There are three key elements to every direct marketing campaign: the list, the offer, and the creative. Experts seem to agree that the single most important element is the list. In fact, the rule we generally use when planning campaigns is: 70% list, 20% offer, and 10% creative. It is ironic, because most mailers and agencies in particular spend most of their time on the creative and very little on the list.
With any campaign it is important to first understand what you want to accomplish. Two common goals are to (a) convince existing customers to buy more or more frequently (loyalty programs), or (b) find new customers and convince them to purchase for the first time (sales prospecting).
The value to your business of any particular customer is known as lifetime customer value (LCV) Â– this represents the sum of all purchases that customer will make from your business over the lifetime of the customer (with your business). Actually, the value of an existing customer can expand well beyond this level when we consider word of mouth referrals from existing customers. It is almost always easier to convince an existing customer to buy more of your products or services, assuming that you are doing a good job of servicing their needs, then to acquire new customers.
Loyalty programs seek to maximize LCV by building an ongoing rapport with existing customers. Here are just a couple of examples of this idea:
Â• A local realtor sends out a monthly newsletter with local property value trends and local community information (sports scores, recipes, even calendars).
Â• A neighborhood quick oil change shop sends out a reminder postcard with a discount coupon when each customerÂ’s next oil change is due.
Â• A retail store sends out an invitation for an Â“exclusiveÂ” private sale event twice a year that is only for itsÂ’ loyal customers.
Â• A restaurant sends out a happy birthday postcard to customers on their birthday that includes a coupon for a free dessert (complete with candles).
Â• The list goes onÂ…
A successful program of this nature requires that we know who our customers are. Most businesses keep a list of current customers Â– this is called a Â“house listÂ”. The most basic list will include a name and contact information (e.g. address, phone number, email address, etc.). However, the more detailed information that is available the more useful the list will be. Detailed customer information helps us craft timely and relevant messages that build stronger offers and relationships.
Given the importance of repeat purchases, and the role that loyalty programs can play in driving those sales, it is important to collect and store information on existing customers. This is pretty straight-forward for businesses that require a complete work-order or invoice for every customer. Other types of retailers might need a little more creativity. Consider the Â“loyalty cardÂ” that your local grocer offers; or a weekly free lunch drawing for clients willing to drop their business card in a fishbowl at a restaurant. These types of techniques allow a business to inexpensively compile a customer list and sometimes even gather buying habits and preferences as well.
When building this type of list be sure that it is Â“opt-inÂ”. This means to let your customers know that you will be sending them information periodically. This is especially important for tools such as email where customer complaints can get your messages blocked or even result in stiff fines in cases of extreme abuse. Most customers participate willingly if they know that you are going to send them information or offers that are relevant to them. Remember the whole idea is to nurture customer relationships to build your business Â– donÂ’t abuse your customers trust with spam or communication that is too frequent.
No matter what type of business you are in, building an accurate and detailed house list is essential for maximizing lifetime customer value. As we will see, it is also an important first step in driving new sales.
Even if you have the most loyal customers in the world there is a natural attrition that occurs. In fact, this attrition may not be the fault of your product or service at all Â– customers move, customers die, lifestyles change, and so do personal preferences. The bottom line is that prospecting for new sales is an essential part of maintaining business health and stability.
One of the most effective tools available for sales prospecting is direct mail. According to the Direct Marketing Association, on average, direct mail returns ten dollars for every dollar invested. However, as noted earlier, the most pivotal element to direct marketing success is having the right list.
If you are prospecting for new customers you will probably not have their names. But, names of qualified prospects are available through list brokers Â– or directly from online service providers such as Zairmail (www.zairmail.com/listpurchase/listonline.asp).
However, in order to acquire a direct mail list, it is essential to know who we are targeting first. One way to get some insight is to scan through our house list and see what common traits our existing customers share. Factors such as geographic location, age, income, gender, and other demographic variables will allow us to compile a typical customer profile. Since these clients have already found value in our products or services, then it is a good bet that other clients with a similar profile will also value what we have to offer too.
In some cases, we may not have enough in-house information to create this profile or we are expanding our reach to new types of prospects. In these cases we will have to start with a mock profile and then run some smaller experiments to gauge interest. When there is any doubt in direct response we always just run some smaller Â“testÂ” campaigns just to be sure.
There are two main types of lists that can be purchased: compiled lists and response lists.
Compiled mailing lists are comprised of information from public records and sources such as the phone book, courthouse records, bankruptcy filings, mortgage deed records and more. On the other hand, response mailing lists consist of individuals who have responded to an offer either through the mail, phone, television, or through other means of mass communication, or receive regular communication from a specific sender (e.g. a magazine subscription list, a catalog mailing list, etc.).
These types of lists are a little different Â– each has a set of unique characteristics that determine when it is the best tool to use. The key to success is to understand when it is most appropriate to use each kind.
