Brad Kugler on Marketing B2B Technology Podcast

Thanks for listening to Marketing B2B Tech, the podcast from Napier, where you can find out what really works in B2B marketing today.

Welcome to Marketing B2B Technology, the podcast from Napier. I’m Mike Maynard and today I’m joined by Brad Kugler. Brad is the CEO and co-founder of Direct Mail 2.0. Welcome to the podcast, Brad.

Thank you for having me, Mike. I’m happy to be here and spread the wealth on B2B marketing.

Absolutely. No, it’s great to talk to you. We always like to learn a little bit about our guests at the start. So, I’d like to hear about your career history. I mean, you’ve got an interesting career history, haven’t you? You spent a long time working in your family’s business and then kind of the whole digital technology world came and disrupted it. Really interesting. But then you went to direct mail which doesn’t strike me as a logical move. So tell us about your career and then tell us about why Direct Mail 2.0.

I’ll tell you, it’s pretty simple. I spent 23, 24 years in packaged media. Media being CDs, DVDs, video games. And we made a great transition to marketing them online via eBay and Amazon and our own destination website. And we always knew that this track had an end. The digital movement was talked about in the early ’90s actually when I first started in that business in my early 20s. So this was not a surprise. The question wasn’t if it was going to happen, it was when. And it really didn’t start taking hold until after 2011, 2012.

We had just come off our best year ever, $25 million. Netflix, Apple, Amazon, and all launched their streaming services and we started losing revenue at the rate of 30% a year. That’s when it was like, it’s here, it’s actually here. And we tried a lot of things. I’ll be honest with you, but I knew this was the beginning of the end.

And I never finished college. I’ll be honest with you. I dropped out of college to join this business. Actually joined another business which was a marketing business. And then I never went back and I’m like, I’m going to be out of a job. I’ve got almost 50 years old. I got two kids in college and I need to figure out what I’m going to do.

So kind of the first thing I looked at is what am I not going to do? I know that I wanted a business that I was either on the disrupting side or that could not be disrupted by technology. And it’s funny that you mentioned in the preamble earlier that, you know, why would I choose direct mail? Well, the business that I had discovered was a disruptor for direct mail. So, it piqued my interest.

It also had a key component of recurring revenue. Direct mail, people that advertise in direct mail tend to do it weekly, monthly, quarterly, whatever. So, it checked a bunch of boxes and the technology seemed solid.

I was offered this position mainly from an old family friend who said, “Hey, look, we have this technology in our print business. We want to spin it off as its own company and you have been a survivor because as my business tanked after 2012, I started doing a lot of different things and starting some other businesses.” And she had noticed my resilience to this. So, we made our deal. We spun this technology off and here we are. It didn’t officially start till 2017 and here we are, you know, eight, nine years later, and we’ve—I have taken it to the next level with the support of my co-founder. But that’s the story of how I got this. It checked the boxes specifically of a disruptor versus a disruptee and a recurring revenue model.

So that’s, I mean, I think really interesting. So you did go into an industry that is, I think, seen by a lot of people as being somewhat old, but you wanted to be the guy disrupting it rather than the guy being disrupted. And I think that’s a great lesson there.

Absolutely. And one of the things is I had used direct mail in my previous DVD and CD business and it worked pretty well, and I know that most people are attracted to bright new shiny objects. All the digital offerings, you know, email and digital targeting and, you know, everything is just like, oh, well, what’s ink on paper? That’s useless. So, the premise of this business is combining that ink on paper with the new technologies to sort of form the best of both worlds.

Direct mail has always been, in most cases, a very good ROI. It turns heads. It’s tactile. You can touch it, you can see it, you can feel it. So combining it with these other things seemed like a logical way to go, and that’s what happened.

So Brad, tell us a little bit about the technology. What are you doing to change the world of direct mail?

So let me make it the way to do it is make it most plain to people that mainly live in countries that have a direct mail marketing industry, such as UK or the US. You’ve all gotten postcards or advertisements that have a QR code or they have a text-back number or they plainly kind of direct a person either to an address or a URL or something. There’s a call to action.

