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Direct Marketing Spotlight: Germany

Date: August, 2014 --

Direct Marketing Spotlight: Germany

In Germany what we in the US commonly refer to as direct, data-driven or response marketing is more commonly known simply as ‘dialogue marketing’. Brand marketers, both in-country as well as those selling cross-border into the market, well understand its ability to generate a high ROI and, therefore make dialogue marketing an important component of their overall strategy. For those of you looking to begin or boost your initiatives into the German market, here is a brief review of the state of direct/dialog marketing in the largest and healthiest economic market in Europe.

Market for Direct Selling

The catalog, or ‘catalogue’ as it may be, industry in Germany has a long history in the country, paralleling the evolutions in the discipline seen in the UK, France and the US.

Many household names are found in, or have their roots in, the catalogue industry. Otto, Heine, Spiegel, Klingel, Wenz, Bader and Schwab and many others are household names which continue to occupy the market. Otto has annual revenues of $16 billion and operations in 20 countries, including Crate & Barrel in the US. US entrant Staples has a successful catalogue operation there begun before the 2008 crash.

Currently, the German Mail Order Association (the BVH or Bundesverband des Deutschen Versandhandels e. V.) has 270 member companies, which constitutes a substantial association size in Germany. As elsewhere, these companies are multi-channel and deploy catalogs, eCommerce websites, direct sales as well as short and long format “show and tell” television ads known in Germany as “TeleShopping”. 

It is not without good reason that cataloguing sometimes referred to as “Home Shopping” in Germany, since companies make the process of returns as simple as in a customer-friendly store. Similar to consumer behavior in the US and other markets, it is not uncommon for a customer to order three different colors or sizes of a dress, keep one, and return the unwanted two items in the original box, which contained a return address label, often postage prepaid. And customers expect this ease of returns. This of course results in higher initial prices on goods, which has surprised more than one American company that had initially expected higher profit margins. 

Digital Marketing Environment

For 2013, Statista reports that digital ad spend in Germany was $5.65 billion, the highest in Europe, and expects that figure to reach $6.22 billion in 2014. While no segment allocations were available, we can report that in 2013, social media ad spend in Germany stood at US$1.1 billion. This was 10.6% of online advertising. Since 2009, social media advertising in the country has increased at a CAGR of 49.3%. 

Mobile spending was projected in 2012 to reach $349 million in 2013 and $1.8 billion in five years. What spending there is occurs among the mega-advertisers, and Germany lags EU the leader in mobile, which is the UK.  

Data Privacy

Germany is well known for having stern data protection regulations and was a relatively early adopter of a strict opt-in requirement for email marketing communications, which is today more common within the larger EU Data Privacy regulations. Some applications of these privacy regulations are likely to affect organizations with a presence in the local market more than those based abroad, especially outside the EU, but it’s always best to seek a legal option as to how any local privacy directive applies to your specific business as it will all areas of data management from marketing to your obligations to those on your database in the event of a data security breach and much more.

Direct Mail and Multi-Channel postal service, Deutsche Post or DP, takes direct marketing very seriously and maintains its influential “direct marketing” research lab which has provided valuable insights on customer behavior for many years. It was one of the first institutions to develop an “eye-tracking” tool to enable advertisement designers to literally follow where the reader looks, how long he/she lingers on any image, and the path his/her eye follows in looking at the piece.

It bears recalling that the postal market in Germany, as in all of Europe, has been fully liberalized since 2010. Consequently, DP is at liberty to enter lines of business and offer services which are closed to the USPS. Nevertheless, it is publicly-owned, has shareholders expecting a profit, and faces competition in nearly all areas of its business, including mail delivery.

It is an understatement to say that DP has merely survived. Its addressed mail services are not seriously challenged by any local competitor and its “Post Bank”, once a small savings institution, is now one of the largest multi-line financial institutions in the country. Its parcels subsidiary, DHL, has operations world-wide.

And DP seriously measures its markets. Its annual survey report on the state of “dialogue marketing” among 2700 reporting companies is Dialogue Marketing Monito. That DP conducts this research proves  the importance of direct marketing to its own business. 

Unfortunately for non-polyglots, Dialogue Marketing Monitor 2014 is published only in German. However, as a sample of the Monitor’s content, we provide the following insights and statistics surrounding multi-channel marketing, which in Germany is referred to as “crossmedia”. This is a term for using (nearly) identical content and layouts in two different media (mail and landing page, for example) in order to make one plus one greater than two. 

The aforementioned practice is becoming more common. In Germany 16% of companies are using crossmedia and about 33% of the total ad spend consists of “crossmedia” promotion. 

Among small companies (revenues under € 250,000), only 15% use it and 40% use one medium or no “dialogue” (direct response) medium at all.

Among large companies (revenues more than €25 million) 50% use crossmedia. They average 8 campaigns per year and on average engage four media, for example email, direct mail, TV and website.

Still with large companies, 75% state that their main “medium” is the homepage. An interesting measure is made of the crossmedia spend on linking the companies’ home pages to various media.  In descending order of spending, the homepage is linked to/combined with print ads (QR and other devices), trade fair displays, followed by outdoor posters and only then online and physical mailings.

It also appears that measurement disciplines are very similar to the US. About 50% of crossmedia using companies try to measure the success of their campaigns. On the other hand, 33% of the businesses report that they focus only on single channels. The majority try to measure their success in all media.

The Post recognizes that its direct marketing customers are not “mono-channel”. This is wise because the report finds that direct mail (addressed only) decreased from 18.6 percent of users to 15.6 percent from 2012 to 2013 and spending dropped from €9.2 billion to €8.6 billion. Declines were most noticeable among manufacturers and service companies. Spend by smaller companies remained stable, but medium and large companies mailed less.

Data Management Service Availability

As one would expect of a nation with a very modern postal service Germany has a robust postal database, meaning targeted address verification is possible. Data Services classifies Germany as a Level A country on our Hygiene Scale (see page 2), given our ability to not only ensure proper address formatting and standardization, but to further validate the accuracy of the elements that make up the address all the way up to the delivery point.

Marketers targeting the German market also have a number of address enhancement and data updating services including National Change of Address (NCOA), Suppression Processing and more. Important Note: Due to those strict privacy laws we mentioned earlier, if you are looking to utilize the German NCOA service, you are required to have a brick and mortar presence within the country in order to do so.

Finally, as an example of the quality of service a marketer can expect when undertaking German direct mail campaigns, take note of the real-time “on the door-step” change of address system. If the postman discovers on the doorstep that an addressee has moved or died, he uses a mobile device to transmit a picture of the envelope and a request to the sender for instructions on handling the letter: complete delivery, forward, return, destroy? (Note: extra charge for this service). 

Of course, Data Services, Inc. will catch all the COAs, Gone-Aways and address corrections and ensure your German or other international marketing data is in perfect working order before you mail. Anything can happen in the interval. Germany being a very developed environment for data-driven marketing initiatives, you may find success there justifies the effort.