Transcript:
Peter Crosby:
Welcome to Unpacking the Digital Shelf where we explore brand manufacturing in the digital age.
Peter Crosby:
Hey everyone. Peter Crosby here from The Digital Shelf Institute. Two trends in e-commerce are aligning right now to create a new or renewed channel for acquisition and cross sell. One, the increasing cost of digital ads makes that channel obviously more expensive and less performant. Second, many retailers have begun or boosted their direct channels and have gathered strong first party data on their consumers. As a result of those two things. It is our old friend direct mail, yes, in a shiny new technology driven suit that is providing strong results, nimble and precise targeting at a reasonable cost. Dave Fink, co-founder and CEO of Postie, joined Lauren Livak and me to explain how.
Peter Crosby:
So Dave, thank you so much for coming on the podcast today. We're really looking forward to having this conversation.
Dave Fink:
Yeah, so am I. I have been counting on the minutes.
Peter Crosby:
Literally we just were. So we're in a time where everyone, all of our listeners are looking for ways to reach consumers less expensively that cuts through the noise that exists out there, that it's hopefully personalized and best yet optimized. And according to you, the answer may be an old school tactic that's wrapped in a new set of modern marketing capabilities. That's right, folks, we are talking about direct mail on the podcast today. So Dave. Yes, I know, the old is new again. Tell us why direct mail is sort of returning to or maybe becoming a great tool for brands to use?
Dave Fink:
Sure, and I would say that it's not just returning per se. The way I would frame it is advertisers that have traditionally engaged in the channel or thinking about it differently and advertisers that have not yet leaned in with the channel are starting to get excited about it and seeing results as a result of their investment in the channel and willingness to open their mind and experiment. So first of all, the reason I think it's important, and I don't think this is going to come as any awakening to any of your listeners, is that over the last 15 years or so with the advancements in targeting and user interfaces and integrations and data tools in our favorite digital channels, namely programmatic and social and search, we've been able to do some pretty amazing things.
Dave Fink:
We've been able to do a lot with much smaller headcounts. We've been able to automate and create really solid workflows that are incredibly efficient and getting lots of different channels working together. At least in the digital world. We've been able to be really addressable with our advertising spend speaking to very targeted segments of prospects, consumers, et cetera. And it kind of harnesses all of our first party data to gain insights into why consumers are engaging with us as a brand or as a product or a service. And that's been great for many years, but we're all feeling the pain that's coming from the mass amount of ad dollars that have been shifted into a few key channels and the lack of efficiency that we're now seeing.
Dave Fink:
So sure, we're all still on Facebook and Instagram and Google, but we've seen ad rates go through the roof. We've seen the level of competitiveness with advertisers in our own competitive set, let alone across other verticals and industries compete for the same eyeballs, the same impressions, the same ad placements, and the tools are still there. The data and the targeting's still there, the rates are going up and it's becoming harder and harder to find efficiency in those channels.
Dave Fink:
And while I would never suggest, hey, let's move away from those channels entirely, my philosophy is that we have to move to a more omnichannel approach without giving up our addressability, our measurement capabilities, our efficiencies that we've worked so hard to build into our marketing stack. And so that then leads us to the question of like, well, what are the next channels? What else can be big and scalable and efficient to offset some of the inefficient budgets that we're putting towards some of the wall gardens, Facebook and Google that in turn will probably make Facebook and Google behave more efficiently as well. And in the offline world, direct mail is a channel that has a lot of similarities with these newer modern digital channels.
Dave Fink:
And so direct mail has always been an addressable channel. You're sending ads directly to individuals living at specific households, and if you're doing it right, you're leveraging data and analysis and prediction in order to determine how best to allocate budgets to different segments within your addressable markets and how to speak and tell your story appropriately to those different segments. It's a channel where there's measurement, we know who we're sending our ads and in most cases as a brand we're now capturing data back, understanding who's converting and engaging with our brands so you can identify which of those audiences are engaging and driving the return on investment that you're looking for. And when you put those two things together, that means that all of a sudden you can start testing and optimizing different tactics, strategies, messages, offers creative frequency the same way we're doing it on digital channels.
