For printers and their ink suppliers, the direct mail segment is, as a result, an area which, if not showing growth, has at least been stable.
Since the mid-1990s, spending on direct marketing in Western Europe has been growing at an average annual rate of approximately 12 percent, which has helped ensure a continuous increase in direct mail print sales.
Direct mail operators have, however, been struggling a bit over the last few months, particularly in mail order and catalogs. Nonetheless, business has tended to be flat rather than being hit by a sharp decline, as has been the case in the advertising industry.
“We’re finding that European printers are not investing in new equipment at the moment because their customers have been postponing campaigns or cutting back the numbers of them,” said Eveline Bruins van Loon, sales and marketing manager at Halm Industries International, the Dutch global leader in envelope overprinting presses.
“However, we are expecting a quick recovery in the market later this year, certainly quicker than that in the advertising sector, “ she added. “The envelope is still the best way of reaching the customer.”
Nonetheless, direct mail still faces short-term uncertainties, in particular challenges within the direct marketing sector itself. In recent years the rate at which it has been losing share within direct marketing has accelerated, while the Internet has also been making inroads in the sector, although from a small base.
Since 1995, direct mail’s share of direct marketing expenditure has decreased from close to 80 percent to 70 percent in Western Europe. Telemarketing expenditure has risen from 19 percent to 25 percent, while the Internet has increased from 3 percent to 5 percent.
“There are variations across Europe, with telemarketing in countries like the U.K. having an even bigger share of total expenditure,” said Alastair Tempest, director general of the Federation of European Direct Marketing (FEDMA).
Direct mail expenditure in the U.K. has risen approximately 2.5 times since 1994. But spending on telemarketing in the country has almost tripled since then.
The U.K. was one of the first countries in Europe to liberalize its state-controlled telephone services. Privatization has opened up the telecommunications sector to competition, which has pushed down costs and provided opportunities for new telemarketing initiatives.
Now telemarketing is on level pegging with direct mail spending in the U.K. When door-to-door mailing is excluded, spending on telemarketing exceeded that on direct mail by 25 percent last year, according to figures from the U.K. Direct Marketing Association (DMA) and Advertising Association.
“Telemarketing now covers all sections of the media,” said Ben Hourahine, co-author of a report on direct marketing in the U.K., commissioned by the DMA. “Direct-response adverts in newspapers and magazines and on TV and radio all tend to carry free-phone numbers.”
In countries like Germany and France with a stronger tradition of mail-order shopping, a high proportion of direct-response replies tend to be through postal coupons.
Throughout Europe, nonetheless, competition from telemarketing and the Internet is making printers and ink makers focus on the need to both improve quality and lower costs.
“Quality requirements are becoming keener and keener because quality is the one way direct mail will hang on to its share of the market,” said Wim van Maastricht, sales and marketing manager at Van Son in the Netherlands.
Standards are being raised and innovations achieved through close relations between ink companies like Van Son and printers and equipment manufacturers.
“From the ink companies’ viewpoint, direct mail is still a specialist sector,” said Mr. van Maastricht. “Because of our close ties with people in direct mail we know what is wanted and how they work. Competition is strong but it is difficult for competitors to get into the market because of the necessity for good relationships.”
The demand by direct-mail houses for eye-catching materials has bolstered the use of color and meant that more ink is being used per mail shot.
“To make an impression on the householder, envelopes have become bigger and are being printed with full colors,” said Ms. Bruins van Loon. “Direct mail campaigns are also getting smaller with fewer mail shots for each campaign because improved databases have resulted in better targeting. Printers have to be sure of quicker change-overs between jobs.”
The larger envelopes have enabled flexo printing to make bigger inroads into the direct mail sector, where advances in flexo’s color reproduction have enhanced its competitiveness.
As the content of direct mail shots become more diversified, printers have been combining printing methods within their operations to become a one-stop source for their customers.
“They are not only printing the outside of the envelope but also an increasing amount of what is inside it as well, including the personalization material,” explained Mr. Maastricht.
“We’re providing a full-service package for these printers so they can be supplied with virtually all the inks they need from us,” he said. “That means we have to supply flexo as well as sheetfed offset inks and systems for quick mixing of colors. It also means doing quick deliveries because printers want to keep their stocks to a minimum.”
As direct mail shots become visually more interesting, technical demands on ink makers have increased.
“Some mail shots are now extraordinarily complex,” said David Francis, vice president, digital division at Flint-Schmidt GmbH & Co. KG. “Items inside the envelope often have a large number of folds, yet there must be no cracks or scuffing of the color inks. There is also now a need for inks which have their own adhesives.”
Increased personalization of direct mail has resulted in more use of digital printing. As database marketing has become prevalent, electronic printing has started to be a more appropriate technology for the sector.
“Personalization has spread from the wrapper to inside the envelope,” said David Pickford, commercial director at Domino U.K. Ltd., Cambridge, England, makers of digital printing equipment and ink. “Europe is now in the early stages of introducing personalized images in direct mail material, so that they match the lifestyle of the person receiving the information.”
Once digital printing starts to be applied to the provision of full color images in direct mail material, it will begin to become the predominant technology in the sector.
“Direct mail could be one of the first major printing sectors to be taken over by digital printing,” said Mr. Francis. “The introduction of digital printing on that sort of scale could lead the way to advertising agencies doing the printing of their own direct mail campaigns. Big consumer product companies like Unilever or Proctor & Gamble could also start to do the same, because it will no longer be necessary to have large purpose-built buildings for printing presses.”
With the prospect of a radical change in the way its printing is organized, the direct mail sector is already having to accept the need for a multimedia approach. It is becoming a less distinct promotional vehicle and more a method of reaching customers in combination with other means of direct contact.
Consequently, as direct marketing becomes more sophisticated and above all costly, direct mail companies are consolidating so that more campaigns, particularly international ones, are being undertaken by larger operators.
This trend should help to ensure that in the medium and long term there will be consistent growth in direct marketing and hence direct mail.
The new players have been taking advantage of the liberalization of postal services within the European Union to build up large direct marketing networks, both in the printed and electronic media. Ironically, some of the most ambitious operators in this multimedia arena have been the national post offices, most of them state-owned or only recently privatized.
The EU has introduced legislation which has already obliged EU countries to open up to free competition their postal services for parcels and heavy mail items above 350 grams in weight. The limit will be reduced in two stages to 50g by 2006, with the prospect for full liberalization by the end of the decade.
“The liberalization which has taken place so far has already led non-postal organizations to set up infrastructures and networks to compete with the post offices,” explained Mr. Tempest. “The effect has been that now across Europe, there are alternative carriers in operation, which has been a tremendous boost to the expansion of unaddressed direct mail.”
In some countries, governments have gone further than the EU regulations by accelerating the full liberalization of their postal services. In the U.K., for example, all bulk mail services are being deregulated from next year.
In response to the imminent arrival of a free market in postal services, the post offices have been expanding their activities, particularly outside their own countries, through the setting up of international networks. Some have developed their own direct mail houses with printing facilities.
The most ambitious has been the German post office Deutsche Post, which is already by far the biggest postal organization in Europe. It has its own direct marketing and catalog mailing business and through a 50 percent share in the international courier DHL, is able to deliver items directly to premises outside Germany.
“Direct mail is the only one of the established media which is certain to continue to grow,” said David Robottom, the DMA’s development director. “The liberalization of postal services will be another spur to that growth. It will help put downward pressure on costs, lead to higher quality services and result in more innovation.”