Still Standing

LIKE THE TIDE, INSERTS' popularity ebbs and flows. But insert marketers are optimistic their business will keep growing, even in the face of challenges from newcomers like search engine marketing.

The field — largely occupied by small family businesses — has gotten a bit smaller over the past 12 months. For example, earlier this year Singer Direct was acquired by Omnicom Media Group, while Mokrynskidirect and Millard Group were snapped up by InfoUSA.

What will this mean in the long term? The jury's still out, according to an informal survey of industry professionals.

INSERTS VS. MAIL

As usual, the higher postage rates implemented in January — and the increases expected in 2007 — likely will be good news for insert marketing, since its delivery costs tend to be far lower than those for direct mail. Of course, response is well below mail too.

“Interest in insert media picks up whenever postage rates go up, and we just had back-to-back increases,” says Jim Zuckermandel, president of Zed Marketing in Edmond, OK.

STEADY GROWTH

Zuckermandel says he's seen steady growth in catalog package insert and blow-in programs during the past few years. He's helping to create alternative media programs for the Sporty's, Signals, Wireless, What on Earth and Art and Artifacts catalogs.

But while rising postal rates have brought about more inquiries, they haven't necessarily translated into hard dollars for insert marketers, says Rob Stanton, vice president for business development at Stanton Direct Marketing in Elmira, NY. That's probably because it takes so long for insert campaigns to show results.

For their part, some newer players like online marketing companies and DVD rental service Netflix have jumped at using package inserts, notes Stan Madyda, senior vice president at Estee Marketing Services, New Rochelle, NY. And Stanton says Internet telephone service provider Vonage and Geico insurance have stepped up their use as well.

Overall, different companies experiment with inserts at different times, according to Leon Henry, chairman of Hartsdale, NY-based Leon Henry Inc. But he maintains that inserts make sense for those companies that use them year in and year out.

“We always see companies come and go” with their use of insert marketing techniques, says Diane Caruso, president of Choice Media in Amherst, NH. “But we do try to keep some of them.”

Catalog blow-in programs also have been expanding in recent years, partly because they benefit both the marketers and the catalogers that carry them.

“We're getting more and more inquiries from catalogers about blow-ins, even though some are philosophically opposed to carrying inserts for another cataloger,” Zuckermandel says.

Henry acknowledges that the number of blow-in programs has gone from maybe five or so in the late 1990s to several hundred now.

Much of blow-ins' appeal is the lower price compared with direct mail, says Madyda. They tend to cost around $30 to $40 per thousand, which in some cases is less than half the cost of a mailing list. The downside is that response rates can be as low as .35% and the responses themselves can take as long as nine months to a year to come in.

“But they do add names to a marketer's database,” Madyda adds.

However, blow-in programs have certain characteristics that potential users should watch out for, Caruso warns. Catalog printers must know if a book can accommodate blow-in cards without causing production problems and if a blow-in's weight conforms with existing postal regulations.

M&A SCORECARD

Apart from insert media's use levels is the question of whether the industry is on the path to greater consolidation or if it essentially will remain a sector of privately owned entrepreneurial shops.

This past spring, Omnicom Media Group bought Singer Direct, which specializes in insert media buying and management services. While operating under the Omnicom umbrella, Singer functions as a standalone company with current management staying in place.

On top of that, InfoUSA picked up list brokerage and management firm Mokrynskidirect in June for $6.5 million, following its nearly $14 million purchase of Millard Group last November.

Even so, most insert marketers think the business will retain its character.

Zuckermandel interprets these developments as moves by smaller players who may not want to run their businesses day to day. But he doesn't see this in the cards for his own family-run firm anytime soon.

Stanton was unsure if larger companies would be that interested in a very specialized business that takes a long time to learn. And Caruso was even less sure, saying she'll wait and see what happens.

Consolidations or not, can the industry grow much beyond its current size? And just what is the size of the industry, anyway?

“The industry has a lot of potential, especially if companies would get together and publicize their message more,” says Henry. But he concedes that most insert brokers are reluctant to admit how well their programs perform for clients: “Companies are very protective of their accounts.”

More importantly, Henry doesn't think Google and the other search engines are going to kill off the insert business.

“I've seen a lot of things come and go,” he says. “Six years from now, Google will still be here — but so will inserts.”