Compiled list are ideal for those businesses with a well-defined market when we understand the specific demographics of customers. For instance, imagine a business that is trying to reach single adults, over 40 years of age, with an income greater than $50,000 year, located within a five mail radius of a specific retail store; or a homeowner with an FHA or VA loan, with a credit score greater than 640, and an interest rate greater than 6%. These types of lists are readily available using compiled data.
This is great news if you understand the demographic profile of your customers since compiled lists are generally less expensive than response lists Â– costing between $40 and $70 (credit scored data generally costs more) per thousand versus $90 to $125 per thousand for response lists.
On the other hand, response lists are the best choice if you need to cover an entire market of prospects with similar characteristics. For example, if you are looking for Harley Davidson enthusiasts, or offering continuing education for Certified Public Accountant in the state of Oregon, there are lists available from publications that serve these markets. Often information is even available on how frequently readers respond to offers they receive. Response lists, especially among those who are shown to respond, can produce higher response rates Â– thus justifying the higher price.
One other issue to consider is deliverability. The bulk of the cost in any direct mail campaign is not in the list or the print, but in the postage (60% – 70%). So, we need to make sure that the data is not only well targeted but deliverable as well. In order to improve accuracy direct mail services like Zairmail (www.zairmail.com) run every list through two processes. First, lists are run through the USPS coding accuracy support system (CASS) to assure that each address actually exists. Second, lists are run through the USPS national change of address database (NCOA) to redirect mail for movers.
Even with these extra steps there are going to be some addresses that are undeliverable in every list Â– this number will increase as the list ages. One other benefit of response lists is since there is a regular ongoing correspondence, deliverability rates are often higher, but this needs to be weighed against the higher cost as well. The other rule here is that lists should be refreshed often to maximize deliverability.
Both types of lists are not always available for all audiences. So a little research may be required to determine what is available for your target market.
Once the correct type of list is determined the next step is to decide how many names are required. This comes back to your direct mail marketing plan. First, decide how many responses you need.
The answer is not as simple as Â“as many as possibleÂ”. Consider how many responses your business can handle. If the goal is to have customers respond by telephone, and we only have one person to answer the calls, then we probably donÂ’t want 10,000 prospects responding at once. In general, the further we get from the initial point of contact with prospects before connecting with them, the less likely they are to buy. Thus, we only want as many prospects as we can service at any given moment in time. If there is limited capacity it would make more sense to use several smaller campaigns rather than one large one.
Similarly, if you have a restaurant that only has seats for 100; it doesnÂ’t make sense to attract 1,000 new customers to your doorstep on a specific night. Another simple rule of marketing is that it is ten times easier to get a new customer to try your business the first time, then it is to get them to try it Â“againÂ” if they have a bad experience the last time; plan to acquire only as many customers as you can service Â– and serve them well. In the long-run this is a far more powerful plan.
With your target in mind just work backwards. For example, if you are trying to attract 100 new customers, and you believe that 2% will respond to the promotion, of those 50% will buy, then you will need 10,000 names (10,000 * 2% * 50% = 100). Response rates will vary depending upon the accuracy of the list and attractiveness of the offer. Direct mail professionals often use a 2% response rate as the benchmark for a successful campaign. However, much higher response rates are possible with a targeted list and an attractive offer.
When using a response list the vendor can often provide you with target counts. These may or may not be enough to meet your goals. You may need to combine several response lists to get the list counts that are required.
With compiled lists the trick is to configure the demographic selects appropriately to produce the size list required. For example, if you need 10,000 names, and you request all the females within ten miles of your business, and the initial list count is 100,000 names, then you may have to tighten your search criteria Â–possibly by adding another select (e.g. income level or age). In a similar fashion, the demographic criteria can be relaxed slightly if the name count is not high enough.
In addition, this is not a strictly compiled or response list decision. If both are available, and the counts are sufficient, then it may be appropriate to do some small test mailings to determine which produces the best results for your business. Whatever type of list you choose, it is always best to do a small test mailing to a particular list, hone your message, and then mail to the larger list.
In conclusion, direct mail is the most powerful advertising medium available, especially for acquiring new customers. But, in order to maximize sales results we need to make sure that we are talking to the right audience and that means having the right mailing list. We know that if we put the right offer in front of the right prospect good things will happen. Follow these simple tips to make sure that you are talking to the right audience when making your killer offer.
Wilson Zehr was the original founder of Zairmail, the fastest and easiest way to send direct (postal) mail right from your desktop. Upload a document, select a list, approve an online proof, and you are in the mail, tomorrow or the next day, for 50% less. Zairmail pioneered this concept working with the USPS in 1999. Check out the website and the affiliate program at www.zairmail.com. Wilson is currently CEO of Cendix (www.cendix.com) the leading provider of Web-to-print solutions that increase sales both online and offline.