Consumer insights – direct mail and the leisure and entertainment sector April 2010 Author: MMC Sources: BMRB, Billetts, TGI, Mintel The strengths, weaknesses and marketing opportunities of this £70bn UK sector – which covers in-home and out-of-home activities from gambling to galleries to gym-going. It also analyses responses to different media among key age groups and social classes.

Snapshot of the market Economy The overall value of the out-of-home leisure industry declined by 1.5% in 2009, reflecting the impact of the recession on consumer spending behaviour. However, it remains a substantial industry worth approaching £70 billion per annum. The recession has increased consumers’ focus on value for money and operators have been forced to react to this by introducing more competitive offers. Market Traditional leisure activities such as drinking in pubs/bars have seen participation levels dip in recent years as the smoking ban and recession make themselves felt. Eating out remains the most popular out-of-home leisure pursuit, although there has been a slight dip in the past two years. The huge penetration of eating out underlines the way in which it has become ingrained into society as something which is done regularly rather than just on special occasions. Cultural attractions such as museums and art galleries have seen strong growth. Many such venues are free to enter and this has been a particular attraction to families in the recession. Cinema has seen growth, reflecting the fact that it is seen as offering good value for money in terms of entertainment per pound spent and therefore popular in recession when times are hard and money tight. With 90% of households connected to digital TV, viewers have increased control over ‘when’ and ‘how’ they watch thanks to hard drive-based video recorders and online catch-up services. The resulting effect is viewers are more able to watch TV based around their own schedules, not the broadcasters’. Consumers Concern about unemployment underlies the continuing poor state of consumer confidence. This is afflicting both the youth market (where unemployment is particularly high) and also the family market, where consumers are reluctant to invest in large-scale leisure spending when they face the prospect of a pay freeze, pay cut or even losing their job.

Entertainment and leisure sector - strengths and weaknesses High value Leisure remains a huge area of consumer spending, valued at almost £70 billion in 2009. Introduction of new leisure activities An up-and-coming sector is gambling, which has made the transition to respectability thanks to the Lottery and the development of online gaming. Entertainment on demand The economic downturn will also have a positive effect on the on-demand market, as consumers spend more time at home and reduce the frequency of their out-of-home leisure activities. Weaknesses Legislative burden grows The burden of legislation on the leisure industry has increased steadily during the past five years. Increased overheads Operators have also been troubled by a huge increase in their overheads, ranging from higher staff costs due to sharp rises in food and utility costs. Planning regulations Planning regulations have impacted considerably on the type and location of leisure developments in recent years, driving activity into the town centre, to the detriment of some sectors which require large footprint sites. Source: Mintel Weekday Leisure Time UK May 2009 3

What are the top five types of entertainment mail sent? Number of mailings sent by the entertainment sub market Competition mailings are the most common form of entertainment mail sent. Over the past 12 months, consumers have been sent 29,364,313 competition mailings. Source: Billetts January – December 2009

Direct mail consumers enjoy a wide range of entertainment activities… Top media quintiles (index) Adults who take part in leisure and entertainment activities are more likely than average UK adults to be heavy respondents to direct mail. Heavy responders to direct mail visit gyms, watch plays, visit art galleries and are interested in individual sport. They also gamble and take part in competitions. Source: TGI 2009 Q4

And they are responsive to direct mail…

Theatre-goers respond to direct mail It is vital that marketers look beyond traditional response rates when judging the full return on investment of mail. Research shows significant value is delivered beyond the initial interaction. 55% of adults who are theatre-goers have done something in the past 12 months as a result of the direct mail they’ve received. Bought something 37% bought or ordered something 9% made an enquiry or asked for more information 28% used a coupon 8% tried a new product or service 16% visited a store 25% kept it for later use 9% passed it on 7% paid more attention to ad Asked for something Did something Source: TGI 2009 Q4

Art gallery visitors respond to direct mail It is vital that marketers look beyond traditional response rates when judging the full return on investment of mail. Research shows significant value is delivered beyond the initial interaction. 54% of adults who visit art galleries have done something in the past 12 months as a result of the direct mail they’ve received. Bought something 36% bought or ordered something 9% made an enquiry or asked for more information 28% used a coupon 8% tried a new product or service 15% visited a store 25% kept it for later use 9% passed it on 6% paid more attention to ad Asked for something Did something Source: TGI 2009 Q4.

