that’s the only way most products and services can actually reach out to target audiences. At the same time, mass media advertising is too expensive, and mass media is highly diverse, and audiences are highly fragmented,” Bhatia contends.

One of the major trends, evolved in terms of formats, in the industry during the last year was the shift towards more personalised ways to connect with the audience. Laxminarayanan explains this when he says that DM is all about one-to-one contact or making touch-points. “For DM agencies it is not the client but the customer who is at the centre of thinking and planning. The cost of a direct mail per customer varies between Rs 8 and Rs 10 per mail today. But today this has been done away with, thanks to technology, especially the Internet and mobile phones. DM is actually the CRM today,” he says. Sathyanarayan of Wunderman goes a step further when he says marketers today are trying to find ways to manage their tribes, and so, “marketers are moving towards building relationships with end-consumers and secondary markets, rather than be content with their immediate trade.”

Chandra of RMG also echoes the same sentiment when she says, “DM is not a stuffed envelope that lands into your mailbox.” Explaining the evolution of the tool, she adds that “it could be the ambient, it could be digital, it could be viral, three-dimensional, or on-and-off-line. It’s no longer linear. It could go the full circle. It is no longer just selling—it is all about advocacy, loyalty, and community building strategies.” Aditya Atri, chief executive and managing director of MRM Worldwide, the DM arm of McCann, also agrees that the definition of DM has undergone tremendous change with increased focus on relationship marketing. Another point that he makes is that earlier the stress was more on understanding the behaviour of the audience and therefore the focuss is now on behavioural data. Another trend that Atri brings up is that marketers have become agnostic about how the choice of the medium through which the solution has to be delivered. FCB Ulka vice-president Satish Ramchandran agrees saying, “considering the diminishing divides between ATL above BTL and looking at customer as a whole, planning of the entire communication idea has improved today, thanks to DM.”

Another trend that ruled the past year in the light of the ever-increasing need for accountability for the RoMI-conscious marketer, is the fact that marketers are opting for more than one agencies to help them with solutions. As Solution’s Sastri says, “clients have become more cost- conscious today. They seem to have turned promiscuous, not being shy to rope in more than one boutique agency to do various parts of his marketing process well. There is a greater focus on bottomlines rather than size of the firm.”

Bhatia of UCP is perhaps more critical in looking at the development. “DM as we knew, which was led by the creative, is dead. Database-driven direct marketing has grown at a very slow pace,” he says. Despite all these, as Direxions director Brian Almeida says, “the industry got larger through acquisitions as companies are searching for fresher ways to acquire customers in this highly competative marketplace.”

Going by the individual scorecards, the industry performed well in 2007. RMG Connect, which underwent a change in command, had a pretty good year. “As we increase our scale, the attempt is to consolidate and firm up our future relevance in DM, CRM and digital space including data analytics. Our proprietary CRM tool called Connexions best exemplifies our investments and commitment to becoming a new age player providing seamless convergence,” says Chandra. Almeida also claims that his company has been growing around 40 percent for the past two years. The agency has been betting big on its expansion as they have opened office in New Delhi. Mudra’s Laxminarayanan also exhibits an upbeat mood when he says, “for us it was a very good year. We more than doubled our revenues. We are among the top five players today.” The FCB Interactive head also notes that his agency could achieve 50 percent growth. But Wunderman’s Sathyan- arayan admits that his agency had an average growth, which still was above the industry average. UCP’s Bhatia is bit disappointed at his 20 percent growth. “I would say that a 20 percnt growth is very disappointing as everyone is growing at 30-40 percent.  We could reach this growth only by changing our business model, and by focusing on loyalty and database rather than creative,” he says.

Looking ahead, there is widespread optimism across the board in the industry. As Ramachandran of FCB opines, “our outlook is extremely positive, we expect huge organic growth and new clients opting for interactive as part of 360 solution. We are also seeing clients diverting higher budgets to one-one media.” Solution’s Sastri also expects a good year ahead riding high on media fragmentation. “With mass-media’s return on investment going down drastically because of audience fragmentation and media-cost inflation, marketers are increasingly looking at BTL to deliver customised solutions for their brands. My outlook for 2008 is great, thanks to a growing economy,” he says.

Bhatia of UCP also though expects a bright year as he sees digital spends going up four to five times in the future. “Also, lack of people will make the business more operation intensive than ‘smarter’. So we may see the advent of more fragmentation of services.” However, he sounds cautious when he says, “I expect some DM agencies to bite the dust and others will continue to battle with shrinking margins.” Wundrman’s Sathyana- rayan is looking forward to a bright year, drawing strength from the ongoing retail revolution. “It is bullish outlook which is supported by growth in retail, and service sector marketing. We also see evolution of the new consumer class where we start seeing non consumers becoming consumers,” he says. Bullish is also the word that sums up Mudra’s outlook. Direxions also foresees a better future driven by maturing industries and their need for customer service. RMG’s Chandra feels that there can’t be a better canvas as, “The market is growing exponentially, brands are aggressive, results and accountability are everything.” MRM’s Atri gives three basic premises on which he feels the growth would ride. “Increasing investments in the digital space coupled with higher focus on consumer engagement and increased focus on segmentation driven by behavioral data will be the way to things that would make all the difference,” he sums up.

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Neeta Nair

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