Episode 79: Synergies Between Direct Mail and Digital Marketing: 1 + 1 = 3

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‍Transcript

Announcer
Welcome to Nerd Marketing, an original podcast for eCommerce operators and marketers looking to level up. Drew Sanocki and Michael Epstein will bring you actionable strategies from their decades of running eight and nine figure brands, along with interviews and insights from the leaders of some of the most successful brands in the world.

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Drew
Hey everybody, Drew Sanocki, Nerd Marketing Podcast. We have brands, big brands coming to us every day saying they've got massive budgets to burn. And should they go and drop it on a Super Bowl ad? Because there's no other way to acquire customers. Meanwhile, every day catalogs are showing up at their front door. It's a great way to acquire new customers, a time-tested way. And today on the Nerd Marketing Podcast, we've got the CEO of CohereOne.

CohereOne is one of, if not the biggest, catalog agency, they've been doing it the longest. What makes them unique, they've got a great creative team that get into a lot of the creative behind the catalog. And also they sync it with digital campaigns, which as you'll see is secret sauce for getting your catalog to work. Big takeaway is like can generate new demand through catalogs. And there's a lot of synergies between your direct mail and your digital channels. If you're digital only, you're foregoing that synergy. So we get into where to start, some tips, some key takeaways, we talk about our favorite catalogs. Today, the CEO of CohereOne, Tim Curtis on the Nerd Marketing Podcast. Hope you enjoy it.

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Michael

Tim, I had the pleasure of hearing one of your talks, actually, at the National Postal Forum in Indiana a couple of weeks ago. And one of the parts that you spent a good chunk of time on that I've always found particularly interesting, compelling, and something that doesn't get talked about or measured enough is this halo effect on other channels when you're running direct mail campaigns and when you're in the mail. A lot of people are always thinking about just what's my direct response ROI on a particular campaign that went out, but they're not able to identify or measure how it's impacting other channels. I'd love for you to talk a little bit about how you look at it, what you've seen in your work and some of those anecdotes that you shared at the postal forum. 

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Tim 

Yeah, you bet. Well, it was great to see you. It was fun to kind of hang out afterwards as well. I kind of have to take a step back and say I come from the digital side. So I came from digital marketing. I had a background in database marketing, which at the time was largely direct mail. I grew up doing both. So I didn't really ever have the feeling that you had to pick either digital or that offline postal direct mail side. And so it gave me a little bit of an unfair advantage when it came to working really closely with clients on direct mail. I often in my history saw what would happen to web sales when any kind of direct mail would be pushed out all sorts of formats. We had self mailers, we had catalogs, we had all sorts of different types of direct mail. I mean, way back in the day, you know, you were always testing different formats. So fast forward to today and the thing that is really astonishing and I had a conversation end of last week with a digital agency that was equating direct mail sales to the call center and couldn't quite connect that direct mail could drive ecommerce sales. So just to give you a sense of just how far from reality so many folks on the digital side are, they just don't think about it. And so the concept of direct mail actually having a halo effect is something that they haven't really even conceived. 

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In our work, we've done a lot of testing over the years. We've set up the test panels, the controls to really validate what's actually happening when you put direct mail in the mix. One of the things that has been real fun for us to do is to test the validity of these channels and how direct mail can inflate sales in a digital channel. Most of the things that we talk about on the digital side is related to search. So it's actually quite passive in terms of its ability to generate income. And what I mean by passive is you're really, when you're optimizing on search, you're really waiting for someone to search that term. And we know that there's gonna be volume out there of people who are searching on that, but it's not really a tap on the shoulder to get people to search for your terms. That's sort of what PPC is trying to get in front of people. But again, it's sort of in a passive sort of rain. What we have seen in testing is some very significant synergies between paid search and catalog or direct mail. So significant in fact that in some of these tests, what we have found is that demand will drop by upwards of 70-75 % in a search channel when direct mail is no longer pushing active searches out there. It's generating all this buzz and activity online. Tested it time and time again depending on the client's vertical, the degree to which they have put direct mail into the mix, that percentage can shift. 