Gym goers respond to direct mail It is vital that marketers look beyond traditional response rates when judging the full return on investment of mail. Research shows significant value is delivered beyond the initial interaction. 53% of adults who are gym goers have done something in the past 12 months as a result of the direct mail they’ve received. Bought something 36% bought or ordered something 11% made an enquiry or asked for more information 26% used a coupon 7% tried a new product or service 15% visited a store 25% kept it for later use 10% passed it on 7% paid more attention to ad Asked for something Did something Source: TGI 2009 Q4

Adults interested in individual sports respond to direct mail It is vital that marketers look beyond traditional response rates when judging the full return on investment of mail. Research shows significant value is delivered beyond the initial interaction. 53% of adults who are interested in individual sport have done something in the past 12 months as a result of the direct mail they’ve received. Bought something 33% bought or ordered something 8% made an enquiry or asked for more information 24% used a coupon 7% tried a new product or service 14% visited a store 20% kept it for later use 8% passed it on 6% paid more attention to ad Asked for something Did something Source: TGI 2009 Q4

Adults who often enter competitions respond to direct mail It is vital that marketers look beyond traditional response rates when judging the full return on investment of mail. Research shows significant value is delivered beyond the initial interaction. 53% of adults who often enter competitions have done something in the past 12 months as a result of the direct mail they’ve received. Bought something 38% bought or ordered something 11% made an enquiry or asked for more information 32% used a coupon 11% tried a new product or service 18% visited a store 22% kept it for later use 11% passed it on 8% paid more attention to ad Asked for something Did something Source: TGI 2009 Q4

Adults who bet and gamble respond to direct mail It is vital that marketers look beyond traditional response rates when judging the full return on investment of mail. Research shows significant value is delivered beyond the initial interaction. 52% of adults who regularly or occasionally take part in gambling have done something in the past 12 months as a result of the direct mail they’ve received. Bought something 36% bought or ordered something 9% made an enquiry or asked for more information 27% used a coupon 8% tried a new product or service 17% visited a store 22% kept it for later use 9% passed it on 7% paid more attention to ad Asked for something Did something Source: TGI 2009 Q4.

How do people follow up a piece of direct mail Response to direct mail received in the past 12 months (000s) Take part in betting (in past 12 months) Visit gym Watch plays Visit art galleries Interested in individual sport Often enter competitions Using a landline phone 526 102 307 313 1,738 423 Using a mobile phone 168 24 36 53 414 112 By post 487 93 237 220 1,425 476 In person, eg visit to shop 820 192 482 532 2,849 688 Through the internet 565 131 345 406 1,999 469 Via email 184 37 104 107 525 160 Almost 3 million people who exercise at the gym, followed up direct mail in person, for example, by visiting a shop. Source: TGI 2009 Q4

Voucher redemption Use of vouchers in past 12 months (000s) 16m people who are interested in individual sports always use money-off coupons. 8.4m have used a voucher or coupon sent to them by direct mail. Use of vouchers in past 12 months (000s) Source: TGI 2009 Q4

Most entertainment mailings were sent to C2DEs Entertainment, media and leisure sector direct mailing by social class and gender, June 2008 to May 2009 (%) 57% of entertainment mailings were targeted at C2DEs. ABC1s were only targeted by 43% of entertainment mailings. Men were targeted by 52% of all entertainment mailings. Source: Billetts 2010

Most entertainment mailings are sent to people aged 45+ Entertainment, media and leisure sector direct mailing by age, June 2008 to May 2009 (%) Adults 65+ were targeted the most, by 39% of all entertainment mailings. 78% of mailings were sent to adults aged 45 and above. Only 22% of mailings were sent to adults aged 16-44. Source: Billetts 2010

However, most entertainment consumers are ABC1s Entertainment, media and leisure sector direct mailing by social class and gender (%) 81% of art gallery visitors are ABC1. 78% of theatre-goers are ABC1. 63% of gym goers are ABC1. 60% of adults interested in individual sports are ABC1. Adults that regularly or occasionally bet and often enter competitions tend to be C2DE - 50% and 52% respectively. Source: TGI 2009 Q4

And many entertainment consumers are under 45 Entertainment, media and leisure sector direct mailing by age (%) 48% of art gallery visitors are under 45. 44% of theatre- goers are under 45. 65% of gym-goers are under 45. 60% of adults who regularly or occasionally take part in betting are under 45. 54% of adults who often enter competitions are under 45. Source: TGI 2009 Q4

Betting & gambling except lottery Played individual sports Reasons to open mail Leisure and entertainment (%)   All Adults Betting & gambling except lottery Often enter competitions Played individual sports Visited gym Visited theatre Visited art gallery If it's a bank statement 97% 96% 98% If it's a bill 95% If I am the customer of the sender 90% 92% 91% If it makes a sound (for example music) 43% 44% 54% 46% 39% If it has a smell (for example the scent of a product) 41% 42% 38% If it contains something you can taste 61% 48% If it contains a catalogue 57% 52% 71% 59% If it contains a magazine 69% 66% 84% 70% 72% If it contains a coupon 79% 81% 85% 78% If it contains a free sample 68% 67% If it contains an interactive DVD 51% 64% 49% If it's something I have requested 77% If I am already considering buying the type of product 75% 73% 74% 76% Source: BMRB Royal Mail Q1 2010

