MAILING LIST BOOT CAMP
Basic Principles for
Mailing Lists
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, many direct marketing professionals claim that the relative
ratio of importance is: 70% list, 20% offer, and 10% creative. It is ironic, because this is also the
element that is least well understood by small business owners and most often
over-looked.
Before you start it
is important to understand the intent of your campaign and develop a direct
mail marketing campaign. Two common
goals for small businesses are to either (a) convince existing customers to buy
more (loyalty programs), or (b) convince new customers to purchase for the
first time (sales prospecting).
Loyalty Programs:
The value to your
business of any particular customer is known as Lifetime Customer Value - this
represents the sum of all purchases that customer will make from your business
over the lifetime of the customer. It
almost always easier to convince an existing customer to buy more of your
products or services, assuming satisfied customers, then to sell to new
customers. In fact, repeat sales are
essential ingredient for realizing lifetime customer value (LCV).
Loyalty programs seek
to maximize LCV by building an ongoing rapport with existing customers. Imagine the local realtor who sends a
monthly newsletter, the neighborhood garage that sends out a note when it's
time for a regularly scheduled oil change, or a local retailer who sends out
invitations several times a year for private sales events for "preferred"
customers only. These are all examples
of loyalty programs.
To do a successful program of this
nature it is essential to know who your customers are. Most businesses keep a list of current
customers - this is called a house list.
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. For example, it is
simple to see how purchase history, income level, gender, and personal data can
all lead to more targeted marketing.
The more targeted a program the better the chance of success.
Given the importance
of repeat purchases, and the role that loyalty programs can play in driving
those sales, it is important to gather information on your existing
customers. Some businesses routinely
gather this information (e.g. auto mechanics, plumbers, and appliance repair
people require a completed work-order for every customer). For other types of businesses, a little more
creativity may be required (e.g. the "club card" that Safeway offers, or a
weekly lunch give-away by a local restaurant for those customers willing to put
their card in a fishbowl).
When building this
type of list be sure that it is "opt-in".
This means to tell your customers that you will be sending them
information periodically and get their permission. Most customers will give you permission willingly if they know
you will periodically send them offers or information that are valuable to them
(e.g. coupons, special offers, the weekly menu, etc.).
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.
Sales Prospecting:
Even with the most
loyal customers there is a natural attrition among existing customers. In fact, this attrition may not be the fault
of your product or service - customers move, customers die, lifestyles change,
and so do personal preferences. The
bottom line is that sales' prospecting is an essential part of maintaining
business growth.
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. What does it look like? Where does it come from? Where do you start?
If you are
prospecting for new customers you will probably not have their names. But, names of qualified prospects are
available through list brokers - or directly from Zairmail. However, to buy mailing lists it is
essential to know what your best prospective customers look like. That's where your house list comes in handy. Scanning through your house list you can
identify the traits that are common among your best customers. For example, you may find that your best
customers live within five miles of your business and have incomes less than
$50,000. This demographic information
will help you purchase a list of customers that will buy.
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 (e.g. a
magazine subscription list, a catalog mailing list, etc.).
These types of lists must be understood - each has a set of
unique characteristics that enables it to achieve specific and distinct
objectives. The key to success is to
understand when it is most appropriate to use each kind.
Compiled list are ideal for those businesses that need
special demographic selectivity to target a well-defined market, for instance
targeting auditing companies specializing in bookkeeping, manufacturers with 50
or more employees, or families with household incomes of $50,000 who live
within 10 miles of your store. All of
these examples are likely to do better with a compiled list than a response
list. This is good news if you
understand the demographic profile of your customers since compiled lists are
generally less expensive than response lists - costing between $40 and $70 per
thousand versus $90 to $125 per thousand for response lists.
Response lists are the best choice if you need to cover an
entire market of prospects with similar characteristics. For example, if you are selling a
specialized software engineering tool, or to every Certified Public Accountant
in the State, there are lists available from publications that serve these
markets. Often information is even
available on how frequently these prospects typically respond to offers they
receive. Response lists, especially
among those who are shown to respond, can produce higher response rates - thus
justifying the higher price.
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 customers you are
trying to acquire.
The answer is not as simple as "as many as possible". Consider how many responses you can
handle. If the goal is to have
customers call you, and you only have one person to answer the phones, then you
probably don't want 10,000 prospects calling you at once. It is a simple rule of marketing that the
further you get from the initial point of contact with your prospects the less
likely they are to buy. Thus, you only
want as many prospects as you can service at any given moment in time.
Similarly, if you have a restaurant that only has seats for
100; it doesn't make sense to attract 1,000 new customers to your doorstep on
any given day. If you have the chance
to acquire a new customer you may only have one chance. 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 again if they have a bad experience; plan to
acquire only as many customers as you can service - 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 and 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 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 -
possibly by adding another select (e.g. income level). 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 test mailings to a particular list, hone your message, and
then mail to the larger list.
Summary:
There are two types of mailings that should be used to drive
any successful marketing effort: loyalty programs and prospect mailing. The best results are achieved for loyalty
programs when a detailed house list is available. For prospect mailings, lists must usually be purchased - a
detailed house list can also be incredibly valuable for purchasing the correct
list.
There are two primary types of lists available for prospect
mailings: compiled lists and response lists.
The correct choice revolves around the type of customer you are
targeting, geographic and market reach, and total list counts that are
available. The best choice is based on
a well thought out direct mail marketing plan and realistic targets.
Direct mail is the most powerful advertising medium available - bar none. Put the right offer in front of the right customer and they will buy. If you need assistance we are here to help. Zairmail can help you purchase the right list for your needs. It is our mission to put all the tools in your hands to leverage direct mail and make your business an overwhelming success.
About the Author
Wilson Zehr is CEO of Cendix (www.cendix.com), the leading provider of Web-to-print solutions that increase sales both online and offline. Cendix also provides strategic and tactical marketing consulting services for emerging growth companies in the Pacific Northest. In addition, Wilson serves on the faculty for the School of Management at Concordia University, Portland, Oregon. A complete bio and contact information are available at contact Wilson Zehr and more details on the Zairmail affiliate program can be found at Zairmail Affiliate Program.