Direct's digital halo effect

At a time when brands are battening down the hatches in preparation for recession, one of the first casualties is media spend. The question is: which media channels should marketers be re-evaluating, given the need to generate revenue?

With finance directors calling for quantifiable results, those channels based on a direct call to action are facing the economic downturn with more hope than most.

And yet, the omens for purely offline direct marketing aren't good. "Traditional" direct response (DR) media - the paper-based triumvirate of direct mail, inserts and door-drops, alongside DR press and TV ads - have quantifiable response as their raison d'etre. However, so have e-mail, search and affiliate marketing, techniques that are now must-haves on any media schedule.

Client-agency broker the Advertising Agency Register (AAR) reported a decline of 40% in the amount of purely offline direct marketing (DM) briefs it received in 2007. The IPA's latest Bellwether survey brought further bad news, with marketers saying they revised DM budgets downwards by 5% in Q3.

But while spend on the primary DM channel of direct mail may be falling - in 2007, direct mail spend fell by 9% compared to 2006, according to Billetts Media Consulting - traditional DR channels have found a new lease of life in driving consumers online. And the internet is the one media sector that didn't register a decline in Q3, according to the Bellwether Report.

Richard Davies, head of integration at DR agency Tri-Direct, says: "The sound principles of using direct mail or door-drops to deliver a timely message to a pre-scored individual continue to make sense. If that person then chooses to purchase via a search engine on the advertiser's website, it means the DM's targeting insight was right."

Integrating media

The integration of offline DM with online is becoming the name of the game for media agencies. Last year, Mindshare established its direct arm, led by Lucy Stafford, a DM media veteran and former director of Tri-Direct.

Stafford says Mindshare's DM billings have risen from £5m to £60m over the past 12 months, driven by clients such as telecoms provider 3 increasing spend on direct channels.

Media agencies with a direct marketing heritage claim they lead in understanding how DM and digital integrate - a phenomenon Stafford describes as the "halo effect".

Stafford believes media agencies with a DM mindset "have the expertise to understand what is statistically robust and meaningful".

Proof of the halo effect lies in agencies that have migrated from pure DM media into buying digital. For example, Equi=Media started work with clients Esure and pet insurer Allianz Animal Health buying their offline DM only, and then progressed to buying their digital channels as well.

The rise of search has meant a redefining of what constitutes direct response for both brands and agencies. In 2006, MediaCom moved its search, affiliate and search engine optimisation teams into its Direct MediaCom division.

Darren Barber, joint managing director of Direct MediaCom, says: "Search is a DR channel and we wanted to apply gold-standard DR principles to it, such as the right test matrices and the focus on return on investment."

This desire to apply the robustness of DM metrics to online is fuelled largely by what Barber describes as "over-claiming" by digital channels.

With most campaigns now based on a mix of media driving consumers to websites, channel attribution has become a big conundrum. "We talk about the tyranny of Google," says Richard Wheaton, managing director of neo@ogilvy, the media division of Ogilvy Group. "If you're the channel most closely associated with the sale, then you get the credit."

Traditional direct mail metrics such as A/B split testing also have relevance to online media. Direct MediaCom's Barber says A/B testing can be applied online by serving two different ads on a website, each sending cookies to the user.

"We then check how many people end up on the client's website," Barber says.

But the complex interdependency between channels such as TV, direct mail and search requires more sophisticated metrics. As Peter Mitchell, chief executive of Rapp Media, points out: "Linear measurement happens within channels with little or no understanding of how channels interact. That's how DM used to work."

Statistical data models are now taking on a crucial role and, not surprisingly for a metrics-obsessed sector, there's a difference of opinion about which tool is the most robust.

Equi=Media uses the DM principles of database marketing and gain-score testing to model which channels deserve the greatest investment. Media response information from data warehouse Unite Base is matched back to clients' marketing databases.

Equi=Media's managing director, Andrew Burgess, says: "We extract data such as web traffic and apply that to sales to discover the 'unbroken journey' consumers make from the initial contact to the last, and what marketing inventory they were exposed to." Using Unite Base, the agency can target search and online display according to postcode, just as it would for door drops and direct mail.

But further complexity arises where journeys to purchase are "broken". According to Kevin Murphy, joint managing director of Zed Media, the way consumers react to a DR message has fundamentally changed. "They may just research online and not purchase at that time, so the response part is broken," he says. "Some DR ads contain a bespoke URL or offer an online discount if you enter a promotional code, but most consumers wouldn't be that conscientious."

The "broken journey" phenomenon has led to the rise of econometrics in marketing, where statistical skills are used to blend past media spend with variables, such as the weather, to forecast the most efficient media choices.

Direct MediaCom's econometric modelling service, Economiser, combines variables such as a brand's ad spend, its competitors' spend and the seasonality of the market. The model redistributes sales according to its identification of the real drivers of response.

Rapp Media's Mitchell cautions on relying on econometrics too heavily because of the assumptions that are built in. "Sometimes you have to tell clients there are too many gaps in the data to do a reliable model," he says, instead advocating "robust measurement of media spend", which can be tailored for different clients.

As the pendulum for DR media swings in the direction of the internet, the trick is understanding the complex interplay between channels and what priority to give DR channels within media schedules. It's a need that has become more acute as recession starts to bite.

CASE STUDY - Honda

A combination of DM analytics, offline DM media and online channels was at the heart of a Honda campaign to prospective buyers who had expressed an interest in specific car models.

E-mail, SMS, microsites and direct mail were the channels chosen in a campaign conducted by DM shop Hicklin Slade & Partners. Mark Khoo, senior account director at the agency, says: "We know from channel preference analysis of our database segmentation that some customer types have a likelihood to prefer direct mail, some prefer e-mail and others prefer a multichannel relationship."

Michael Doyle, manager of customer understanding at Honda UK, says the company often combines e-mail and direct mail. "We have also found that using microsites and SMS in conjunction with direct mail works well with specific groups," he adds.

Those groups were identified through segmentation of Honda's database, as well as data collected via affiliate marketing and sponsored lifestyle surveys.

The agency constructed six customer profiles, including "affluent professionals" and "young urbanites". Pen portraits of each group were drawn, using survey data such as TGI and brand tracking, as well as profiling information from tools such as MOSAIC.

Twenty-five cars were sold as a result of the first e-mail campaign, equating to a sales conversion rate of 0.57% and a cost-per-sale of £215. One car was sold for every 175 e-mails sent.

Honda is set to go further in bridging offline DM and online channels. It is testing a Honda Accord mail pack produced by Sony DADC containing an interactive DVD that allows recipients to link to the brand's website and request a test drive.

This article was first published on Media Week