New Chair Discusses DMA Challenges

Put aside the three ‘R’s – relevance, responsibility and results -- the Direct Marketing Association offers as exemplifying “The Power of Direct.” Two days after being named chairman of the organization’s board, Eugene R. Raitt spoke with Direct Newsline about three R-themed challenges facing the organization – renewals, responsiveness and revenue.

“The value proposition needs to be tweaked and put out” in front of the direct marketing community, Raitt said.

But, he added, there is good news to tell. He pointed to lobbying efforts on both the state and federal level, including halting do-not mail legislation and the DMA’s role in forestalling postage rate increases and beating back proposed Internet sales taxes as three under-trumpeted successes.

And he dismisses concerns about the organization’s near-term viability, citing numbers he has seen since the start of the DMA’s current fiscal year in support of his confidence.

The organization’s renewal rates, Raitt said, were the number-one reason he’s not concerned about the organization’s near-term viability. “If renewals had dropped, and acquisitions were down, then I’d be concerned,” he said.

According to the DMA’s most recent annual report, the organization had 3,115 corporate members as of June 30 – a drop of 294, or 8.6%, from fiscal year 2008’s level of 3,409.

“It’s not a precipitous drop,” he said, adding that, the DMA had forecast a range of membership defection rates at the beginning of the year, and the dropoff was “well within the low side of that range.”

In the three months after June 30, when fiscal 2009 ended, the DMA has experienced an uptick in renewals, according to Raitt.

“This [membership drop] occurred in the worst economic conditions of our lifetime” Raitt observed. That said, “If I wasn’t concerned [about the drop in renewals themselves, as opposed to the DMA’s viability], I wouldn’t be talking about beefing up our value proposition, and making changes.”

Raitt said the reasons for companies not renewing are multifold. The current economic climate has doubtless influenced more than a few decisions not to re-ante. For those indicating it is purely a fiscal choice, he is willing to explore the idea of a membership hiatus – as opposed to a flat-out defection – although he hastened to add that no judgment or decision on this has been issued by the board.

To members uncertain of the DMA’s value proposition, he offered the lobbying successes noted above. And he challenged the perception that the organization’s digital marketing education offerings aren’t as good as other programs.

“I understand the perception is out there,” Raitt said, adding that he’d had discussions with members on this topic. “I ask them, ‘have you looked at our programming? They admit shamefully they haven’t. I opened [the program from the DMA’s 2009 annual conference]. Fifty percent of the sessions are digital, interactive or social media. Have we done a good job of advertising this? No.”

Raitt’s contention that the DMA’s digital efforts are under-recognized is one reason why he says the organization’s name and logo are not sacrosanct. “There are still many people who think DMA is just direct mail,” he said.

Changing a logo and some letterhead, however, won’t be enough to turn around the organization’s fortunes – and there is no getting around the fact that fiscal 2009 could at best be described as an uncomfortable year. At $33.57 million, the DMA’s operating expenses outstripped its operating revenue of $30.84 million by $2.7 million.

This isn’t wonderful, but like the membership falloff it is on the low end of the range the organization anticipated at the beginning of the year. Back then, estimates ranged from $2.5 million to $4 million, according to the Treasurer’s report at the DMA’s annual business meeting.

Much of the actual loss, Raitt said, was due to a choice the DMA made years ago to create a defined-benefit pension plan.

“We have to get out of that,” Raitt said. But those changes, if they happen, will not affect staff that have already earned this benefit, he stressed.

The next calendar year offers an advantage for the DMA, in terms of generating revenue.

“The annual conference next year is in San Francisco, which is the number-one performer [venue] in terms of conference revenue yield,” Raitt said. “I’d have been worried if we were locked into Orlando,” which has not been as lucrative a venue. Orlando was taken off the rotation of possible annual locations in 2007.

Raitt was not asked about how conference revenue and expenses are generally accounted for, but this is more than just an academic question. The San Francisco conference will not take place until the DMA’s 2011 fiscal year, but the DMA will get fiscal commitments from attendees and exhibitors – and will likely sign expense contracts -- during the 2010 fiscal year. How the revenue and expenses are recorded will have an impact on the current year’s figures.

The third R, the DMA’s responsiveness, or lack thereof, to its members, was one of the issues raised by board member Gerry Pike. Pike mounted a proxy vote challenge which resulted in three voting members – Pike himself and Matt Blumberg, CEO of e-mail deliverability firm Return Path, and Chris Bradley, CEO of home fashions marketer Cuddledown – being placed on the slate of board nominees. All three were elected to the board during the Oct. 18 business meeting.

The board also created three “adjunct members” (a newly created board member class) who will serve as membership representatives, but will not have voting privileges and will be excused from certain board functions.

The inaugural adjunct members are Suresh Mathai, CEO of ContinuumGlobal, Inc.; John Papalia, president and CEO at Statlistics; and Charles Prescott, the DMA’s former VP of global knowledge who currently serves as chairman of the consultative committee of the Universal Postal Union.

During the business meeting, Pike referred to these six members as a “reform block”.

While Pike collected what he called “hundreds” of proxy votes (neither he, nor the DMA – which ran its own proxy campaign – released their totals), the weeks leading up to the board election were marked by both online and offline industry buzz.

Raitt is aware of the conversations, and he indicated he will look to engage the DM community. But he characterized some of the people who posted their concerns in online discussion groups as “a small, vocal group of disgruntled people.”

“I recognize the posters,” he said. “I recognized their back story. Some are former [DMA] staff, or people who wanted to speak at conferences.

“[The group is] small, but important,” he added.

The impetus for change, Raitt asserted, did not start with Pike’s proxy battle. It started in April 2008, when Raitt himself – then the board’s vice chair – touted the need for change during an executive committee meeting, Raitt claimed. “You may not recognize the DMA in a few years,” Raitt said. “It will be bigger, stronger and more viable.”

“What I give Gerry credit for is creating renewed energy, engagement and buzz,” Raitt continued. “He created a bigger mandate.”

If there were unrecognized heroes in the Pike/DMA proxy fight, Raitt added, they were the three board members up for re-election who voluntarily stepped aside to make room for Pike, Blumberg and Bradley.

The three were Christine Aguilera, president of SkyMall Inc.; Don McKenzie, president and CEO of Direct Group; and Wesley D. Protheroe, president and CEO of Gerber Life Insurance Co. All had been on an earlier slate of board members, and all had been nominees for a second term.

“They served with distinction,” Raitt said of Aguilera, McKenzie and Protheroe. “They voluntarily offered to retire to help avoid distraction.”

Despite Pike’s contention at the board meeting, the new board of directors does not have a six-person reform block, Raitt continued. “The reform block is all 46 members.”

And feedback will be part of that reform. “This has to be two-way,” Raitt said. “If we don’t listen, we’re sunk.”

What does Raitt think of Pike, the dissident board member who drew attention to a host of perceived and alleged management and board failings – and who will now serve as a board member under Raitt?

“I have known Gerry for 25 years,” Raitt said, adding that he believes Pike had the interests of the DMA at heart and that he considered Pike a friend.

That said, “I’m not thrilled with his methods.”

Note: An earlier version of this story incorrectly referred to the type of pension plan the board will consider changing. As is correctly reflected above, Raitt said the DMA had created a defined benefit plan years ago.