Nirmal D. Menon
Call it an eventful summer for the marketing fraternity. This May, relationship marketers across the country will join hands to roll out a direct marketing association. Given the lack of infrastructure, innovation, and understanding of the difference between direct marketing and direct selling, the birth of this association might seem premature.
However, honchos at direct marketing major RMG Connect feel otherwise. Catalyst caught up with Tal Adams, Chief Strategy Officer, RMG Connect (Worldwide) and Rakshin Patel, Senior Vice-President & General Manager, RMG Connect India, to demystify `relationship marketing' and to get a worldview on how the business has changed over the years. Excerpts from the interview:
Could you give an overview of the direct marketing business specific to 2004?
Tal Adams: In terms of trends, it's the growth of interactive medium. Unlike the dotcom bust, it is coming back in a big way globally, especially in Western Europe and North America. We expect to see growth across Asia where you see the digital space whether it's mobile or any other interactive device growing leaps and bounds.
Rakshin Patel: In the US, more than 50 per cent of the advertising monies is spent on relationship marketing. We are talking about not just 10,000 crores of rupees but multiples of that.
The direct marketing industry is witnessing double-digit growth. However, the spends are not only through direct marketing agencies but also from ad agencies, telemarketing companies, list broking agencies and clients (corporates) themselves who invest a lot in direct marketing.
Direct marketing is estimated at eight per cent of the total advertising pie. This spends happen through ad agencies. However, eight per cent of the total DM spend comes from specialised DM agencies such as Wunderman, RMG, iContract and Direm.
Could you enlist key sectors that have begun to adopt relationship marketing as an integral part of brand building?
Adams: It is traditionally the data-driven companies - aviation, car companies, telecom - that have a lot of data and want to target and personalise communication to their customers.
Patel: Also, B2B is a large segment using direct marketing. So we have Aviva, Wipro, Infosys and almost all technology companies which want to sell their products to other companies. We also have FMCG brands. Hindustan Lever traditionally never used one-on-one. Today it is quite active in this area. We recently did a campaign in Mumbai for HLL through which it could sell products worth Rs 10 lakh in a single day. The value was achieved despite limiting the campaign to select outlets in the city.
Adams: In the '70s and '80s, the cost of managing data and building database dropped. That allowed more and more companies to start direct mailers. However, with technology changing, we are able to do direct one-on-one communication through those media without any kind of investment. Now, we have a lot of companies coming into relationship marketing space using predominantly Internet, e-mail and mobile because individual communication cost is much more favourable. The question is again how you plan to acquire customers and generate loyalty depending upon the brand communication one seeks.
Patel: We also have entertainment foraying in a big way. Look at all the TV channels. Whether they are news or entertainment ... they ask you to SMS your response.
There is a huge need for clients to acquire customers. Mobile phones and insurance companies are some sectors considering these. The crucial questions in today's market place would be, "How much they are trying to acquire? How much they will invest in retaining them?"
How has technology influenced the growth of this business after the dotcom bubble burst?
Adams: People learnt lessons from the dotcom bust. They understand which business models work and which won't. So in most parts of the world, broadband technology is emerging as a natural way of accessing the Internet. People thought when broadband came in, they would spend less time as they could download things faster. However, people using broadband tend to access much more because they are now able to locate and download video, experience different types of content. Studies show that people spend more time on the Internet than on TV.
Moreover, customers are now taking control whereas things were pushed out to them earlier. They expect customisation and more personalisation, and tech majors are offering them technology to do it.
Patel: RMG Connect In India just launched `connexions' which is a centralised database management system, accessible by anyone across the world. So whether it's e-mail, mobile marketing, campaign management or analytics, it's all managed centrally. We are the first agency to have something like this. Clients can benefit by this system, and need not invest crores in their system.
There were recent reports of financial advertisers in the UK washing their hands off direct marketing channels, and authorities like World Advertising Research suggesting that direct marketing spends were growing at a measly 0.9 per cent.
Adams: Relationship marketing and direct marketing mean different things to different people. While some consider e-mail contacts as relationship marketing, there are others who treat it as communication cost. This is a very difficult industry to measure. I think what we know globally is that advertisers are shifting their spends from regular mediums, and one of the big beneficiaries is relationship marketing.
Advertisers may shift from direct mailers to e-mail marketing, trying to understand which of these channels is most effective. There's been another big change last year. In UK, for things like utility bills, and even for bank statements, huge sections of the population are getting their bank statements online. They are also going to access their accounts using their phones. So the amount spent on statement and bills that used to follow the direct mail route are now shifting to the online mode.
Patel: A couple of months ago I was talking to the marketing director of Standard Chartered (our client) and there was this whole thing about banks making telephone calls. They said we've to stop telemarketing because prices of our products will go up. My acquisition cost is so much lower by using the direct medium than other mediums. That's how effective it is for financial institutions like banks.
How critical is loyalty programme to relationship marketing?
Adams: There is an ongoing need to invest more in loyalty and also to get a balance between acquisition and loyalty. While acquisition is important to build up market share, companies need to realise that what matters to the bottom line is how much a company spends on looking after the existing employees. Keeping them. Retaining them.
In the West, direct marketers and postal service share this win-win alliance with each other. Why don't we have similar alliances here?
Patel: Earlier, say 15 years ago, you could not send more than 1,000 mails from a post office here. They said they could not handle the load, and charged extra instead of offering better rates. Things have changed from that end of the spectrum to what exists today. These days they ask us to use their postmen for research. The Direct Marketing Association to be launched in May will include every outfit connected with communicating one-to-one. It will include advertisers, suppliers and the postal department besides direct marketing agencies.
Given that technology and relationship marketing are inseparable, how relevant are direct mailers in the scheme of things?
Patel: It depends on what stage of communication you are in. If I want to invite you for a wine and cheese party, I cannot do that on the phone. I have to send a formal invitation through direct mail and then probably call to check if you were coming or not. So it depends on what stage of communication you are in and whether you were a customer or a prospect.
Unsolicited SMS and junk mail have given the direct marketing industry a bad name.
Patel: Yes, there is a problem. But clients know which medium is more effective. They won't stop using it because some people call it junk. There are small pockets of direct selling agents who operate on plain commissions and send SMS and call up randomly and then serially to get business. There are going to be bad apples somewhere. But the organised ones know whom to target and how relevant their messages are.
Adams: Our clients and we understand that trust is integral to any relationship. We got to protect the privacy of our customers, and do not intrude into their lives. We make sure why we want their information, and what benefits could they derive, and it's only after we get their permission, we go ahead with the one-on-one.
How will the formation of a direct marketing association have an impact on the growth of the business?
Patel: Given the unorganised nature and infrastructure problems such as lack of consumer data, advertisers have usually shied away from spending their monies on direct marketing. The formation of an association will address this issue.
One of the things we want to do is employ best practices, ethics, principles, and we will ensure that all members follow them.
The industry association will also be a one-stop destination for advertisers seeking information on how to use direct marketing, where to go for their supplies, and the list of suppliers who are ISO-certified.