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But if you have someone who has relied heavily on digital and all of a sudden they're sort of supercharging their mix with direct mail, you can see that increase upwards to 30 to 40%. You do a lot of testing and control on that and you see that performance varies greatly. When we talk about digital, typically what we do is we really only report on the highest deciles of digital activity. What that means is it's really the people who are actively engaged with brand in their digital channels. So it could be they're actively engaged in paid search, they're active on email, they may have some paid social in there or organic social as well, because that's really what we call the creme de la creme. Those are the people who are digitally active and if they don't need a direct mail piece, that would be the group that we would find it. And even in those instances, what we found is very, very significant lift when direct mail is included even in those digital only audiences, which at the postal forum, those were some of the slides I was showing. It's pretty interesting to see not only from a contribution standpoint, but just an overall response standpoint, revenue, just how much higher that can be. In some cases, twice as high. 

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Drew

One of the issues with the focus on incrementality, like every CMO talks about incrementality all the time, is it incremental? They're looking at like the delta between channels and not the absolute level. They'll look at a page generating X paid plus direct mail is X plus five. But the problem is that the X is not constant. Like what you're saying is when you layer on direct mail, it's like the tide that lifts all boats.

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Tim 

It is. It's sort of that gift that keeps on giving. When you're layering in the direct mail, we found that there's really two lifts. Number one, it is that initial lift you get just from bringing in more qualified traffic. But the second, the one that we don't talk a lot about, and it's difficult sometimes to get as much excitement generated, let's say a private equity board. But the second one is the lifetime value. They have a much higher lifetime value. They're coming in, they're doing more transactions. We had one client where we started trying to figure out, hey, what's the lifetime value of this client? They were really struggling a bit on validating the amount of print. When they initially saw it though, they saw that the initial orders coming in were 53 % higher when direct mail was involved in the mix as opposed to just digital only. And again, this was a digital plus print of exercise. So we ran it for long term. We found that the subsequent sales after that initial purchase were 110 % higher in the print group. And it was just time and time and time again, we see these types of numbers just being validated. It's hard to look away from, once you see it. 

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Michael 

And it's so relevant and timely now because I'm hearing more and more from brands who are struggling with finding practical and powerful top of funnel and demand creation channels because it feels to them like Facebook is moving more towards this demand capture model where the loss of cookies and tracking is only helping to accelerate the inability of Facebook to like properly parse pure cold net new traffic. And Facebook ends up becoming more of a retargeting engine than a pure top of fund and awareness and creation channel. This actually fits in really nicely with PPC and some of these other channels really becoming demand capture versus demand creation and awareness.

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Tim 

Those are things that I would say are usually classified as fundamental understandings. But in the day-to-day operations, it's really interesting to see that that basic fundamental understanding of something being passive in terms of active and generating interest or revenue just goes unnoticed. And we see clients tend to fall into this unexamined rhythm of just keeping their marketing running, but not really ever stopping to think about, gosh, you're right, Facebook, Meta, no longer really a targeting tool. It's lost so much in the privacy legislation that it's become much more difficult for it to target granularly becomes again, more of that retargeting engine. Now your audience is a great source audiences for lookalike and spendalike campaigns. You can do some of those things still there and get some relative good juice for the squeeze. But the days of being able to just put that money into Facebook and write on it, man, that's gone.

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Michael

Totally. And conversely, you told an interesting story about a brand that was having trouble really understanding the lift and long -term impact of their direct mail program, particularly with respect to the high LTV customers that it was bringing in. So they ended up making a cut and you sort of predicted what was going to happen. I'd love to hear that story again.

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Tim 

It was an equity backed brand. We'd had a relationship with them for some time, but there had been some mergers of some brands and they were looking at wanting to maybe roll the dice a bit and change directions. And one of the directions was they did have an active print program. They kind of fell for the moniker as well of, you know, man, we need to be digital, we need to go digital and didn't really understand fully what that was other than sort of a buzz term. So what we did is we had said, let's walk into this carefully, let's test this and understand what the impact is going to be. So we did that. 

