New Research Findings Validate the Impact of Video Direct Marketing

For the marketing world, the so-called Information Age--now driven by the ever-proliferating speed and power of the Internet--has in some ways evolved into the proverbial cup that overflows.

On the one hand, marketers have the unprecedented ability to collect, generate, access and process valuable information about their customers, their industry and their competition. And they can do so with a quick click of a button, in many cases for free. On the flip side of the coin, this same group is faced with the daunting task of sorting factual information from the mountains of anecdotal evidence that is oftentimes served up, either intentionally or unintentionally, as hard data.

In the fast-emerging video direct marketing arena, this fact-versus-fiction scenario had been somewhat of an industry bugaboo until just a few years ago. Today, a wealth of case studies exist that clearly demonstrate the efficacy of video as one of the most direct, persuasive and effective means of communicating messages to target audiences. In fact, many of these examples have been and continue to be showcased in this publication. Technicolor alone has scores of strong case studies--from Lincoln-Mercury, which used a video promotion to boost sales of its Navigator SUV by more than 17 percent, to PetsMart, which employed a video that helped increase store traffic in newly launched retail stores by up to 15 percent--that further underscore the strength of the format.

Moreover, supportive statistical data is now available from a variety of reliable industry sources. This information reconfirms what many have correctly assumed: that video is cost-efficient and generates higher response rates than most other forms of marketing, including print direct mail, print advertising, broadcast advertising and so forth. [*]

Up until recently there's been little hard data to substantiate these assumptions. Finally, a new benchmark study is bringing some of the real facts about video direct marketing to the fore, and is at last helping to formally substantiate many of the marketing industry's long-held assumptions.

In looking at the marketplace strictly from a hardware standpoint, VHS video is without a doubt one of the world's most pervasive mediums. With more than 93 percent of TV households and over 65 percent of businesses in the United States owning at least one VCR, video is unquestionably an attractive option for marketing professionals.

These strong hardware penetration figures tell only a part of the story, however. Consumer video rental spending in the U.S., according to reports from Adams Media Research, reached an all-time high in 1999 of $8.3 billion, up from $8 billion in 1998. Simply put, people love their VCRs and videos for movies, for entertainment and for information.

Yet from a research perspective, little definitive information exists that unequivocally demonstrates to advertising firms, promotional groups, marketing companies, public relations agencies and corporate America that video as a direct marketing tool works. Thanks to a new attitudinal survey being commissioned by the International Recording Media Association (IRMA), one of the world's leading organizations that advocates the growth and development of all recording media, that is about to change.

Currently in the works, the new study is designed to analyze the use of videocassettes for promotions and premiums through in-depth interviews and surveys of video duplicators and their customers. The project is being conducted and coordinated by Cambridge Associates Incorporated (CAI), an industry think-tank specializing in developing, gathering and evaluating primary research. As noted above, the rationale for the study is straightforward: no substantive research exists about videocassettes as a direct marketing tool. Right now, common sense and assumptions--coupled with research culled from very specific case studies conducted by the Wharton School, P&G and other groups in the 1980s--are the prevailing market drivers.

Overall, the new research is intended to provide the much needed hard data support to the myriad of aforementioned anecdotal market information. Additionally, the study provides the opportunity to determine and then analyze which are the most attractive and receptive direct marketing and promotional channels for videocassettes.

And The Survey Initially Says

While the survey is still a work in progress, there are some preliminary findings that are interesting to note. Though the final results may vary, the findings to date provide a quick glimpse of the research data that will be obtained once the study is completed.

To begin, one of the key goals of the study is to determine which market segments are using video now. As anticipated, the industries with major use of videos for promotion, premiums and information are pharmaceutical/healthcare, automotive, travel resorts and subscriptions. In particular, pharmaceutical companies are finding that videocassettes (and CDs and DVDs) are extremely effective for reaching individuals with highly personal medical and health conditions. In a nutshell, a video offers a private, direct and convenient means for informing and educating that all important audience of one about a product, service and/or treatment that provides a solution for a medical/health need.

As an interesting side note, when researchers talk with these key industry groups, a significant percentage are saying that the total end-user cost to mail a video is approaching that of a catalog, though still not quite below it. For instance, all costs for a videocassette, including duplication, packaging, distribution and mailing, range between $1 and $1.10. All costs for catalogs are between $.70 and $.80. This initial data underscores how cost effective video can be for a wide range of direct marketing uses.

Another significant finding is that video is not treated as junk mail. According to the study's preliminary findings, there are a number of reasons for this. First, greater than 70 percent of recipients will view the video within the first three days of receiving it, according to CAI. In addition, the perceived value of the video is relatively high. Most recipients value a video at between 7 and 10 dollars. What's more, video is passed along to other potentially interested people in more than 25 percent of homes where it has been delivered--clearly a high rate. When compared to flat print mail, which traditionally has an average of two to three percent response rate and a pass along rate well below one percent, video is by far a better performer in most instances.

The CAI study is also finding that video provides much greater information in terms of product demonstration than any other medium. Along with the benefits of sight, sound, motion and emotion, video provides two to four times more information and relevance, which is defined as the ability to see actual demonstrations of a product, location, service and so forth. And, video is perceived as very personal. In other words, a consumer thinks they have been selected to receive the video over others.

The research is also showing that video is clearly viewed as special, meaning that it is unusual and worth looking at compared to normal direct mail pieces. This is due to the different packaging, i.e. the three-dimensional aspects compared to traditional flat direct mail. Interestingly, it is also due to the inability of the recipient to immediately define the content. According to the study so far, recipients are more apt to view a video compared to a catalog, which can be quickly and easily leafed through.

Looking Ahead

Though very preliminary, this data from the CAI study--which is expected to be completed by Fall 2000--adds validity and support to information that has been gleaned from case studies and from other anecdotal sources. Still, there is much yet to come from this research.

For marketers considering video as part of their marketing mix--as well as for those already using the format--the initial findings reinforce that video can and does play a major role as a business and marketing tool. Videocassettes are perceived as having value (up to 10 dollars) as opposed to their print direct mail counterparts. At least seven out of every 10 recipients watch their video. And as a response tool, videotapes can sell a product in an extremely effective and low cost manner with rates running on average from 20 to 60 percent.

In short, authentic evidence supporting video's efficacy as an effective direct marketing vehicle continues to mount. While there is much research to do in the future, this first comprehensive study will go a long way to providing the factual foundation for the efficacy of video as one of the most attractive tools for direct mail, premiums and promotions.

Paul Scott is Senior Vice President of Worldwide Sales for Technicolor. Technicolor is the world's largest independent manufacturer and distributor of videocassettes, CDs and DVDs and serves an international base of entertainment, software and promotional customers. Scott also serves as the CoChair of IRMA's VHS Coalition, a group that promotes the dominance and long-term viability of VHS.

(*.) Kagan Associates 1999/2000, Adams Research 1999, IRMA Market Intelligence Reports 1999/2000

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