Dave Fink:
So for us, we just got really excited about the power of it and the reality is that the channel, it never went away. I mean it's a $50 billion media channel here in the US alone. It's monstrous. It's just that it hasn't been as ubiquitous as social or search or programmatic or retargeting or email because the same level of innovation hasn't flooded into the channel. And so that's what we do every day. We think about how to make the channel behave in more innovative ways that think and align the way that we as modern brands think, but the power of the channel, the capabilities of it has been here for 100 years.
Lauren Livak:
And I would imagine that a digitally first brand, the first thing they think of when they're trying to go to market isn't direct mail. They probably don't think of that as their first channel to go to, but why should they? What are some of the characteristics of a campaign that they should consider when they're thinking about that as a channel?
Dave Fink:
Sure. I would say there are certain verticals that just have unique requirements or capabilities that make them gravitate towards direct mail. And a few of those categories are things like very high consideration product or services like automotive where you're not going to make a decision based on one banner ad or one news feed ad, how you're going to spend $20,000 to $100,000 dollars, that's just not going to happen. Two would be categories that are weightier in their decision making. So things like insurance where those are really serious life decisions and those are big decisions and for typical consumers are a little bit scary. And so having a weightier way to engage with those prospects make a lot of sense as a core channel out of the gate. And then certainly categories like consumer lending where there's unique data that you can tap into credit type data, credit risk type data that can't be applied in digital but can be applied in direct mail.
Dave Fink:
But you're launching a business in one of those categories, it makes a lot of sense for you to lean in with direct mail first. I would also say that there are lots of channels and businesses where it wouldn't make sense to start with direct mail because direct mail may require a bigger budget than some of the more lighter channels like social where you can put thousands of dollars at risk learning what the right messaging is, the right funnels, the right way to engage. And you can do that fast and you can do that really efficiently.
Dave Fink:
It's not that I would necessarily say direct mail should be your first channel, but it needs to be a part of your mix if your goal is to scale and your goal is to scale and eventually become profitable or just start out by scaling profitably. Because even though Facebook may be a great channel to test and learn really early in your brand's life, eventually you're going to hit this kind of asymptotic path to profitability where every incremental customer that you're acquiring on the channel becomes less efficient, has a lower lifetime value is more expensive from a CPA.
Dave Fink:
And that's the challenge with social. It's a great place to learn, it's a great place to scale fast. It's a really challenging place to find profitability. So once you get the basics kind of learned in your business, if you're a new business or launching your product, that's the time that I would say is you should be leaning in with a channel like direct mail.
Lauren Livak:
And I love you shared when we were talking about this originally that you don't think about it as paper and ink, you think about it as, what was it, programmatic audience, machine learning?
Dave Fink:
And measurement. That's exactly right. So the direct mail space, because if you think about it at it's core, unlike digital where you're pushing pixels and it's all happening in real time, automated fashion, direct mail requires literally complex manufacturing every time you want to engage as an audience or serve an ad. There are literally containers being shipped across oceans carrying paper and there are three story machines that are producing the actual creative and the art. And then there are trucks that are palletizing and delivering running complex logistic formulas to get mail delivered fast and efficiently. Then the US Postal Service has 600,000 employees working to actually handle the last miles. And so for many, many years, that's how the channel was, thought it was a procurement game, it was how do I buy the paper or the print and work with a manufacturer to get this product out in the world?
Dave Fink:
And we just looked at and said I understand why that is the way that direct mail had been run, but that is not at all the goal of the marketer. The goal of the marketer isn't to ship pieces of paper to people's households. That's not the goal. The purpose of the marketer is how do I drive awareness of my brand or product? How do I engage consumers? How do I drive transactions and revenue in an efficient way? And so we just stepped into the channel and said, okay, let's recreate the channel and the way it works from the perspective of a marketer, let's just think about it from what do we as marketers need and we need addressability and we need data and we need machine learning and we need prediction, we need interaction with all of these amazing complicated database and CDPs and CRMs that we're working with.
