Wednesday, January 22, 2014
BIG’s Blog: Distant Thunder Portends Rain
Throughout the 1990s while I ran a database marketing company, our sole customer base consisted of the retail branch networks of large retail banking organizations (Chase, Bank of America, Wells Fargo). Electronic banking had been on the scene for a decade, but in the late 1990s its adoption really began to accelerate. To help our bank clients we would always put out predictions of trends we were seeing across the whole of our network of common bank clients to help them get a sense of what was coming. We found this was valuable since a trend that caught on in Indiana and California might take off in other markets as well.
One of those trends that I personally took ownership of (and had major economic implications for our banking clients) was the coming decline in the growth of printed checks by the bank’s retail customers as electronic banking caught on and gained momentum.
There were two major check printing companies, Deluxe Check and Harland, who together easily controlled 80%+ of the retail check business with banks. I had a small team that tracked the slowing growth of check volume by these two companies in hopes of allowing us to validate to our clients the decline in checks that was surely coming. By the mid 1990s, year-over-year growth in printed checks for these two companies had slowed to the low single digits. In 1995, the growth was under 2%. This gave me the confidence to predict in my January 1996 prediction that check volume would fall for the first time. I felt I was on fairly safe ground.
In 1996, however, printed check volume rose 4.3% over 1995. Huh?
Although I felt chastened, I could read the trend lines, and every subsequent year until I sold the company in 2000, I predicted that "this coming year" would see the expected drop-off in printed check volume. And every year up until 2000, check volume grew.
Though I sold my interest in the company and moved on to another industry, I kept my eye on check volume.
In 2001 the worm turned, and for the first time in over 100 years, check volume declined, down 6% in 2001 over 2000. Then came the waterfall. Check volume, which, for the past decade had been growing by low double digits - but still growing - suddenly went into freefall. Off by 14% in 2002, then another 17% in 2003, and then I quit tracking it because my long-predicted decline had arrived.
The banks were fine. By this time they had long-seen the trend to electronic banking and had been building out their electronic banking infrastructure and downsizing their check-processing capacities. They were ready for this major shift.
The check printing companies? Well, that is another story. They clearly saw the shift coming and they knew the end of their check-printing gravy train was coming to an end. They tried to diversify and to date have had some success. Are they still printing checks in 2014? Of course, but every year their volume drops. These check companies are still scrambling to find the new growth business that will be their future.
So why am I dredging up a story from my past?
Well, its because it really is an apt comparison to the fall-off of analog printing in general and direct mail (printed matter) in particular.
In fact, when I compare printed checks for banks being displaced by electronic banking, and printed direct mail appeal communications being displaced by online communications, I am struck by “the Internet” being the common thread. From the inception of the Internet in the 1990s, it has been disrupting industry after industry.
Recently The Agitator (another well-read blogger in the nonprofit fundraising space) played up the same post from AnalyticOnes I mentioned in Monday’s blog over three separate posts. That fact is quite remarkable for The Agitator. The post we were both focusing on is Unsustainable Trends (Part One and Two).
The implications contained in these two posts are not only the evidence of the coming fall-off in direct mail that so many have been predicting, but also show exactly why the fall-off is coming. Their conclusions are based on the data that AnalyticOnes has compiled in their work with nonprofit fundraisers . . . especially those with large direct mail programs.
Once you read these two posts and have digested the implications, you are left with two questions.
First, you now understand that it is about managing the decline of your direct mail program. Growth is coming to an end if it isn’t here already. How do you maximize and optimize your profitability as your program declines?
Second, what takes direct mail’s place?
My suggestion …
Call AnalyticOnes for the answer to the first question.
I think you know who to call for the second question.
-MikeWelcome to BIG's Blog! Please feel free to forward this post to your friends and coworkers...and email me a comment at: firstname.lastname@example.org