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DRMA Spotlight: Zadspace Turns the Box Upside Down

Jeff Giordano says the targeted ad-tech company is scaling up to meet the demand for a new one-to-one, transpromotional marketing era.
Our biggest accomplishment with Zadspace in the past year is turning an idea into a reality,” says Jeff Giordano, CEO of Zadspace, a targeted ad technology company with offices in Norwalk, Conn., and El Segundo, Calif. “I’m really proud that, basically going in market with our solution in January 2012, we already have more than 20 million packages under contract. Our target goal is to be at 100 million packages over 18 months.”

Zadspace, a Direct Response Marketing Alliance (DRMA) member that creates and matches micro-targeted, data-driven promotions for marketers delivered on packages of merchandise ordered by consumers, has been in existence since 2009. However, the company had an injection of fresh management and funding in March 2011, which coincided with a new executive leadership team including of Giordano, Jeff Jensen, the company’s president and chief operating officer, and James Ho, co-founder and chief technology officer — who Giordano calls “the original idea person, whose continued focus we could not do without.”

Giordano’s history in direct response and direct marketing goes back to 1989, including Media Syndication Global, Media Solutions Services, Spiritual Cinema Circle and serving as chairman of the Electronic Retailing Association (ERA). “But Zadspace is a unique company that really excites me,” he says. “Its ecosystem leverages the 4.2 billion direct-to-consumer packages that are shipped annually and the data needed to make each promotion timely, relevant and personal.”

That’s among the many things that Giordano says sets Zadspace apart in what he calls the “transpromotional” (or transpromo) space. “It’s an area of direct, where you basically marry a one-to-one promotion at or near in real time to a transaction,” he says. “We’re part of what is a sea change as it relates to one-to-one marketing.”

Giordano believes that Zadspace — and its product, which is called a “Zad” — has many key benefits (see sidebar for full list) when relating to other direct marketing pieces. “Direct mail is still a $50 billion medium, and growing at 5 percent a year,” he says. “But the simple fact is, according to the DMA’s (Direct Marketing Association) most recent study, 48 percent of direct mail is neither opened nor read. We don’t have that issue with Zads. A Zad is on the outside of a package, within 1½ inches of the shipping label. The fact that it’s fully revealed is important.”

Additionally, Zads hit what industry insiders call a “hotline” buyer. That is, a consumer who’s ordered a product in the past 90 days. Zadspace one-ups that. “A Zad can arrive within 24 hours of an authorized credit card transaction. Twenty-four hours — there is no such recency available on the market today that comes even near in time to that.”

And Zadspace’s technology — both from a data standpoint and its flexibility — is also impressive. “We use transactional and interest-level data,” Giordano says. “We can use publicly available demographic or geographic data to target the Zad.”

He adds, “We are printing daily, in real time. We can play like a digital media. So, if you want to have a Zad specifically tailored to an older demo, you can have one look. To another demo, you can have another look. If you want to change your 15-percent-off offer to 30 percent, you can be on the box with that the next day.”

Giordano tracks Zadspace’s array of services to marketer clients back to a commitment that was developed in early 2011. “We had to develop metrics relating to how well Zads perform, and the only way to do that was to compare it to other mediums,” he says.

The results have been spectacular, as the Zadspace team now understands that the Zad medium must drive an average order value of $50 or more to work for marketers. “It wouldn’t work with a $19.95 widget, per se, but it’s great for continuity programs or high average order values.”

The team also compared Zads to non-targeted package inserts, which “generally come pre-collated, with multiple offers in an envelope,” Giordano says. “We tested a Zad — same promotion, same offer — against a package insert. Depending upon the environment, Zads outperformed package inserts by 429 percent to 858 percent.”

In comparison against another medium, solo direct mail, Giordano says Zads drive a 1.78-percent response rate — “that’s direct mail response rate territory,” he says — at one-third the CPM cost. “We feel pretty confident, given the fact they can outperform package inserts by as much as 800 percent, and that they can rival direct mail in their response rates — and we continue to develop those metrics against it — that the CPMs we have for Zads are reasonable and achievable.”

And the company isn’t done streamlining its metrics. “We don’t pretend to know everything there is to know about Zads,” Giordano says, adding that the company is offering new features to clients, including regression-based clone modeling, customer suppression and cross selling, enhanced data, and third-party optimization tools for campaign refinement.

With the relatively short-term goal of Zads appearing on 100 million packages, its model to gain that scale has lowered the company’s costs drastically, while expanding its market. “Anybody who’s shipping more than 2 million packages a year should be interested in introducing the program,” Giordano says, adding that the company saves marketers costs by using its own printers and paying for all the consumables relating to the printing. “We can save marketers approximately 4 cents per package by doing that — a savings of $40 per thousand is significant.”

Marketers also can create revenue streams by placing pre-approved third-party ads on packages, as well as using the company’s multi-patented Zadware to target cross-sell, upsell and loyalty offers.

Looking ahead, Giordano says the company will continue to build meaningful scale and develop methodologies that will enhance each Zad’s response rate. “At 100 million packages, Zadspace is a really significant company in terms of operating profit and scale,” he says. “At 300 million packages, the numbers are really off the charts. That’s our key right now.”