Dave Fink:
We need an understanding of why we're making decisions and which of those decisions were right. And they're delivering great returns in easy to understand dashboards and reporting views. And so yes, certainly there's no way to execute direct mail without focusing on the operations and logistics. That's something that we do with a lot of integration software and complication. But we're trying to create an ability where the marketer doesn't need to think about that anymore. They're engaging with their first party data to become smarter. They're thinking about what's working in other channels, They're thinking about testing different model builds or different CRM segments or speaking uniquely to different segments within their various addressable audiences to drive their marketing goals.
Peter Crosby:
So David, can you give us an example of a brand that is using direct mail in this modern way that sort of brings together all those components to really get an effective modern direct mail campaign that shows results?
Dave Fink:
Yeah, I'll talk in terms of a number of categories so that if we go a little bit deeper, I'm not doing anything to break confidentiality on data, but a few different wide range categories. So let's start at the top. We're engaging with and we're seeing the biggest telecoms in the world, telecommunication companies that have very specific addressable markets. So they service specific regions and sometimes micro pockets. So geo fencing is very important. They have in many cases decades of historical data understanding who in different households has become a customer, a subscriber and who's not, who's a cord cutter, who's on fiber, who's on copper, who has multiple mobile devices, et cetera. And then they're also looking for ways to figure out moving patterns in migration patterns which became even more relevant in a COVID and post COVID world as the world tended to move around at a higher pace.
Dave Fink:
All that data can be leveraged in the direct mail channel to a geo fence very specifically to ensure that there's no waste outside of an addressable market. So it's one of those channels where you know every single address of every single individual who you're engaging and allocating budget in your audience to raise or raise your accuracy there. Two, they're leveraging all of the first party data on historic behavior in order to build lookalikes, identifying which individuals in their addressable market that are not already customers are most likely to be responsive to a specific ad. They're running very complex creative matrices where they're able to compete with different competitor sets in different micro regions. Because if you think about something like telecom the competitors they have in one city or one state are very different than the competitors they have in another city and state.
Dave Fink:
So to be able to understand and present competitive benefits and value on a creative basis gets complicated. It's a little easier in digital but historically in direct mail becomes complicated to execute. And lastly, they're being more time specific. So instead of thinking and executing in terms of big bulk sends on a monthly or quarterly or even biweekly basis, they're thinking in terms of how do you activate against audiences closer to real time as they see changes in behavior. So it could be as simple as someone who has recently moved into a household, why are you waiting a month before you're engaging with them just because that's the schedule that you're going to production on. So they're working on daily trigger campaigns where the day that someone is registered as new resident of a new address within their addressable market that fits a lookalike model or a cluster analysis model, they're able to reach that individual within a day or two.
Dave Fink:
So that's a wide range of use cases for a complicated organization like a telecom. Now you move to an equally interesting set of advertisers, omnichannel retailers. Think about the kind of the mall based or core city base clothing and apparel retailers that we all shop from on a regular basis. Those brands, for years, have been migrating towards very micro level segmentation based on recent and historic transaction data. So instead of engaging through email or SMS, the same with everyone in your CRM, everyone that purchased in the last 30 days or hasn't purchased, maybe re-engagement campaigns that haven't purchased in the last 30 or 60 days or 90 days. They're actually leveraging what they know about how that individual engaged with their brand, what categories they shop from, what color profiles they tend to gravitate towards, what average order values drive them. Are they offer driven or are they new product specific driven?
Dave Fink:
And they're able to build very complex kind of programmatic campaigns in digital. Well they're now doing the same thing in direct mail. So again, instead of optimizing towards an AB creative test, they're thinking about how to paint in tiny little micro brushes in a very dynamic fashion so that this specific piece of creative that you may receive maybe very different than what I receive because we live in different regions and we have different frequencies of purchase and we purchase different product categories.
