Bronte Media

AdAge had a fascinating article on the decline in response rates of credit card direct mail and other types of financial service marketers.

The article, a writeup of a Direct Marketing Association report, says that response rates have dropped from 2.5% in 2003 to 1.4% in 2005.

Financial Institutions spent $13.2 bn on direct mail last year or roughly three times the entire search industry in the US if you want to relate it to online analogs.

Financial services are a key driver of search spending, both when companies like Amex and Citibank spend with Google but more so when others like Nextag and Lowermybills do. These are two of the company’s largest advertisers and they try to turn the click into a mortgage lead that they then hawk off to a network of brokers and institutions.

Even though response rates offline are declining precipitously, spending is still growing at a vast rate. And although it seems counter-intuitive, it should. As long as marketers are getting positive ROI they should continue to spend unlimited amounts of money on it because it is measurable. Marketers will eventually drive down the conversion rate to a low whereby people break even, but from the figures it seems we are not there yet.

Interestingly, in the search world, conversion rates are headed upwards because there is a natural protection against glut - the consumer determines the inventory. Credit card mailers simply send more offers. But in the search world, what the engines have to sell is limited by the number of people searching for credit cards. This keeps the user experience tolerable and because of the improvements in web technologies and people’s increasing propensity to transact online, the conversion rates go up.

Either way, the direct mail financial services dollar figures are a sober reminder about just how far search has to go (read: a lot).