Acceptance of direct mail

The acceptance of direct mail is one of the most important factors in the development of the direct mail market. The indicators which are most relevant in this connection are the following:

III.3.1 Acceptance of direct mail: Development of the retail sales market and the mail order market

Our assessment and previous studies show that the retailing businesses and financial institutions are the most common users of direct marketing techniques in general and direct mail in particular. The retailing business, and more precisely, the mail order business (within the retailing business) is the most intensive market in the demand for direct mail services. In fact, mail order companies are basically distributors of retailing goods. Therefore, the development of direct mail is fully linked to the development of the retailing business.

Certainly, we could say that the mail order market is a portion of the retailing market.

Therefore, if the retailing market grows, the mail order grows in the same proportion.

Needless to say the mail order business has developed as a major competitor of store retailing services (mail order companies increased their turnover by 36 percent between 1989 and 1994 – EMOTA/AEVPC, 1996). Therefore, the percentage that the mail order market represents in the total retailing market is increasing as consumers become more comfortable using mail order and as consumers become aware of the advantages of this kind of market, which is highly influenced by cultural features of the population and the image of the mail network of the country.

Table: III.3.1.1: Percentage of the total retailing market represented by the mail order market

Indicators affecting the acceptance of direct mail Reliability of service

Development of the retail sales market and the mail order market

Direct mail as a percentage of total direct marketing

Source: Direct Marketing in Europe EMOTA, June 1997 n.a.: not available.

The countries where the mail order market is most developed are Germany, the Scandinavian countries (Denmark, Finland and Sweden) and Austria, France and the U.K., whereas the countries where it is still in the process of development are the Latin countries (Italy, Portugal and Spain). The reasons for such a low rate of development vary among countries. In Spain and Portugal there are important cultural features of the population that prevent the success of the mail order business and the fact that the kind of products marketed in the past using this kind of selling technique were low quality products. However, in Italy it is considered that the current level of reliability of the services given by the public postal operator is the main problem for such a low rate of development.

Therefore, this ratio gives an overall idea of how developed the direct mail market is in different countries, but not such a clear idea of the evolution of demand.

III.3.2 Acceptance of direct mail: as a Direct mail percentage of total direct marketing expenses

(in ECU) (in percentage)

Member State

Mail Order per capita

(1996)

% that mail order represents of the

retail market (1994)

A - Austria 149 3.8

B - Belgium 62 1.7

D - Germany 261 2.6

DK - Denmark 123 3.9

E - Spain 14 n.a.

EL - Greece n.a. n.a.

F - France 126 1.7

FIN - Finland 112 4.4

I - Italy 12 0.4

IRL - Ireland n.a. n.a.

L - Luxembourg n.a. n.a.

NL - Netherlands 67 1.4

P - Portugal 26 1.4

S - Sweden 96 2.5

U.K. - United Kingdom 131 4.2

As shown in section II.3, direct mail expenses represent the biggest share of total direct marketing expenditure.

However, some statistical studies show that, although this ratio would increase significantly in countries where direct mail expenses are still low and consequently have an impact on the overall demand for direct mail services, this impact is perceived as not very significant.

III.3.3 Acceptance of direct mail: Reliability of service

The survey carried out by Arthur Andersen on 51 senders of direct mail throughout Europe shows that the main criteria that determine the choice to use the delivery services offered by public postal operators are basically factors related to "quality of service":

Table III.3.3: Criteria determining the choice of senders when using the services of public postal operators

Source: Arthur Andersen Survey, 1998

There is also a high degree of consensus among postal regulators that the current quality of direct mail services provided by public operators and, when allowed to do so, private operators, is fairly good in terms of price, transit times, reliability and regularity of service and customer service.

Table III.3.3.1: Postal regulators' view on current quality of direct mail service levels

Source: Arthur Andersen Survey, 1998.

Quality of service covers not only increased customer service at every step of the value chain (as explained in section IV.5.1), but also reliability of current and future performance of the service. Indeed, the future behaviour of the demand for direct mail services, as well as the attractiveness of the market for new potential entrants, is strongly related to the reliability of the service.

In this connection, there are three main areas which are of capital importance for senders of direct mail. These areas are, as identified not only by senders of direct mail, but also by the whole European direct mail market:

1. Universal service coverage, 2. Transit times: predictability, and 3. Flexibility

Universal service

coverage-A crucial factor closely related to reliability is that universal service coverage, while ensuring affordability and compliance with minimum quality standards, seems not to be a major problem in the different EU member countries, although remarks on the need for some improvements in quality were made. The guarantee of full universal service coverage seems to be a fact, and therefore an advantage for the use of direct mail services.

Transit

times-Postal operators are required to take full responsibility for mail from receipt to delivery.

Indicator

Number of Affirmative Responses (Good quality of service)

Reliability 13

Regularity 13

Broad delivery network 13

Price 12

Transit times 12

Added value 12

Customer services 12

New products and additional services 11 Completed service (one-stop-shop) 11

In this connection, a factor of capital importance for senders is knowing how long mail takes to reach its final destination. In this respect, operators should guarantee

"predictability". That is, senders are more concerned about controlling "when" the items will reach the final destination, rather than obtaining deliveries in less than three to four days.

Needless to say European senders also want delivery times of less that three-four days, but predictability seems to be more important.

Flexibility:

Senders of direct mail increasingly expect flexibility and certain special services tailored to their needs.

In this connection, 89% of the direct marketing companies and Associations surveyed and 83.3% of the senders surveyed believe that an increase in competition in the delivery services market will lead to better direct mail delivery services than those currently provided by the public postal operators.

Table III.3.3.2: Do you think that the increase in competition will lead to better direct mail delivery services than those currently provided by the public operator?

Source: Arthur Andersen Survey, 1998.

Conclusion-Future customer needs, mainly related to reliability of services, seem to be crucial in defining the structure of postal services in the future to better meet the demand and encourage senders to increase such demand for direct mail services. Therefore, meeting the expectations of senders is of capital importance for the development of mail in general and direct mail in particular (see the assessment on the trends and expectations of senders in section V.1).

In fact, previous studies (such as the Universal Postal Union Study" Post 2005, Core If changes in delivery times are not predictable, the situation could make a marketing

campaign fail if it is heavily dependent on delivery by a particular date, and could cause cause the sender to lose certain expected sales and customers.

Direct marketing companies and

Associations

Senders

Total surveyed: 20 42

Yes No

17 2

35 5

No answer 1 2

Business Scenarios") have evaluated that in high-income countries quality is increasing and will increase in the next ten years at an average rate per year of 2.17%. Therefore, it is forecast that the demand for direct mail would grow in line with that trend.

Obviously, it is also expected that those countries with comparative lower quality levels would increase their quality levels at a higher rate, whereas in those countries already offering very high quality levels the rate of increase would be smaller.

The model in section V has been built up on this basis.