Dave Fink:
That's, to us and really to me, what is so exciting about the channel, it's possible to execute that type of marketing with, you need software to get you there, but the channel does support those capabilities.
Lauren Livak:
The first thing I thought of when you were saying that is anything skin related, if you're in a region where it's dryer or there's more moisture, you might need a different type of lotion for your face or your body. That's could be an example for a CPG company trying to target environmental things that are impacting their products?
Dave Fink:
That's a great use case. Absolutely. But also, you translate that same line of thought into clothing and apparel. Why are you going to include pictures of winter clothes when you're targeting someone in, even though it may be December that they live in Florida or Arizona or Southern California or Texas, that wouldn't make sense. Those type of campaigns, that was always the problem.
Dave Fink:
I remember, I'm dating myself, but I remember the late nineties, early 2000s when I was first involved in online advertising and engaging with brands that didn't even have a digital team. They had some men or woman in a corner office down in the basement trying to figure out what digital advertising was all about. And I would say things like, "Digital is measurable. You can run personalized ads to different individuals, it's fast." And now we take that for granted. And of course you could be a small mason startup brand and you're running very complicated things through Facebook and search and your digital programmatic and email. Why shouldn't you be able to run off on media that way? You may not be able to run the same level of addressability and things like out of home or billboards or train takeovers, but direct mail does give you that addressability.
Lauren Livak:
And to your point about teams and who's tackling things like this, in terms of omnichannel, you have to get your whole organization on board to execute something like this. What teams do you usually work with? Who's involved in these conversations to get a campaign like this off the ground?
Dave Fink:
That's a phenomenal question. Very, very insightful question and something that we certainly do lots of training and wrestling with in our demand gen and go to market teams for sure. It varies depending on where the prospect falls and we kind of think about our go to market as an XY axis and there's one axis that is what we would call challenger brand kind of digital native disruptor all the way to the other end of the spectrum, which would be you Fortune 50 companies, biggest enterprise companies. The other access would be they are heavily invested in direct mail, could be $100 million piece of their P&L all the way down to, doesn't even know what a stamp is even.
Lauren Livak:
Please tell me people like that don't exist.
Peter Crosby:
I haven't used a stamp in so long I have to say because I don't write checks anymore. So many of the things that I used to use stamps for, but I'm also a bad communicator, at least.
Dave Fink:
It is a judgemental free podcast.
Peter Crosby:
You think so?
Lauren Livak:
Keep talking.
Dave Fink:
So maybe everybody still remembers what a stamp is but you get the picture, which is, it's just not lexicon from a marketing perspective. And so in the group, whether they're enterprise or whether they're a digital native challenger brand, if they are not doing direct mail chances are they don't have anyone on the team that has any experience with it, in which case we're engaging in broad strokes typically with two different teams with the CRM team to talk about CRM initiatives and we're talking with their demand gen or acquisition teams and we're just talking in terms of marketing goals, which we love. Those are really fun conversations because they're not showing up with a lot of baggage and legacy assumptions on how the channel works. They're just thinking in terms of this is what we're trying to accomplish from a marketing perspective as a brand.
Dave Fink:
But then you flip to the other end of that spectrum where DM's a well oiled machine, they may have 50 different people touching DM ranging from procurement to data modelers to measurement teams and analysts to creative gurus and product individuals, integration folks on the engineering team. And in those cases we're engaging with a couple different teams. Sometimes we're engaging with the integration lead who's responsible for any marketing software component in their stack. We're typically also engaging with the marketing managers because those type of brands tend to have multiple divisions or sub brands. And ultimately the P&Ls on the marketing society is driven by the marketing P&L owner at that brand.