We’ve taken those calls to action and we’ve added a layer of digital technology. Most print manufacturers, this is not their—they know ink on paper and cutting and packaging and sorting. They don’t know this stuff. So, we’ve taken 15 different things, and they go from landing pages to QR codes, as I mentioned, to email to integration with the United States Post Office to track mail like a package. We’ve taken these technologies and we’ve bundled them together and we offer them up as a one-stop shop because to do these 15 things separately, you could be going to six, seven, eight different vendors. So, we pull it all together and we offer it as a service. It’s a software as a service and we resell it through agencies or print manufacturers.

And over the years, we’ve added to this sheath, this arsenal of technology. I acquired a company called Who’s Mailing What, which basically captures all the direct mail. Well, not all, but a good portion of the direct mail that’s going to people’s homes, almost like a TV rating system has people in their homes that are rating shows. So, we have these hundreds of panelists, as we call them, capturing direct mail and we feed it into a database and we put it through AI.

We’ve also taken all the results of all of these 80,000 campaigns we’ve overseen, which included two billion pieces of mail, and we’ve made a propensity model. We’ve created an AI that will predict future mail results based on past campaigns. So, I continue to build technology that we call the performance stack for direct mail. So, if you’re doing direct mail, I position us as we are the guys that have the technology to help ensure your success.

And that’s really interesting because you’re not actually going out to kill an industry by disrupting it. You’re going out to make it a completely different and much more intelligent approach.

Absolutely. I mean, before, let’s go back 20 years, you send out several thousand mailers and you kind of cross your fingers and you’re like, is anyone going to call? Is anyone going to come in? You know, I don’t know. There was no way to sort of fully attribute a one-to-one. You know, I guess you can if you got their name, you can go through a list and see if they bought something, but you know, that’s at the ROI side.

Is the mail getting people in the door? Is the mail getting people to go to the website? Because, you know, if you relate it just to the closed deal, obviously it’s important, but you know, some of those deals might not close for other reasons. Your website’s terrible. Your customer service is awful. The goal of the mail is to get somebody to react to your offer. Closing them is really the responsibility of the operation itself. A piece of mail or an advertisement is not necessarily going to sell something on its own.

So what we’re doing is we’re measuring the attribution or engagement in real time to that mail piece. And 15, 20 years ago, that could not be done. And now it can be done just as scientifically as an email or a digital ad.

That makes sense. I’m just interested, you know, you said this was a friend of the family who had the technology. I mean, was this something you’d wanted to do or was it something they had to go and sell to you?

Uh, I didn’t understand it at first, to be honest with you. I understood when I ordered direct mail advertising, I called up, we back and forth the design and off went 10,000 pieces and maybe I got some calls. So, I did have to be sold to, but then the vision that it was an underdeveloped, infantile product and service at that point. So, it took me, I’ll be honest, it was a few days of meetings to see how do we get it from this within a print company to its ongoing concern and how do I scale or grow it from there, you know?

So, there was a bit of a, like, how’s this going to work, you know, because I was getting some traction in a few other little side businesses. I was involving myself with—honestly, I went and read 27 business and technology books in this period that I was re-educating myself to hit the market again and again and again. And I reemphasized, I’m 50 years old with a mortgage and two kids in college and, you know, I was a bit nervous. You know, how am I going to hit the job market? What? I’m an entrepreneur. I got to figure something out.

So we had talked and I saw the future. And I’ll give you an example. When I came into this, there were three technologies associated with lifting direct mail. We’ve since created 17. All right? So, we kept adding different technologies to make this a more effective product over the last seven or eight years and we continue to do so. Every quarter we release something else.

And I mean, that’s interesting. You know, you’re looking to optimize direct mail across basically all industries. But I’m interested, you know, I think people feel, and I don’t know if it’s the same in America, but in the UK, like credit card companies must do really well because we get endless credit card mailings. Are there particular industries that do well, or do you believe everyone can do well if they execute a great campaign?