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In this case, we set the brand up. We had highly engaged digital customers. So we set them into a group and they received basically what we call their business as usual, their BAU. It was digital only and we were gonna let them ride just on that contact model they'd established. For the other two groups, let's have group one receive all the print contacts that they would qualify for in this season. The second one is let's pick one event where we'll send them a print piece. Most oftentimes when you're doing that, it's usually around the holidays and it tends to be Black Friday. That's typically what the high holiday is gonna be. So we had the three groups would receive all the print pieces, would receive only one of the print pieces in the highest holiday season or none, business as usual. We ran with that model. We tested it, came back, it was very conclusive that when you compare it, let's say plus digital versus the digital only, the all print plus digital from a revenue standpoint was almost two to one over digital marketing only. And from a profit, it was nearly two to one, just a little shy of two to one from a pure profit. And that was, you know, basically what you're going to have left over to pay the light bill. The middle category where they had one print piece was about 70 % higher than the digital only. And the profit was about the same little less than two times. This was the longitudinal test. So we did this over the course of several months and had a read on the next season that the next season was falling right in line in terms of performance. But as typically happens, the brand decided not to go with that approach. They decided, Nope, we believe in digital only, because that was kind of the cool thing. It was a really more of a herd mentality, which is unfortunate. And what ended up happening was they rolled it out and they lost everything, the sales cratered, they had anticipated digital would continue to perform at a high level. That relationship I mentioned to you, that idiosyncratic relationship between print and search, their search dropped 78 % in revenue when the print wasn't out there feeding the revenue tube and they closed. They ended up having to close. They could not pull out of it all because the bias was so strong against print, even when the numbers showed it. And our final forecast of where we had said they would be if they followed that strategy was within half a percent of where they ended up. I mean, you can't make a case study, an unfortunate case study more strongly than what they did. And it was a learning curve for everybody involved, put it that way. 

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Drew 

At CohereOne, is catalog sort of where you guys start?

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Tim 

Well, we did. CohereOne has been around for a very long time. So you're talking 30, 35, 38 years, something like that. Back in the day, it was all database marketing and the largest expression of database marketing by volume was catalog. So by default, just by age, and when you talk about direct to consumer, e -commerce, it was primarily catalog driving a lot of those brands. You had direct mail really big in the insurance and financial services sector. And we did do some of that work as well. So we've had direct mail always as part of the mix and we also had email, but yeah, catalog was the big one. 

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Drew

You are, I don't want to offend the other two or three agencies, but I would say top three catalog agencies in the country. 

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Tim

Easily

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Drew

Of those two or three or four, you are best known for being holistic in not just focusing on direct mail, but you also will do digital campaigns, complimenting the direct mail strategy, right? I would say for the brands that are listening, $100 million DTC brand has never done direct mail. Like where would you recommend starting with a catalog?

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Tim

You do have to set your expectations again, depending on the space you're in. Let's assume the long form catalog is the format. The thing that you have to consider when you get into any kind of long form format. The first thing is the timeline. It just takes more time to prepare a long form catalog than it does. Let's say a brochure or a gatefold or double gatefold. You know, those are much quicker pieces, not only to set up to design, but much quicker in terms of the execution. The catalog side just takes longer. So the very first thing that needs to occur is to help the client understand a timeline so that they understand if they want to be in the mail for holiday, here's where we have to start work. That's the number one. The number two is to genuinely trust the process. You're going to have to get involved and look at your data in a different way. You kind of have to put on your thick skin and understand that you're not as special as you think you are, number one. And we kind of need to take a look at what others are doing and maybe look at some audience development tools that can further refine the audiences. Lastly is we want to work very closely with what's happening digitally so that we can take digital cues from what's happening in your own digital ecosystem, your own digital marketing and use those to refine your targeting on the audience development.

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Drew

Hypothetical $50 million DTC brand, are you recommending they go like, start with the catalog or trifold to sort of dip their toe in the water?

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Tim

Typically, when we're talking about acquisition, which is where most brands come, most of them are looking for growth, the format that has worked best over the years, and you'll find a lot of testing on this, is the longer form catalog. Prospects like to be able to be introduced to the brand. They have a much better chance of finding items that they can merchandise against. Of course, that depends also on the client's assortment. If they have a very small assortment, they just don't have a ton of products. Long form catalog might not be the best thing. It could be a digest format or something like that, a smaller book. But if you're looking at a traditional, let's say apparel company that has a broad assortment, that's where we typically see the catalog format work best because acquisition is almost always their goal. Most of the time they're not even thinking about reactivation. And reactivation and acquisition use a lot of the same tools. And one, you're turning it to people who haven't purchased in a while. The other, you're just turning it to pure prospects. But that's the format that we found particularly works well since most of these people are going after acquisition. 