Dave Fink:
And we oftentimes could be talking with the design team and there's a procurement team as well. Those conversations get a bit more complicated because they have just more layers to the organization. They're bigger and they have kind of legacy debt associated with how the channel is run. And if we're in that conversation it's because they have some pain points or they're looking to do things that they can't do without technology. So really ranges. Vertical can play into it as well what the titles and individuals look like. But that was a really good question. It's something we absolutely try to get better at understanding on an account by account basis to ensure we are talking to the right people in there.
Peter Crosby:
Well when you mentioned technology and when you go to your site, it's run direct mail campaigns, just like you run digital ads with the push of a button. So tell me about, because I imagine when people are coming to you with pains, it probably has, I would imagine the ones that have been doing it for a while are frustrated with both the pace, the complexity, the targeting capabilities and that technology can be a solver for that and the more established direct mail companies just have not innovated in that way. Is my guess anywhere near correct?
Dave Fink:
You're spot on. So we would think about three core buckets of pain that really any media channel but certainly direct mail from a legacy perspective carries. So one is just the targeting. When you think about what you can do with an integration and a click of a few buttons on Facebook and Instagram or TikTok or Google Display Network or the Trade Desk or Data Zoo or DB 360, any of these programmatic platforms, it's remarkable. They make it possible and in many cases relatively easy to do very complex things with data science and segmentation and targeting. So that's a pain point where even if I were to drop names, you'd be shocked at some of these organizations that are in many cases spending, tens of, if not hundreds of millions of dollars in the channel and they have frustrations and complications around the limitations of what they can do from a targeting perspective.
Dave Fink:
Two would be the measurement side of things. It's a channel that has historically been measurable, but it's been done on Excel sheets and lacking fidelity in the data. And so that leads to lack of accuracy in your measurement, which leads to faulty assumptions and how you optimize your campaigns. So the cleanliness around your data pipes and how you're getting accurate views and insights into what's performed, what's not is a second bucket that happens regardless whether you're enterprise or a smaller brand.
Dave Fink:
And then third piece is execution. Nobody really enjoys the executional part of gam, at least the production part of it. That's not true that nobody, the manufacturers do, that's their business, that's a great place for them to be and they bring a lot of expertise. But the marketer sitting there with the mark on his or her back to hit a certain number of new customers with an allowable CPA or hit a revenue goal and a profitability metric like that, they're typically not looking to spend the better part of their week dealing with how paper gets from a warehouse to a printing press and then to the US Postal Service.
Dave Fink:
And then just the execution includes in integration of what can be done, how you move direct mail from a channel that's been run as a silo because it has been analog to all of a sudden having the channel integrated with your full marketing stack. So the same data pipes, the same predictions, same addressable strategies and knowledge and insights on prospect audiences or CRM audiences can work harmoniously. That's part of the executional side as well. And then certainly the speed, how you go from an idea to the real world in a matter of days versus weeks or even months.
Peter Crosby:
That's very cool. I'm going to date myself here I was doing marketing back in the day when you sold through brochures, multi-panel fold outs. And actually one of my favorite things was going to the printing house and just watching that happen because it's amazing to see. But it's really cool to hear how that old world process is moving into a new world technology base because to close out with you here, Dave, the listeners that are here that are listening right now that are thinking, I want to figure out how this fits into my mix, how can that lower my acquisition costs or how can it drive greater mentality and growth? I know this is one of those, it depends questions, but what kind of results are out there for this? Is it competitive with the other channels that they're doing with or how should they think about the possibilities here?
Dave Fink:
100%. And look, when we first came up with the hypothesis behind what we wanted to build with Postie, that was the double edged sword. We wanted to bring all this technology, but a lot of it comes to performance and transparency. And the risk was that hey, well if we create more transparency and more accurate measurement, is one potentiality that we uncover the channel doesn't work as well as digital channels from a performance perspective. And we knew that that was a possibility six years later, literally hundreds of millions of pieces of mail, tens of thousands of campaigns, thousands of advertisers later. I'm here to tell you definitively and consistently and at scale, the channel performs competitively with any digital channel maybe outside of branded search, which is going to be a very obviously tight bucket of individuals typing in your branded name.