Listen, I’ll be honest. No, not everyone. Okay? And it comes down to your lifetime value of a customer, your average order value. You—and I’ll give you an example. You brought up credit cards. Credit card guys know that people are going to carry debt and they’re going to carry debt at 20% a year. So if the average person is carrying seven or eight thousand dollars of credit card debt, that bank is into $1,600 a year of interest payments probably for years. So you’re talking about a $67,000 return. So to spend a dollar to contact a customer is really nothing. Okay?

Everybody has credit cards, multiple credit cards. Other sweet spot industries besides financial or debt are automotive. You know, you sell one car, $80,000.

Universities and higher education, that’s hundreds of thousands of dollars.

So, would I advise a guy who has a pizza service to spend a lot of money on direct mail? No. What’s his pizza? $20. Maybe he’ll sell a couple a year to the guy. There’s a lot of competition out there. So, it really depends on that average order or lifetime customer value.

Health spas and clinics do very well. Nonprofits who have no real cost of delivery other than their advertisement, they do really well. So, there are six or seven large industries that tend to gravitate towards direct mail because of that high average order volume or high margins.

And then what about B2B type communications? Because I think direct mail is a bit uncool in business to business. But we’ve still seen some great campaigns.

Absolutely. On B2B, I think it’s underutilized because your average order volume is very high. It is very difficult to reach the intended person in a company you need to reach. With direct mail, you can get their home address and reach them easily at home—direct. No gatekeeper, you know, no worrying about them getting 600 emails a day and deleting 590 of them in 10 minutes, especially using AI tools now.

So B2B, I think, is probably one of the bigger growth patterns, you know, and most people are not getting a lot of mail about work stuff at their work or, let alone, at their home. So I think there’s a great growth potential there.

That’s really optimistic. Just switching tack a bit, I mean effectively, and I hate to summarize it so simply, but one of the great things you can do is you can measure the effectiveness of direct mail, which then allows people to optimize it. So attribution and measurement is so difficult to do in marketing today. You can get lots of data, really hard sometimes to tie it down. What are you doing to get really good quality data?

So, basically, there’s an interesting thing on every piece of mail in the United States. It’s called intelligent mail barcode. It’s a 33-digit number which recognizes an individual. So, to tie back them and I—I stay away from ROI because different companies sell different volumes of things and, like I said, you can learn to sell at the door just as quickly as we got them there.

So we track engagement. Engagement is the one-to-one contact between the address and the seller or the brand that’s advertising. So if we can track an engagement rate on a percentage of pieces mailed. So, you mail a thousand pieces and we usually expect with our platform 3 to 5% engagement. You know, you get above that, you are a rock star. You know, you’re shooting below 2% engagement. Things need to be tweaked with that campaign.

So obviously if I can help drive a higher engagement, again, the responsibility on the close is up to the company. Then I’ve done my job. You know, we don’t dabble in creative or the strategic as much as just improving the reporting and improving the number of repetitions of that message. We very closely track engagement rate and we provide the names of the people who have engaged.

So, if John Smith at 123 Main Street, he clicked the QR code, we know he went to the website, he clicked on an Informed Delivery, I say, “Here are the three engagements from this guy. He responded three different ways. You get after it.” I mean, then it’s up to the advertiser to get after it. I’ve done my job, you know. Not absolving myself from responsibility, but my job is to raise that engagement, and I can do that confidently with our technology.

So you can measure how effective people’s campaigns are to really granular details and give them actually a lot of help in closing sales. The Who’s Mailing What acquisition is interesting. I mean, how do you feel that really helped your core business?

Uh, it’s a great question. So, a, it’s another product that could be sold to direct mail advertisers. So it was a simple transference of having something else to sell them. Two, as I stated earlier, we launched DM20.AI, which is our propensity modeling database that basically benchmarks your intended piece of direct mail against our database.

Now, that database with Who’s Mailing What has increased by a geometric order of magnitude. Anything involving AI requires a substantial amount of data, the more the better. Okay, you begin to normalize the outliers, you have more data to fill the holes.

