Direct-ad opportunity knocks
The men in yellow shirts are competing with your mail carrier.
They wend their way through quiet, residential neighborhoods, dropping off mail at every house, delivering it not to mailboxes, but by hanging it on doorknobs, no postage stamps needed.
They’re employees of Newport Beach-based PowerDirect, which is trying to capitalize on rising postal rates and an aversion to junk mail by delivering advertisements to homes themselves.
The colorful and glossy door-hanger ads often come with coupons for department stores such as Macy’s or Old Navy. They’re more compelling than direct-mail pitches that come folded into mysterious white envelopes, or the flimsy ads -- forgettable and easily disposable -- that local businesses used years ago.
At least that’s what Bill Borneman, chief executive of PowerDirect, is hoping.
“With better response rates and lower cost than direct mail, advertisers will be hard pressed to pass us by,” he said.
His new delivery business is sophisticated: He tracks his workers with global positioning systems to make sure the door hangers are delivered to the right places and on time, and he uses direct-mail targeting strategies to make sure the ads are reaching people who might respond to them. His company has 45 employees and revenue of around $20 million.
Borneman, who came from the direct-mail business, sees his door hangers as a less-expensive alternative to mail -- 5 cents a unit cheaper, to be exact.
It’s a lucrative time for advertising at people’s homes.
The volume of standard mail sent to U.S. residences increased from 87 billion pieces in 2002 to 102 billion in 2006. Sending ads to consumers’ mailboxes is effective even as more advertising migrates to the Internet, said Stephanie Hendricks, spokeswoman for the Direct Marketing Assn.
Direct mail often motivates consumers to check out an advertiser’s website. Amazon.com, for example, has started using direct mail to reach potential customers.
But many advertisers are getting squeezed by rising postal rates.
On May 14, the price for a basic piece of standard mail increased from 23.1 cents to 25.2 cents. The cost probably will keep going up every year because of a law signed in December pegging rates to the consumer price index.
That’s led to a burgeoning industry of companies such as PowerDirect that deliver mail to customers’ homes, skipping the U.S. Postal Service.
Private distribution companies are more flexible than the letter carrier because they deliver ads any day of the week and at all times of the day, said Mike Lynch, president of the Assn. of Alternate Postal Systems. (Lynch is president of CIPS Marketing Inc., which is partially owned by Tribune Co., which also owns the Los Angeles Times.)
And it is less expensive to send oversized mail through distribution companies than through the postal service. Oversized mail is becoming more important as customers become less responsive to direct mail.
“If your advertisements are sitting on someone’s doorknob, it’s more likely that people will see them,” Lynch said.
Direct-mail companies also have struggled to become more environmentally friendly. Members of the Direct Mail Assn. started putting “Recycle please” on their mailers only in May. Around one-fourth of PowerDirect clients choose to pay more to use door hangers printed on recycled paper, Borneman says.
The Quiznos restaurant chain used PowerDirect advertising when it began offering home delivery last year. Josh Kern, who was then senior vice president of marketing for the company, said that nearly 3% of households that received door hangers responded to the ads, more than double the response rate to direct-mail ads for the same campaign. Door hangers, at 31 cents apiece, were half the price of direct mail, he said.
“It’s hard to stand out when you’re in the mailbox,” he said. “Door hangers get it in their hands.”
Many customers who receive door hangers are irritated by the ads and rip them down immediately, Kern acknowledged. But the menu and pictures often catch their eye anyway, and they call Quiznos to order dinner, said Kern, who is now chief marketing officer at Earl of Sandwich, which is owned by Planet Hollywood.
Not all exasperation with the ads turns to a sale. Take Don Skousen, a Gilbert, Ariz., City Council member who became so frustrated with door hanger deliverers traipsing across his lawn that he talked of banning the ads. Instead, the local chamber of commerce sent a letter to businesses asking them to respect consumers’ privacy.
The delivery method improved, but the ads are still clutter, he said.
“Let’s go gather up all these ads and put it on their front door,” he said of the advertisers. “Let them clean up their mess.”
But to Borneman, PowerDirect’s door-hanging ads are more than just clutter. When he came up with the idea for the company in 2001, he approached Blockbuster Inc. to discuss ways to make the concept more appealing to clients and customers.
“My original vision,” he said “was to reinvent door-hanger advertising.”
Blockbuster initially was concerned that the ads wouldn’t be delivered and that the idea wouldn’t work on a large scale.
After he persuaded an investor to put $50,000 into the company, Borneman was able to implement changes, including the GPS system, as well as two levels of auditors for each “drop” to make sure all the ads had been delivered. He came up with targeting capabilities that he says are as good as those used by direct-mail marketers.
Blockbuster ultimately decided not to work with PowerDirect, but SBC Communications Inc. and Gateway Inc. soon signed on, and Borneman was up and running. His operation now hangs ads in 48 states, Puerto Rico and Canada. And the company has the capacity to find many more doorknobs, Borneman said.
“We’ve been profitable,” he said, “since Day One.”
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