BELOW THE RADAR -- AND WORKING.
THE TITLE for this piece came from a conversation I had with Leon Henry during the Annual Catalog Conference in Boston last June. "You know," said Henry, chairman of Leon Henry Inc., "inserts fly below the radar screen. We're quite a large industry if you'd take the time to look. We're a factor and no one knows it."
So I accepted Henry's challenge and decided to tackle this story. No easy task. It's difficult, if not impossible, to accurately quantify the size of the industry. I contacted The Direct Marketing Association (The DMA) and its Alternate Response Media Council, and was told no figures exist. Most mailers don't want to talk about the success they've had using co-ops, inserts, bindins, statement stuffers and other alternative print media. And even vendors don't want to share too much information on their businesses because by and large they are privately held. But those who did talk helped to shed some light on a media segment too important to ignore.
HOW BIG IS THIS INDUSTRY?
According to Leon Henry, direct marketers should recognize that the alternative print media industry is much larger than anyone realizes (there are brokerage firms that place more than one billion inserts per year, says Henry).
Here's Henry's math:
"If you look at the raw figures, there are about 700 to 1,000 insert program owners, some offering 15 ways into a package, and that's through known sources such as SRDS and MIN. There also are a host of private deals out there between companies. Only about 135 to 150 brokerage companies exist (with a company such as mine being in the mid-size range). There are 1,000 to 1,500 maximum direct mailers out there meaning there's a lot of uncovered ground. At least 15 to 20 billion inserts a year is what I can extrapolate from what I do plus the others.
"If the average rates in SRDS are listed at $60/M (but we all know they're going for discounts in the $35/M range), and then you multiply that out, you end up with a $525 million to $700 million industry-and that doesn't include printing and other associated costs."
The first major growth for this industry occurred during the mid-1970s, according to Henry. And even though there are a host of major direct marketing businesses that were built upon alternative media-catalogers such as Lillian Vernon, L.L. Bean and Cabela's-Henry says: "The people who are doing it are very quiet about it, and just keep on trucking."
COST VS. RESPONSE
Escalating postal costs continue to be the main reason mailers get involved in alternative media programs. "With the recent postal increases, more mailers than ever are entering the alternate media marketplace," says Jody Smith, alternate media director at Walter Karl. "This includes traditional list mailers who cannot afford to rely entirely on solo direct mail campaigns as well as coop mailers looking for more responsive, targeted, yet sizeable markets." Recently, Walter Karl has seen several mailers reconfigure their mail plans to include more alternate media programs than solo mailings in an effort to maximize response while reducing costs, Smith says.
"Postage rates have continued to rise over the 45 years that I've worked in the business, and that's fueled the growth of alternative media. You can do a direct correlation [to more people testing alternative print media] with each increase," Leon Henry asserts.
"With the increase in postal expenses and printing costs in recent years, it is much more reasonable to use alternative print media," agrees Arlene Rosen, president of Alternate Response Associates in New York City, and chair of the Alternate Response Media Council of The DMA. Plus, another benefit to alternative media, Rosen says: Rarely do mailers pay rate card prices.
Of course, mailers who test alternative media must deal with the realities of somewhat lower average response rates. "Overall, response to alternative print media is going to be less than with solo direct mail," says Michael Feldstein, director of alternate media for Boardroom Inc., Greenwich, CT. "But the fact that it is going to be costing so much less can yield you an acceptable CPO [cost per order]."
Agreeing with Feldstein, Rosen says alternative media programs frequently have less than a 1-percent response. But; she adds, "You must look at it in terms of cost vs. response. With list rental, you might achieve a 1 percent or 2 percent response, but the costs could be five times greater."
Rosen recently heard one major mailer cite responses equal to solo direct mail--all costs and things considered. That mailer, Grolier Direct Marketing, uses such unique media as inserts inside McDonald's kids' Happy Meal toy packs.
Feldstein has this to add: "An important point is that the long-term value of customers generated via alternative print media is generally just as good as direct mail over time." When compared to some media like direct response television, he says, alternative print media buyers have higher lifetime value.
Ellen East, business development manager at Lifestyle Change Communications, says direct marketers who are not currently participating in alternative media are missing the opportunity to expose their offer to millions of consumers for a fraction of the cost of traditional direct mail. "At a time when mailing costs are rising, alternative media offers a practical solution," she says.
LOTS OF CHOICES: THE MAJOR PLAYERS
"Advertising is about choice," Rosen says. "And alternative media has so many choices out there that it's important to target your insert piece to the right audience. You need to match up the offer to the medium," she adds.
In addition, Smith explains, "If a mailer finds a particular list to be very successful and that company offers an alternative means of reaching that same market, such as through a package insert or catalog blow-in, we recommend that the mailer consider testing that medium."