So I know for me to offer a quality product or the best product out there, I have to have the best direct mail database around, which I have secured and we continue to build products for this. And it goes so much beyond the direct mail. I know that someone in a household at a certain address has responded to offers for auto or finance or whatever, what the offers were, what the keywords were, how they responded. I have a gold mine of data which we are now working to turn into a monetizable, usable thing, especially with AI, because now AI can kind of take that data and break it down to build you an ICP or can build you some sort of direction to better strategize your direct mail.

But the reason for the acquisition comes down to really building this immense direct mail database bigger than anybody’s got, because then I’m—I can’t be knocked off by somebody else if I own the data.

You know, makes a lot of sense and I’m interested how you’re using AI because I think a lot of people today, you know, you’ve talked about AI and direct marketing. They’re thinking about copy being written by AI or images being generated, but you’re actually doing something very different. You’re grading the mail piece. So how do you think your approach is working and why is it better?

So, we’re doing two things. We’re taking the creative piece and we’re digitizing it or annotating it. We’re breaking down every piece of text, image-to-text ratio, use of colors, the size, the copy, the size and placement of key call-to-action things like the website, the QR code, the URL. And we measure these against the engagement rates that we’ve accumulated over the years so that we can sort of plot a middle ground.

Okay, this is the average engagement rate, but we found ones that use certain keywords or place their URL in a certain color may have a slightly higher lift. So, if you can lift that engagement rate even a fraction of a percent, what does that extrapolate to over millions of pieces of mail? It could be millions of dollars, a few—even a fraction of a percent of a higher engagement rate.

So, we hired a data science team to take our proprietary data and build these models by vertical, by geographical, by certain things in their creative. Then, because that was kind of dry—it’s just a mathematician’s nightmare of numbers and things like that with probabilities—we then take that and we go to three different Frontier LLMs. We go to ChatGPT, we go to Claude and we go to Gemini and we say, “Take this. Tell me what you think are its strengths and its weaknesses.” Then we go to the next one. Tell me where the last one might have missed something and error check it. Then we go to the third one. Give me a summarization of this that’s in plain language that would speak to a marketer.

So, we have invested heavily into taking the proprietary data and putting it through the best LLMs in the world to output what could the user actually do to improve the piece. So that launched in April and now we’re taking it one step deeper, one step further: we’re going to actually have the AI implement those recommendations into the creative and the copy and suggest other ICPs or ideal client profiles that might engage better based on our data.

So having all of this data builds on it and then I’ll fold Who’s Mailing What into it. So now we can say, “Hey, Mr. Advertiser, here’s what the competitors are doing in your same vertical, in your same geographic region. We suggest you take some of these pieces, the things they’re doing, and incorporate them into your campaign.” So to us, it’s kind of like the no-brainer.

For $40 or $50, you can get a complete marketing rethink on a piece on a campaign you’re about to drop 10 grand on. Is it worth 50 bucks to get all this information in three minutes? To me, it’s a no-brainer.

We’re not having—I can’t exactly say that they’re lining up handing us $50 bills for that. The most common question we get is, “Well, why don’t I just send this to Chat?” I said, “Go ahead, send it to Chat and see if it gets back anything close to what you’re getting in our free trial.” And they go, “Oh, yeah, you’re right. Well, let me talk. You know, it’s a new product. Everybody’s already dropping 20 bucks a month.” And there is a hesitation to invest, especially by small businesses and advertising.

So, and maybe I think there’s a little bit in the back of marketers’ head with, why do I want to spend money to get told what I’ve done wrong?

Yeah. Yeah. There is a resistance, and I wouldn’t call this the hottest economy we’ve ever had right now. And when things slow down, most businesses, the first thing that they can easily cut costs on is marketing, which is a mistake to me, but they would rather cut marketing costs than have to lay people off, which I understand. That’s no fun.

So, I believe the marketing industry is getting hit first in this economic trough that we’re in, but usually as you come out of it, the people that invested first are the ones that come out of it the quickest, you know.

