Magazine article Marketing

Can DM Convince FMCG Marketers?

Magazine article Marketing

Can DM Convince FMCG Marketers?

Article excerpt

The FMCG sector has yet to be won over by direct marketing's merits.

Look through the average week's pile of direct mail that has fallen through your letterbox and there might be a striking omission among the articles.

Why is it, that among the masses of finance, charity and utilities direct mail, there is so little activity from FMCG brands?

Don't take it personally Research released in February by the Royal Mail-funded Direct Mail Information Service (DMIS) revealed that major FMCG companies are still at the experimental stage with direct mail, with a mere 10% classifiable as 'committed' users of the medium.

DMIS defines 'committed' usersas those which spend at least [pounds]40,000 a year on the medium -- hardly a huge amount -- and have done so for at least two years.

On average, the research revealed, FMCG ad budgets are about [pounds]7.5m a year, with DM spend at just one-tenth of that level. However, the medium is seen as a more relevant and powerful tool than it used to be and users cite a number of reasons for a shift in the allocation of budget from above-to below-the-line (see graph, page 30).

However, the report concluded that support for DM was "generally best described as lukewarm"--only three-fifths of respondents agreed strongly with the statement that the medium is fundamentally important in the development of relationships with consumers.

Perceptions of suitability

At a time when so many companies give lip service to customer relationship management and one-to-one marketing, direct marketers may think these findings a little dispiriting. Will the FMCG sector ever embrace DM with enthusiasm?

"I've always thought that FMCG companies would be dissatisfied with direct marketing -- they sell low-margin products via intermediaries which are bought primarily on impulse," says Dave Poole, managing director of DM agency DP&A.

"They are consequently better suited to the old model of above-the-line and sales promotion, where the latter performs the role of generating shelf-space. There may be some limited value in loyalty direct marketing, but I really don't see FMCG companies piling into it in a big way."

But other direct marketing industry figures argue that the leading agencies in the marketplace could do more to educate FMCG clients about its advantages.

"Marketers in FMCG companies are slow to divert budget into direct mail because we aren't helping them understand how the discipline can best profit their business," says Shona Forster, planning director at Barraclough Hall Woolston Gray.

"The direct model works very differently in most FMCG categories to the way it does in financial services and mail-order markets. Your most loyal customer is unlikely to provide an opportunity for increased value and profitability because there are only so many units of a product they can buy in a year, and the margin on each is usually a small amount of money.

"Also, consumers who buy heavily into a particular category often can't be persuaded to be loyal to a brand because boredom sets in. So we need to work harder at finding the right role for direct marketing, rather than resorting to textbook solutions. However, it certainly can be made to pay, given some original thinking and a thorough understanding of he market."

The relative dearth of FMCG direct mail at least gives those companies which do use the medium the chance for some stand-out and the opportunity to generate good response rates.

In 1997, the Institute of Direct Marketing carried out a Response Rates Survey which found that DM clients in food/drink FMCG had the highest response rates of any category, at 10%. This compared very favourably with 3% for travel and charity clients, 2% for the insurance category, 1% for investments and 1% for 'other financial' DM.

Short-termism strife

Other research by DMIS and the Institute of Direct of Marketing has found that 75% of consumer direct mail is opened, and that 53% is opened and read. …

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