This Month's Spectrum Summary:

(The following is an excerpt from the June 2005 issue of Spectrum, a proprietary monthly briefing published exclusively for the clients of I.T. Strategies, Inc. © 2005)

VARIABLE DATA DIRECT MAIL-
Surprise! Digital press applications
multiply, but not where expected

This month I.T. Strategies consultants Liz Ziepniewski, Marco Boer and Patti Williams meet to discuss how variable data direct mail printing has turned out to be a significant digital press application, and the significance of this to the broader industry. But it is only beginning. There are islands of applications, for example in supermarket loyalty programs, by auto dealerships, and in gambling casinos. The holdup on broader application is not the presses. Rather it is the development of the data infrastructure.

Currently there are huge bases of transaction data, but the data mining to convert that into targeted direct mail is expensive and just beginning to expand. Motivation is strong, since early users report getting 15 to 40 percent response rates, compared with just 1% to 4% for static direct mail. Each piece may cost the mailer $1 or more, but worth it because of the much greater response. The application clearly makes financial sense for both the print provider and the direct mail customer.

The key is to educate direct mail users, and provide them with the software tools needed. Kodak and HP are building programs to support their customers in this application. Major commercial print vendors are as well. RR Donnelley has announced an agreement to purchase The Astron Group, described as a leader in integrated business process outsourcing solutions. And there are growing independent data mining companies with relevant tools such as XMPie and GMC Software.

Although direct mail isn't a major application in Japan and elsewhere overseas, it is expected that in time Japanese digital vendors will get involved with scaled down systems that will compete favorably with the U.S. companies now pioneering direct mail. As the application expands, because it is more effective, the overall volume of direct mail may go down, impacting the paper mills and the non-digital commercial printers. Direct mail will also be impacted by growing Internet commerce.

Pioneering users of variable data direct mail tend not to want to talk about it for competitive reasons. However we have surveyed a number of digital press print providers that have shared some of their applications and specific direct mail documents, including Valassis and DMI, Inc.

Digital press performance is not the barrier. They have had this capability for years. It is the data infrastructure, and now that is developing. Variable data direct mail has been proven effective. It pays for both the user and the print provider. The pieces are in place. It may take a bit more time but in perhaps five years or less, market pull is expected to fuel a refreshing wave of growth. It could impact not only the digital press segment, but help restore overall industry growth rates back up into the double-digits.