What are the main types of alternative print media out there? Here's an explanation from some of our experts on some of the major choices; for more information on this topic, visit www.leonhenryinc.com and click on Package Inserts. A good broker can come in handy in knowing what to test.
Card decks are a low-cost medium used by many business-to-business mailers--most often for two-step, lead generation programs for higher priced products and services. The cost to participate typically is in the $20/M to $35/M range.
Catalog bind-ins/blow-ins are a vehicle more and more catalogers are accepting today, according to Feldstein. "The cost is $20/M to $30/M, and the cataloger has the right to refuse any they deem too closely competitive," Feldstein says. "But there are big audiences to be reached, as a lot of catalogers are mailing into the millions," he explains.
Smith agrees, 'This type of program offers mailers high volume to a proven audience."
Feldstein says that blow-ins for some reason, tend to do a bit better than bind-ins. Adds Rosen, "I've noticed more catalog blow-ins of late--and not just in the gardening catalogs."
Co-op mailings are where you have many different offers sharing the same space. This is a mass mailing and a price sensitive medium, says Feldstein. Prices are in the $10/M to $20/M range and are very negotiable, he explains.
Statement stuffers do very well, according to Feldstein. "These are a truly hidden medium. For a cost of $25/M to $40/M, you can have your offer sent in a first-class envelope along with a credit card company's bill. So, you're reaching someone who's most likely credit worthy. And you have the implied endorsement of the carrier," he says. Only one or two are allowed in an envelope, so there's not much competition for the recipient's attention, Feldstein adds. In addition to credit cards, look to newspaper bills, cable bills and magazine statements as possible statement stuffer vehicles.
Package inserts are highly targeted in terms of audience and due to the fact that you're reaching a known direct response buyer, Feldstein says. Plus, he adds, it's a hotline buyer, and you have that implied endorsement if your insert is going out, for example, in a Sharper Image package (a program managed by Walter Karl).
With all that going for them, package inserts cost a bit more than other alternative media: between $40/M and $60/M.
Be certain there is a limit on the number of inserts the mailer accept per package; up to six is OK in Feldstein's eyes. Lillian Vernon accepts inserts in all of its outgoing packages, but limits them to five per box, says company spokesman David Hochberg. According to Hochberg, the catalog has had several book clubs, music clubs and collectibles marketers successfully using its insert program.
Publication inserts are an offshoot of package inserts; they include magazine inserts and free-standing inserts (FSIs) in newspapers. Lifestyle Change Communications offers two targeted publication insert programs: Its Senior Newspaper Program can be selected by city, state, type of distribution and readership demographics, and For The Bride by Demetrios, which follows standard program parameters for publication inserts.
Ridealongs are offers sent in an envelope with that of another marketer, such as BMG or Columbia House. At $40/M to $60/M, according to Leon Henry's figures, the cost is a bit more. But, says Feldstein, you are dealing with an active direct marketing customer who is hopefully in the mood to buy. And again, you have the implied endorsement of the mailer.
In terms of which alternative print media are working best right now, "Everything is cyclical," says Feldstein. "Also what works best for one company doesn't necessarily work best for another company. Finally, we like to give specific media a rest after running it awhile and then come back to it at a later date."
In addition to all of the traditional means outlined above, you may be able to unearth some unusual alternative media, especially if you work with an experienced broker. As Rosen explains, "While I always look to place my clients into package inserts, some sampling programs, FSIs, ridealongs, I also have been able to create programs where none existed previously." How? "I thought about what other products that audience buys and then tried to go to those companies to see if they'd accept an insert from my client," says Rosen. "For example, I placed Parents and Child Magazine inserts into Century car seat packages, and that program ran for three years. I also placed their inserts into Playtex Nursers boxes."
9 Success Secrets
1. Get a good price. "Don't be afraid to negotiate hard," Boardroom's Michael Feldstein says.
2. Unlike direct mail where you get a [postal form]3602, inserts are more difficult to track, Feldstein says. He recommends working with your broker to stay on top of what was delivered and when.
3. Look for media with implied endorsements, recommends Arlene Rosen of Alternate Response Associates.
4. Key-code your programs. "Multiple keycodes are definitely in order," Feldstein says.
5. Have extra printed material in inventory. "This is critical for being able to take advantage of remnant space opportunities," Feldstein explains. Rosen concurs, "Print extra test stock; if you're doing 10 keys, do two additional."
6. Have a good tracking system in place before you get started, Feldstein says.
7. "Use as large a piece as the program will allow so your offer doesn't get lost in the shuffle," Rosen suggests.
8. Take as much circulation as you can afford, Rosen says.
9. "If it's working, continue with it," Rosen says. "But as in all direct mail, you should always keep testing."