Direct Marketing Services
Buy This Industry Report
Get more in-depth industry information with a First Research industry report containing business challenges, trends, executive insight, call prep questions, and so much more!
Increase Appointments
Engage Prospects
Build Your Confidence
Industry Overview
The US direct marketing services industry includes about 3,700 companies with combined annual revenue of over $11 billion. Major companies include Harte-Hanks, infoUSA Services Group, RR Donnelley & Sons, and Acxiom. The industry is relatively fragmented: the 50 largest firms account for 46 percent of industry revenue.
Competitive Landscape
Demand is driven by economic activity and corporate profits. The profitability of individual companies depends on their targeting services, creative skills, and marketing ability. Large companies have advantages in economies of scale in database analytics, marketing, and automated operations, which allow them to compete more aggressively on price. Small companies can compete effectively by specializing in a particular industry, geographic market, or service type. The direct marketing services industry is labor-intensive: average annual revenue per employee is less than $150,000.
Products, Operations & Technology
Major services are letter shop services (preparing and sorting mail pieces); printing; mailing list services; concept development; and full direct mail services, which include all of the above. Full direct mail services accounts for almost two-thirds of industry revenue. Companies providing only letter shop services account for about 15 percent of industry revenue, and companies providing only print services account for about 8 percent. Other offerings include fulfillment, sales promotion, and distribution services.
Historically, direct marketing referred to direct mail and telemarketing. Direct marketing can use any medium to reach specific customers, including mail, TV, print, email, banner ads, and billboards. The direct marketing industry is changing as organizations allocate more of their advertising budgets to online marketing.
The most commonly used medium for direct marketing remains direct mail, where marketing pieces are sent to prospects using the USPS. Direct mail typically uses standard mail rates (previously known as bulk or third class mail), which are less expensive than first class mail. Marketers use customer databases to target those most likely to buy a product or service. Mailing lists are bought or rented from list compilers to reach prospective customers. The communication piece – a catalog, postcard, or mailer – is developed and then printed, packaged, sorted, and mailed. Responses are tracked to measure the effectiveness of the campaign, and changes may be made to improve response rates. Response rates for direct mail are typically 1 to 3 percent.
Direct mail marketing uses large amounts of paper, which is bought in bulk under long-term contracts. Postage is a major cost and firms depend on prices and mailing rules set by the USPS. Standard mail accounts for nearly half of the mail volume handled by the USPS, so rates are raised periodically as labor costs rise.
Many organizations have invested in customer relationship management (CRM) software, which allows them to collect more information about customers. Direct marketing firms use client CRM information to target prospects. List compilers invest in software to analyze their databases and develop segmentation strategies. Some large firms have invested in data warehousing and database management solutions for clients. Letter shop companies have special machinery to prepare, sort, and bundle mail.