Dave Fink:
If measured from a CPA perspective for sure, measured from a return ad spend perspective for sure. But the little gem of a surprise, even better than that, this channel competes head to head with any digital channel is that time and time again, the lifetime value of customers acquired through direct mail proves to be noticeably higher than the lifetime value of customers acquired through digital channels. And while we haven't done a true scientific experiment, my hypothesis is that if you just think about the user experience, it's fully deliberate. If you receive a piece of mail and that mail is a core driver in your behavior, it requires you to pull your phone out of your pocket or open your laptop, open up a browser, type in a URL and go and engage with that brand. And so you're fully engaged.
Dave Fink:
Whereas the double edged sort of digital is that we've all learned the tips and tricks on how to create that sense of urgency and that impulse that oftentimes may lead to a conversion. But oftentimes it's also a quick cancel conversion or someone who is unlikely to be a repeat customer because that shiny little ad that you flip by just drove you to take an action without thinking about it. And direct mail’s a heavier, weightier media tool. So I think that's why we see it. But I can again tell you definitively, it is as performant as any of the digital channels and there are oftentimes when it's more performant, it's stable, it's consistent, it gets more efficient with scale, not less efficient.
Peter Crosby:
And final question on that, do you see that that's true across all age demographics? Is the younger generation who is so digital, are you seeing them adopting this?
Dave Fink:
Unquestionably, yes. It's really tied more towards the brand and the authenticity of the media itself. The creative itself. Early on that was another hypothesis that we had. It's like, oh, maybe DM works really well in a 49 plus demo and doesn't work well in the Millennial set or whatnot. So after being in business for about a year or so and running lots of campaigns, we did an internal analysis looking at conversion rate and return to ad spend by decade band. So teens to 20, 21 to 30, 31 to 40, maybe it was 30 to 39, I can't remember exactly right now. But the gist of it is that the Millennial set at that point had the strongest results. That's not to say that the older populations didn't perform well as well, they did. But we were shocked to see that the younger populations, the younger buckets actually converted higher.
Dave Fink:
Now I will disclose that there may have been some self selective data, some biased data and at that point many of the brands we were working with and therefore the data that we were using to run that analysis were brands that just targeted that Millennial Gen Z population. But what that tells us is that it's all about the brand and the relevancy to the specific target addressable audience. Sure. If you took an AARP ad and you mailed it to a bunch of 20 year olds, yeah probably wouldn't convert so well, wrong market.
Peter Crosby:
Same in digital.
Dave Fink:
And if you took it, I don't want to insult anyone in my generation because I'm getting up there too, but a brand that clearly appealed to a teen or 20 something year old and you mailed it to 50 to 60 year olds, probably not going to convert super well to that segment either. So yeah, we have not seen any selection bias in demographic. It really just hammers home that the knowledge that direct mail is an addressable channel. And so you can get your audience and you can get your message to that audience just like you can on digital.
Peter Crosby:
Well Dave, thank you so much because I think this is a great time for any brands that are looking to drive growth in this period and are challenged by the state of digital advertising right now from a bunch of different perspectives. Kind of thinking about this in the toolkit is a really, really interesting thing to do. And I'm delighted that you came and told us about what you're up to. Thank you so much.
Dave Fink:
Thanks for having me. I appreciate the conversation and as you can tell more than anything, I have a lot of empathy for the responsibility and the role of the marketer in an organization. And so we love getting up every day and trying to think about ways to make the marketer's life a little bit easier and more successful.
Lauren Livak:
I'm going to rethink every piece of mail I get now and how it's connected.
Peter Crosby:
Thanks Dave.
Lauren Livak:
Love it. Thanks Dave.
Peter Crosby:
Thanks again to Dave for all the new generation direct mail tips and tricks, swing on over to digitalshelfinstitute.org and become a member to get all the latest a new Digital Shelf Playbook webinar is coming soon, you don't want to miss it. Thanks as always for being part of our community.
