Data Analysis and Machine Learning Causing Evolution in Direct Marketing

Trevor Rasmussen February 22nd, 2018
Marketing Insights

Direct marketing can get a bad rap, even in the banking industry, which, according to the Data & Marketing Association (DMA), is still the heaviest user of it. We’ve even heard from clients and prospects who have the perception that consumers don’t like it or that it’s not effective anymore.

More and more consumers are installing ad blockers, email filters, and rules, and other tactics to cut down on the amount of advertising they take in. In fact, according to research from HubSpot, digital ads have hit a bit of a breaking point, 87 percent say there are more ads in general than 2-3 years ago and 91 percent feel ads are more intrusive. People feel overwhelmed, interrupted, and stalked by bad digital ads, but they don’t really mind the good ones. On top of that, Pitney Bowes reports that 73 percent of consumers prefer direct marketing to mobile.

Yet, the mailbox has become so empty that people (even millennials) find it somewhat exciting to get mail again.  When direct mail arrives, your recipient must at least touch it — if only for a few moments before recycling it — but if you’ve crafted a targeted and meaningful message, it will get opened.

The DMA reports that customer response rates increased year-over-year by 43 percent, but prospect response rates more than doubled, up by 190 percent! So, it’s no wonder brands that have never mailed before are finding it a viable medium for both their retention and acquisition efforts.

Direct mail trends

According to a direct mail study by InfoTrends:

  • Amount of direct mail that is opened: 66 percent
  • Amount of direct mail that is read for a minute or more: 82 percent
  • Number of consumers who responded to direct mail by going online or visiting the physical store: 56 percent
  • Number of consumers who responded to direct mail in the past three months by making a purchase: 62 percent
  • Number of consumers who reported personalization made them more likely to open a direct mail piece: 84 percent

Data analysis moving the needle for direct mail

As the data proves, direct marketing is a highly effective way to reach customers. Savvy marketers have been using it for years, but this isn’t your parents’ direct mail marketplace. Traditional direct mail marketing has changed dramatically. The days of “spray and pray,” often associated with direct mail, are close to over. Today, it’s all about using targeted direct marketing, driven by data. It’s changing the way we communicate with our customers and prospects especially when it extends across all (or many) channels. By harnessing the power of data analytics, marketers can turn direct mail into one of the most efficient channels available.

Data analytics can use your internal data, like purchase history, and combine it with third-party data, including credit scores and payment history, giving you a window into:

  • What has already happened (descriptive analytics)
  • Why something has happened (diagnostic analytics)
  • When it’s most likely to happen (predictive analytics)
  • Where to go from here in terms of recommended actions to take (prescriptive analytics)

The impact of digital and direct marketing together

So, you’ve got this data. Machine learning, or artificial intelligence, can quickly and accurately analyze it, uncovering spending patterns, life events, and other patterns that allow you to gain powerful insights about customers and their past, present, and future behavior.

The integration of data analytics and machine learning allows marketers to target consumers with pinpoint accuracy, creating an impressive return on marketing investment (ROMI) and even more impressive lift over control (the larger your footprint, the more impressive the return, typically).

As a best practice, marketers should integrate direct marketing alongside digital channels to fuel a multichannel strategy that connects with consumers across all (or most) touch points.

Here’s some data about why:

  • Direct mail has the third-highest ROI, according to the report. Email led with 124 percent (mostly due to its low cost), followed by social media at 30 percent, direct mail at 29 percent, paid search at 23 percent, and online display at 16 percent.
  • The combination of physical and digital communications lifts response rates around 45 percent, according to Infotrends.
  • Marketing campaigns that used direct mail and one or more digital media experienced 118 percent lift in response rate compared to using direct mail only.

Let data analysis do the heavy lifting so your communications are more efficient and desired by the consumer or small business across all channels.

Bottom line: By pairing online behavioral data with machine learning, you can now create a customized mailing with a unique offer, product, and creative and send it straight to an individual consumer or business. By tracking a consumer’s unique online behavior — what items they click on and what emails they open — and pairing it with location or other demographic information, financial institutions can send mail that really matters to their account holders and prospects.

At Deluxe, we know that big data, machine learning, and AI are swiftly shifting the marketing landscape. We can help you navigate this sea change and make it work for your business.

This content is accurate at the time of publication and may not be updated.