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Drew

What's a reasonable expectation you want to set? Are they getting an ROI on the first drop? 

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Tim 

A lot of them are. It takes a while to get a read, let's say on some of the digital lift, because we need to set up those audiences and then kind of wait to see how they perform. Unlike conversion optimization on a site where you're setting something up and then watching what happens, you want to watch those longer form, especially when you get into channel mix, you want to watch that longitudinally, so six months, right? Really want to see how the behavior is changing. But positive ROI is quite honestly, oftentimes achieved in the first drop, which is encouraging to them. And then what happens as there's other levels of sophistication, once they get in and understand direct mail, that's where you can really start to utilize the mix and you can have specific smaller postcards or gatefolds or something for specific events, sales events, or, you know, here's a new product category that's coming out. Then you can really have fun with it and mix up the various formats.

But we get them into that and into postal retargeting, which is that bottom of funnel almost immediately so that we can get them from both top and bottom of funnel at the same time. 

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Drew

You're measuring success off of matchback? 

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Tim 

Well, we use matchbacks as a tool to number one to see someone who gets this, if they receive a print piece, does their behavior differ from those that don't? So you can look at that kind of at a holistic, but that's how you can really check to see what's happening with those audiences. And it's pretty stark. We've even applied that logic to affiliate to see what happens when affiliates have received a print piece versus those that haven't. You can see some really interesting things in terms of performance, even at a specific channel level. But that's how we tend to take a look at that. But we don't assume that the match back is everything. We understand that it's not everything, but it is a great tool to have as one of those pieces which can really shed a lot of light on the activity of those particular contact points.

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Michael 

We talk a lot about how direct mail is actually perceived more like a gift versus an interruption with digital ads and emails, but you've done some studies on this as well and it's just a missing piece. It's such a different type of engagement with a brand when you're holding something physical. What have you found? 

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Tim 

The last 10 years have really opened up all sorts of research on the subject that didn't exist before. The use of functional MRIs for research other than medical, right? So we understand the MRIs in the medical sense, but a functional MRI in a research capacity, imagine you have three people lined up, and this was Dr. David Eagleman, his team did this research. What they found was one received digital stimuli, another received kind of a mix of more broadcasts, so your traditional broadcast, radio, television, those things. And then the last one would also receive print or textile type formats. Really interesting in the studies, you had your traditional responses, the same areas kind of lit up, not necessarily remarkable difference between let's say the digital only and the broadcast. But then when they came to print, it was very interesting. They put print in the hands of people and what the functional MRI showed was all of a sudden in these deep recesses of the brain lit up color, all sorts of various colors in these areas of the brain that had not lit up in the other two stimuli. What that does in the functional MRI is it's saying that all of a sudden that area of the brain has been flushed with blood. There's all sorts of activity and you can see from the blood flow within the brain where the activity is occurring. 

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What comes out of that is essentially we are wired for response, we're wired for haptics, the touch. It starts with a sensory experience. You know, more than half the brain is devoted to processing sensory experience. So touch, touch is a hugely important element of being human. We see it in, you know, in children for example, the importance of being held and cradled at early ages, right out of birth and how important that is for bonding, the natural bonding process that occurs. So it's an endowment effect. It's that tips the psyche towards ownership. But really, I think at the end of the day, what really began to teach us was that the cognitive scanning abilities that we know from scanning the page is much higher in retention and recollection than it is, you know, on digital. And when we think about that, we also think about the rush that the school districts have all pushed in putting everything digitally for learning. And we know that children's brains, as well as adults, mapping on paper is the best for retention and recollection. 

