Marketers are expected to spend $39.36 billion on direct mail during 2023, down from $41.7 billion during 2022 and $43.1 billion for 2019. The reason for the decrease tends to be postal cost increases and integrated platforms.
The challenge is that postage spending has increased, from 45.7% of the overall cost during 2019 to a projected 48.4% for 2023, according to data in a new report from the Winterberry Group with the U.S. Postal Service (USPS) as the presenting and commissioning sponsor. It is lower for nonprofits due to the nonprofit postage rates which are usually in the 20-25% range of overall mailing costs.
The growing costs and challenges associated with the addressability of data-driven digital media are leading many marketers to test alternative channels, including direct mail, in support of their growth ambitions, according to the report’s authors.
Nonprofits relying on direct mail for fundraising have been reducing mail volume for several years due to postage costs. Direct mail totals – letters, flats and parcels, and periodicals have declined from 13.8 billion pieces during 2019 to 12.04 billion pieces during 2022, according to data from the Alliance of Nonprofit Mailers in Washington, D.C.
“While supply chain issues are no longer prevalent for nonprofits, cost increases have made it more challenging, over the past two years in particular. Paper, postage, and production cost increases have reduced purchase power by 25-30%, said Roger Hiyama, executive vice president, solutions & innovation for Wiland, a premier sponsor of the research and audience development firm that works with nonprofits.
“Direct mail continues to be the primary acquisition channel for nonprofits because it is keenly targetable, personalized in its content and messaging, very measurable and still the most cost effective medium for most nonprofits,” said Hiyama.
Aggregate marketer investment in the direct mail channel has yet to return to pre-COVID levels and might not do so for another year or longer based on prevailing demand trends. But it is still considered a key to overall performance.
The authors found in the data collected:
- Deeper integration of direct mail with enterprise marketing technology platforms will support more seamless campaign management, orchestration and reporting, assuming the platforms continue evolving to support direct mail integration, embracing its role in the omnichannel mix.
- The rapid maturity of AI and machine learning applications will impact how DM programs are conceptualized, built and executed. As with other marketing disciplines, innovation in this respect is more likely than outright disruption, according to the authors.
- New generative AI tools show promise for automating certain manual composition and workflow functions. Over time, the technology might grow to power more granular and faster-paced predictive segmentation, personalization and cross-channel messaging applications.
- Advances in AI-enabled analytics and the ability to examine ever-larger datasets can enable better targeting, helping nonprofits achieve higher response rates and higher long-term value of newly acquired donors, said Hiyama.
- Measurement will continue to represent the keystone to campaign optimization. Brands will need to go “beyond the offer code” to better incorporate direct mail in multichannel attribution strategies with the aim of better understanding how the channel impacts a range of desired actions.
- Technology will play a more prominent role in facilitating faster campaign turnarounds, vendor coordination and other core functions — all essential if direct mail is going to continue playing a central omnichannel role alongside digital media that seem purpose-built to support speed and targetability; and,
- Legacy preconceptions of direct mail will continue to give way as more brands embrace its role as a dynamic performance media channel — substantiating the business cases needed to dissolve legacy operating silos, pursue deeper integration of direct mail in omnichannel strategies. It will be a more robust marketing infrastructure geared to drive desired outcomes, honor consumer preferences and safeguard data in accordance with changing regulatory standards.
Marketers responded that they expect to maintain direct mail budgets at comparable levels. It has fared particularly well in recent years as better data availability and the advent of sophisticated measurement and attribution technologies have allowed for more precise comparison against other channels, according to the authors.
The research was substantially completed between November 2022 and March 2023, with updates completed between May 2023 and August 2023. The research included a series of interviews with senior executives from major U.S. mailers and companies in the direct mail supply chain (including agencies, data providers, marketing technology developers, commercial printers, mailing service companies and others), according to the report’s authors. There was a survey that received responses from more than 500 enterprise and middle-market marketing and agency executives.