Betting & gambling except lottery Played individual sports Reasons why people don’t open mail Leisure and entertainment (%)   All Adults Betting & gambling except lottery Often enter competitions Played individual sports Visited gym Visited theatre Visited art gallery If my name is spelt incorrectly 33% 36% 31% If it's addressed to 'the occupier' 50% 53% 49% 51% 54% If I don't know who it is from 35% 28% 29% 30% If it is from a company I have heard of but don't deal with 45% 48% 42% 44% 46% If I've had too much mail on that day 24% 25% 26% 20% If I've seen the same information before 61% 62% 63% Source: BMRB Royal Mail Q1 2010

Betting & gambling except lottery Played individual sports Attitudes to mail Leisure and entertainment (%) All Adults Betting & gambling except lottery Often Enter Competitions Played individual sports Visited gym Visited theatre Visited art gallery I tend to open all of my post 84% 80% 89% 83% 82% I keep bills and statements 86% 92% 88% I often keep printed brochures/leaflets to read at my leisure 46% 44% 59% I like receiving money-off vouchers, special offers or coupons 75% 77% 76% 81% 71% I like to receive customer magazines 38% 41% 62% 43% 37% I like to receive catalogues 34% 31% 51% 33% 36% 35% I welcome receiving mail from companies I'm already a customer of 61% 60% 57% 56% I would like my bank to stop sending me paper statements 27% 28% 26% 30% 29% I prefer to get paper bills and statements rather than access them online 63% 66% 58% 55% I'd like my bank/utility/phone/supermarket to write to me 45% 54% 42% When researching a purchase online, I'd like the option of requesting more information by post 49% 48% 50% I would like Royal Mail to offer a service so that I could tell them what mailing I'm interested in 64% 65% Source: BMRB Royal Mail Q1 2010

Summary The competitions sub market sends the largest amount of mailings in the entertainment sector. However, consumers of direct mail enjoy a much wider range of entertainment activities. Most entertainment mailings are sent to C2DEs aged 45+. However, most entertainment consumers are ABC1 and aged under 45. This presents a missed marketing opportunity to many entertainment advertisers.

Appendix Details of research surveys and terms used 23 BMRB Royal Mail uses BMRB to pose additional questions to BMRB TGI respondents. A nationally representative sample of 2,000 respondents aged 16+ are drawn from the latest rolling TGI and re-contacted using CATI (Computer Assisted Telephone Interviewing). Their responses are then merged with their TGI data. www.bmrb.co.uk Billetts Media Monitoring A Division of Ebiquity A single source survey providing fast and accurate estimates of media expenditure in the UK across press, TV, radio, internet (including paid search), outdoor, cinema, direct mail and door drops. Billetts Media Monitoring also provide a continuous monitor of consumers’ attitudes to direct mail. www.billetts.co.uk Mintel International Group Mintel is an independent award-winning provider of world-leading market intelligence, delivering robust information, analysis and critical recommendations. Mintel's trusted portfolio of proprietary industry solutions and products has been supporting high profile clients in key sectors such as FMCG, financial services, media, retail, leisure and education for over 38 years. With office locations in London, Chicago, New York, Shanghai, Tokyo and Sydney our global presence continues to grow. www.mintel.com Nielsen The Nielsen Company is the global leader in multinational media research and analysis. It is active in 40 markets, offering TV and radio audience measurement, advertising information services, print readership and customised research services. www.uk.nielsen.com Royal Mail Consumer Panel TNS has run a Consumer Panel for Royal Mail since 1985, measuring all consumer activity in relation to Royal Mail including full details of all mail received and sent. Information collected from panel members’ diaries is used to estimate consumer mail volumes for the UK. The panel is based on a representative sample of 1,000 households in the UK (from a live panel of 1,350 households). www.tnsglobal.com   TGI TGI is a continuous, single-source survey of consumer demographics, usage habits, lifestyles, media exposure and attitudes. Established in 1969, the survey provides accurate and independent marketing information on GB adults aged 15+. Annual sample size 24,000. Published by BMRB. www.bmrb-tgi.co.uk Quintile Media quintiles are created by separating media consumers into equal fifths from the heaviest to the lightest 20% in terms of their consumption of each medium. 23

Mail Media Centre, the MMC logo and the Royal Mail cruciform are all trademarks of the Royal Mail Group Ltd. Consumer insights – direct mail and the leisure and entertainment sector © Royal Mail Group Ltd 2010. All rights reserved.   Royal Mail Group is registered in England and Wales. Registered number 4138203. Registered office: 100 Victoria Embankment, London EC4Y 0HQ. To find out more about the information in this presentation, please call us on 0800 917 0640 or email us at info@mmc.co.uk