If Direct Marketing is worth £350bn in Europe, then why are the politicians trying to kill it?

The EU Legislature is currently consulting on a range of measures designed to strengthen the existing Data Protection regulations that govern European marketers. Potential changes that will impact particularly on online marketers include:


  • Requirement for explicit consent.

  • A ‘right to be forgotten.’

  • Easier transfer of personal data from one service provider to another.


The “advantages” (in theory) of these changes will be a  single set of rules on Data Protection, valid across the European Union. The argument is that red tape will be reduced, and that businesses will benefit from the resulting efficiencies as a result.

In reality, any marketing program that is reliant on using web analytics, knowledge of subscribers’ IP addresses, and even potentially email open and click tracking is under threat.

The timing of this consultation could not be much worse. Particularly as the Euro zone struggles to emerge from the worst recession in living memory “tailored and fact-based marketing, that is data driven and digitally delivered, is going to be a vital component of UK success” 1

In the UK, spend on Direct Marketing (defined as “any channel that uses personal data for 1:1 communications”) rose to £14.2bn in 2011, and is forecast to rise a further 7% in 2012. Email marketing commands the second largest slice of this spend at 16% (£2.27bn) and is the largest of any of the online channels. In 2012, spend on email marketing is forecast to increase by a further 12% to £2.54bn, leaving social media (8%) and search advertising (6%) in its wake.2

The irony of the proposed changes it that they will penalise best practice marketing programs - the ones that send targeted messages to consumers who actually want to receive them, and who are most predisposed to transact – most harshly. This is despite the fact that “65% of UK consumers expect organisations to analyse the behaviour of visitors to their websites and use this information  to improve their services in the future.”3 Email marketing is squarely in the firing line – its ongoing success is directly related to its measurability, and reducing the ability to measure will directly compromise effectiveness.

The Direct Marketing Association (UK) has been sufficiently concerned about the proposed amendments to the EU Data Protection Directive to commission independent research from the Future Foundation to gauge the impact that these proposed changes would have on personalised Direct Marketing. The full report can be viewed here.

The research identified that 23% of the UK’s annual sales turnover is either directly or indirectly attributable to Direct Marketing. Based on total sales of £3tn, this equates to £700bn of  sales revenue that DM is responsible for generating.

The research also identified that the proposed amendments would reduce the overall effectiveness of Direct Marketing by an average 6.7% through not being able to apply the same levels of targeting, segmentation, and personalisation that are currently possible. This would equate to £47bn in lost sales.

Of course, the UK is only 1 of 27 EU members – extrapolate these numbers on the basis that the UK represents roughly 13% of the total EU economy and the full potential impact of this proposed legislation is in the region of £350bn!

Contrast this with the estimated €2.3bn in potential savings that the EU Legislature believes will be delivered through reduced red tape, and we can see that balance of probability is heavily weighted in favour of a negative outcome.

What should marketers be doing? The single most important answer is to ensure that they don’t sit on their hands. The biggest mistake that was made with the recently revised EU Privacy Directive (the so-called “Cookie Legislation”) was that the marketing industry failed to voice a collective opinion until the new legislation was already fait accompli. This time around the feedback needs to be more vocal, more compelling, and it needs to happen now! All parties who are potentially affected need to lobby their customers, their trade associations, and their members of parliament to convey the impact on their businesses. A unified voice, that can articulate real-life commercial consequences, will be more successful in ensuring that the revisions represent a fair balance between the needs of both marketers and consumers. In this way, both can be accommodated, and in a manner that delivers a win-win solution for all involved.

References:

  1. Richard Holt (Capital Economics) and Melanie Howard (Future Foundation) speaking at the DMA UK’s “Putting a Price on Direct Marketing” event on 31st July, 2012.

  2. http://www.dma.org.uk/toolkit/infographic-putting-price-direct-marketing

  3. http://www.dma.org.uk/toolkit/data-privacy-what-consumer-really-thinks