2005: The Year Ahead

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Print Production

2005 will bring nail-biting competitiveness between major printers, a number of which are starting to feel the competitive pinch up against visionary printers who understand the end-game: Consolidation. There are not going to be any new entries to the large print production vendors; rather, there will be fewer in 2005 and beyond.

In printing, it's all about front-end and crew efficiencies. With full Direct-to-Plate and advanced streaming technologies, those printers who can print the greatest number of overall signatures with the fewest crews can offer cost-savings to customers. In 2005, companies like QuadGraphics, which is stacking presses one on top of another and running more print lines with fewer crews, and doing it better than anyone else, will be the competitive winners. As paper prices increase and postage costs begin to increase again, the buying process for print production will focus on the back-end economics of printing, a focus that has not been the primary experience in a number of years.

This is the year to compare costs of the press-related expense of the catalog. The new 64-page presses Quad is using can offer additional savings when coupled with lower crew requirements. Your risk is that you are locked into inefficient print production contracts with printers who neglected to figure out an economic cure for consolidation. That failure should not be your expense to pay for.

Postage

Can there be any doubt? Postage costs will go up at the end of 2005 and I am advising that you prepare for a minimum of 15 percent increase, maybe higher. There has been no postal reform nor does it appear there is going to be any; that means rate hikes. Your silent partner, Uncle Wiggly, has a lot of rabbits to pay retirement for, and postage rates seem to be the best bet given a recalcitrant congress and zero administration pressure. Welcome to the end of the three-year postal rate moratorium! Grab your ankles!

Wine

I think there will be some great prices for good wines in 2005. Huge production overages in France and Italy are driving prices to the bottom, and venerable vineyard and winery bankruptcies are beginning to be seen. Great production coming from Spain, Portugal and Chile and quality is improving every day. This will pressure California producers who have been quite aggressive on pricing what are only moderately good production reds. The Law of Substitutes is alive and well. I know this has nothing to do with direct marketing, but it's good to know you will continue to get a nice, well-made red in 2005 for under $10. I'm always looking for Heart Healthy foods for you.

Privacy and Other Legislation

Pray that Eliot Spitzer doesn't turn his attention to direct marketing next. With so much information directly and indirectly linked to the so-called Patriot Act, there is every possibility that additional restrictions on information are going to be seen in 2005. What remains to be seen is the DMA's commitment to taking a stand on these matters and the (at long last) early dialogue that direct marketing needs to improve its image. Perhaps there will be movement in that direction, however my bet is that additional erosion in information gathering and dissemination will be seen in 2005. Developing proprietary prospecting databases, where feasible and affordable, may be the best answer. Clearly, taking full advantage of cooperative and shared databases, such as MeritBase, makes a great deal of sense. Now is the time to do as much prospecting investment as you can possibly do, before the postal price hikes and before more stringent restrictions are put in place by legal zealots and the FTC.

Telecommunications

Your existing telephone systems may be in for an upgrade in 2005. The systems that integrate with the Internet are going to save you money and give you capability you only dreamed about before, especially where large call centers are being staffed. If you haven't had a demonstration of the state-of-the-art telephone systems which use Voice Over Internet Protocol (VOIP) with its attractive no long distance costs, now is a good time to get one scheduled. These are amazing systems that take connectivity to a whole new level. Remember, in 2005 it's all about access.

Acquisitions

Putting aside the "bigs," those mega-companies of direct marketing who have already bought up everything they can find, we will see in 2005 the acceleration of small and middle market consolidation in direct marketing. Companies in the $10 million to $50 million range will be looking for $2 million to $15 million multi-channel direct companies to purchase. And, the $4 to $15 million companies will also be looking to buy even smaller companies in the $500,000 to $2 million range because they need to grow, too. These will, by and large, be strategic buyers who need more market share, more customers, more revenues and the economies of consolidation scale that drive lower costs. The private equity funds, however, will likely become even more aggressive as they have massive amounts of investment money to put to work, and direct marketing remains an attractive segment for them to invest in due to the multi-channel efficiencies and the huge jump catalogers had over retailers and other channels.

Talent

2005 is likely to be the year of the Search Engine Maven. For those of you still kicking and screaming about this sub-channel (or possibly stand-alone channel), Search Engine Marketing is actually a full-blown channel with unique attributes, skills and knowledges. This is not the bailiwick of traditional marketing types, rather it is a specialty and deserves to be developed as a specialty discipline within direct marketing, certainly within Internet marketing.

Proven talent in Search Engine Marketing will be hard to find and expensive. Consider: A person with three-years of experience has probably been there since day one in SEM and is in high demand. I know a couple of computer guys who most people would consider total geeks, but they know more about search engines than anybody ought to be allowed to know. And they have absolutely nothing to do with direct marketing or catalogs. If you're smart, you'll go out and hire a couple of really weird 'gamers' and get them involved in ginning up your SEM programs. We are talking about a whole new way of viewing the world; you need enthusiasts sporting dittas and really bushy sideburns, not perfect résumés.

Customer Service

While CRM is anathema and excommunicato to me generally, there is a very real chance that 2005 will bring yet a further erosion to customer services which have all but fallen irretrievably into the clutches of these inane CRM systems. Worse, it doesn't appear to matter. As with health care, education, taxation, politicians, or about anything else you care to name, the American public seems perfectly resigned to being pushed around, ignored, stepped on, lied to and treated with contempt . . . and comes back for more. I personally cannot think of a year that was so bad for basic customer service than 2004 and I fear 2005 will be even worse. There are shining examples that refute this assertion, but they are becoming rarer and they are giving up a little bit at a time. 2005 will likely see direct marketing and cataloging drawing closer to the customer services delivered by retailers, and that is about as low as it goes. Why do we do this? Our industry was built on great service.

Overall Growth

Despite the positives and the negatives, this year, I have every belief that the full direct marketing segment of the American economy will outpace any other segment and that we will see for all channels combined an overall 8 percent growth (or perhaps a point better) in 2005 barring any major socio-political disruption. That is a growth rate that assures the money will flow into all channels that contribute to this success story. The long and short of it: Mail more. Prospect more. Acquire more. Brand more. Online SEM more. Hire weird more. Print cheaper more. Wholesale more. And drink more wine.

Go forth into 2005 . . . and multiply more!

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