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When smartphones came out and we were scanning those, you know, all the ads, everything, our body was actually having difficulty processing, it was getting a little bit overloaded with the information. So it was draining on our resources. The brain in its adaptive abilities, essentially developed a protection against that. And so now we actually have the ability to digitally skim something and our brain has put distance between our reaction to that as a protection method. So not only has the brain rewired itself for protection, but it's another reason why the efficacy sometimes with those digital ads, we're just not seeing the same things. Our bodies have shielded us against too much of that stimulation. You know, you really bring print into the mix. And what we found in the basic end of it all is that printing gauges, the brain's dormant response centers. It's science. You can simply see the brain flooding with this type of information. And for brands or haptic brands, they have to appeal to those senses. If you're a high -end luxury brand and you're trying to make sales, but they're not near a showroom, how are they going to feel the fabric? How are they going to have that sensory experience and understand value of that brand because like it or not, we're going to place a value on the brand based on what we receive. When a brand is putting that out and they're putting paper out, you know, a lot of times they are concerned with the touch, the feel of the paper. Is there a spot varnish? Is there something like that on it? Because they want those haptic responses to reinforce the brand. Very, very smart people, lots of research. It's annoying that we have to kind of tell the story again and again, but it's where we are. And strong bands, great brands have begun to figure that out. And the brands that know that, hey, my brand is important. I want to reinforce that brand. They know they can charge what they need to charge because they have the brand equity to do it. 

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Michael 

Yeah. I love that. Especially what you said at the very end that brands who would get really big really start to understand this deeply. And reminds me of Byron Sharp's book, How Brands Grow, where he talks a lot about this concept of brand salience among brands that truly get really big and reach scale. It's not just about hitting that bottom of the funnel, hitting people when they're directly in market. It's about how do you keep your brand top of mind for that time when they do become in market for the product. The tactical element has such an impact on your ability to drive that, that I think a lot of brands just aren't thinking about. But at the same time, these big DTC brands who got built on the back of meta are trying to figure out how do I keep growing? I'm sort of running out of. And this just reinforces how this is a great tool for them. 

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Tim 

You know, when you're combating a 24 % increase in PPC cost in one year, it's driving boards to demand different forms of growth. They can't simply pour more money into PPC if the return is not coming in as it has historically. So that's why people are trying to diversify. 

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Drew

Do you have any favorite catalogs?

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Tim 

It's like asking if you have favorite children. One of the ones that I've always liked to receive, and this is one that we've launched with them, is Yeti. I guess you could call it more of a Magalog kind of thing. It's the dispatch. It's filled with stories. A lot of times they'll have, you know, really cool bind ends. They've had really cool decals or stickers, killer like chili recipes and things they've stuck inside. It's done with a high degree of intentionality. They know that it represents the brand. And so it was an investment and there's always been some kind of a cover treatment on it so that it has the haptic look and feel and it's one of those pieces that goes directly on the coffee table. And there's a number of outdoor brands and fashion brands, Free People on the fashion side is another one that we love to work with. Beautiful imagery, beautiful catalogs. They take a great degree of care in terms of what type of paper. They're very exacting in the printing process and what comes out is a beautiful work but continues to be incredibly successful. Print continues to be incredibly successful in driving sales, which is again, you're talking about brands that are very hip, very chic, who have a lot of younger people shopping and they respond exceedingly well to print, exceedingly well to print. 

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Michael 

I love that. We tell people that too. Everyone's like, it's for old people, right? And we're like, no, actually it's more of the surprise factor in a lot of ways. It's reaching that audience in a way that is different from how they're getting bombarded by every other brand. 

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Drew

Yeah, this was great, Tim. Really appreciate you coming on. If people want to get a hold of you, brands want to work with you?

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Tim 

Yeah, the easy way to get ahold of me, you can you can email me directly. It's tcurtis@cohereone.com. Find me on LinkedIn too.

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Drew 

Well, really appreciate you coming on and sharing your experience with direct mail and catalogs. It's really interesting stuff, compelling. I think we get brands all the time that are just skeptical about the channel and just to show some real data on how it increases customer lifetime value and overall revenue is really compelling. So appreciate you sharing with that.

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Tim

Yeah, thanks for having me on.

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Michael

Great partner of ours that we enjoy working with.

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Announcer

Thanks for listening to Nerd Marketing. Don't forget to check out all of the other great episodes, some of which include interviews with e-commerce marketing masters working with Mr. Beast and Joe Rogan, plus Drew and Michael's experiences in private equity, advice from VC firms on what they look for in investments, and so much more. Like, share, subscribe, and tune in every week for a new episode.

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