Absolutely makes sense. I mean, I guess one question of having AI kind of look at mail pieces and then optimize them is you’re not necessarily going to get that brilliant, you know, mailpiece that works because it’s just so different. I mean, is that a problem? Is that something you’ve looked at?

Yeah, we found that people are very emotional about their concept for creative, whether it’s the best or the worst. This is something that they believed in inherently. So when you get some kind of AI that says, “Oh, don’t do this or add this,” I’ll be honest with you, most people don’t want to hear it. They know better and in some cases they do. There are many occasions where you come up with a wild idea and it does really well.

But does it consistently do well or was it just because it was so different people got their attention and then when they see it a hundred times, guess what? It doesn’t work anymore. So there’s a lot of marketing fatigue out there and people stick with sometimes their great idea for far too long, you know.

Okay, it’s kind of like the stock market. You get a hunch on a stock and it goes to the moon and now you think you’ve got the magic touch and anything you do is going to go to the moon. However, you stick with some of the more current S&P 500. You may not go to the moon, but it’s a constant gradual increase for a long period of time. That’s kind of what AI does. It smooths out the troughs and the valleys to a general sort of things that have known to work over the long term.

Yeah, it makes a lot of sense. I mean, Brad’s been really interesting. Before you go, I’ve just got a couple of quick questions we like to ask everybody. The first one simply about marketing advice. What’s the best piece of marketing advice that someone’s given to you?

You know, it’s so tough. That’s like asking someone what’s their favorite book you’ve ever read or your favorite movie? And there’s so much good advice. It’s hard to focus on one. But in business in general, I tend to stick with the one about persistence and resiliency, you know, and again, you do a marketing action one time and it doesn’t knock it out of the park or even doesn’t move the needle. Don’t give up. Okay? I would continue to persist on that a little longer and see if the traction sort of builds on itself. So, I’m a big believer in persistence on a given course for a period of time, especially in marketing.

Yeah, I love it. I think that’s great. And consistency in marketing, I think, is so important. And the other question is, and this is really interesting because, you know, you’ve been in a business that’s been disrupted by technology and now you’re running a business that’s trying to disrupt a market. If you’re a graduate leaving university, I mean, it’s pretty scary making your way into a marketing career when things are changing so quickly. So what advice would you give someone starting a career?

Oh man, at this point almost anybody in business, whether it’s marketing or not, learn as much about this AI revolution as possible. This will dwarf the internet e-commerce revolution of the early 2000s. It will invade every part of our lives. So it is so important.

You know, when I got out of college or when I started getting into the job market, you had to know some Excel and Word and if you didn’t know something about those, you sort of were unhirable. To me, AI—being confident in its usage—is just as important now as having those skills 20 or 30 years ago.

You must know something about it. And marketing is not static. There are some basics: persistence of message, repetition of message, but the tools being used are in flux more than I think they ever have. And I’d stay current with that stuff as much as you can.

Yeah, I think that’s great advice, Brad. It’s been fascinating. I feel like we could talk for, you know, ages on this.

Um, but if people want to know more, maybe they feel inspired to do a better direct mail campaign, I mean, where can they go to find out more information?

Probably the easiest place is dm2.com. dm2.com. From there you can find all of the links to our direct mail performance stack. You can find myself if you have a question. I love to help people. I’ve gotten to a point in my career where I feel the greatest benefit I could be to the world is just helping others and things that I’ve learned through my years and mistakes. So, love to talk to people. I’m easy to find on LinkedIn at bradleycougler.com or dm2.com.

Awesome. Brad, thank you so much. Been fascinating. Thanks for being a guest on Marketing B2B Technology.

Thanks again, Mike. Happy to be here.

Thanks so much for listening to Marketing B2B Tech. We hope you enjoyed the episode and if you did, please make sure you subscribe on iTunes or on your favorite podcast application. If you’d like to know more, please visit our website at napabb.com or contact me directly on LinkedIn.