The Direct Marketer's Core Strategy: The Marketing Allowable

Customer Acquisition Allowable

Use marketing allowables to develop your marketing budget rather than a percentage of sales.

This focuses your budget on your most profitable customers and less on what's left over. Drive your plans using a single evaluation process to create successful marketing programs.

For example, if your customer marketing acquisition is $200 for each new customer. And your business plan calls for 10,000 new customers to make plan. Your total budget for acquisition becomes a matter of simple arithmetic.

$200 per customer X 10,000 new customers = $2,000,000

Your promotion, staffing, fulfillment, product deliveries, returns, phone support and and other related marketing costs for customer acquisition fall within this $2,000,000 budget.

You will also want to develop a customer retention allowable to add to your budget.

Keep it as simple as possible by quantifying your financial goals. Then determine the customer mix you need to achieve those goals.

This simple concept makes a lot of sense to CMOs, CFOs and CEOs. The devil lies in the development and agreement on the allowable details.

The customer lifetime value drives the creation of a reliable allowable. Most companies save the needed information to calculate customer lifetime value.

1. Average sale for all customers

2. Average profit margin per average sale

3. Average number of annual sales

4. Number of years and months the average customer remains active

5. The above information yields the average lifetime value of a new customer

Once you have the lifetime value, then the CFO or someone on his team calculates the allowables. His team will include present cost versus future value to come with the final allowables.

So far, my discussion revolves around the vital role of the allowable in preparing the marketing budget. The allowable plays a critical role in evaluating channel mix, offers, and creative executions. It can ven help divide the budget by marketing strategy such as social media support for traditional campaigns.

Through testing, how does TV or direct mail alone perform without the support of outbound telemarketing? How is social media contributing to acquisition or retention? Are we spending beyond our allowables? What mix performs best based on the allowables.

We must work to find ways to quantify all marketing spends. The first step is to create a reliable evaluation KPI. I know the allowable remains the Key Performance Indicator for all marketing activity.

How to Beat Direct Mail Controls

Creating a direct mail test package

Creating a direct mail test package

If you are like most direct mail creative people, you've lost more than you've won.

Some super controls have resisted many attempts to beat them. The discouraging part is that those direct mail winners often look unlikely to win.

They follow the rules, but seem to lack the creative spark that separate them from the pack. So how do you beat them?

I think the secret lies within the offer itself. This is what makes the target audience respond to mail for high response rates. Repositioning the offer may make a big difference. For example, "two for one," "50% off" and "half price" represent the same offer. This repositioning alone may make the difference between success and failure.

Format also plays an important role

Test envelope formats containing a personalized letter and response form with a simple flyer. Stay away from heavy dependence on postcards or self-mailers. They rarely work as well on a cost per sale or cost per lead basis.

Reviewing the poor performers reveal copy and layouts to avoid. You should also look at competitor mailers that repeat. Direct marketers will not remail loosers.

Don't think great design, humor or witty copy like a brander

Concentrate on the recipient's problem and how your product will solve it. Sale with conviction, testimonials and third party endorsements. Use as much copy as you need to answer anticipated objections. Most of all, build urgency whenever possible.

Remember that direct response mail must sell. Do not entertain or impress the audience with flawless prose or award winning design. Focus on the need of an individual recipient and create an irresistible need to respond now.

Avoid stop action copy in the letter that stop the reader in the middle of your message. Mention links, phone numbers and references to other pieces in your mailing at the end of your letter. 

Successful direct mail revolves around a central theme or the main selling proposition. Don't try to do too many things in your selling message. Reduce the number of decisions your are asking the reader to make.

Strive for breakthroughs rather than incremental improvement

Breakthroughs happen only by testing significantly different creative executions. Test everything at once without worrying too about what element might make a huge difference in response.

A 25% plus reduction in the cost per sale or cost per lead qualifies as a breakthrough.

In your testing, don't spend too much time trying to figure out exactly “what” made the big difference. Take your gloves off and concentrate on testing different offers and main selling propositions.  

Posted on June 6, 2017 and filed under Direct Mail, Direct Response Creative.

The Critical Importance Of Lead Validation In Internet Marketing

If you bought a lottery ticket but didn't scratch it, would you start spending your jackpot? Of course, you wouldn't -- you need to know whether or not you actually won something first.

For a lot of direct marketers -- Internet marketers especially -- they're spending their winnings before they know if they won because they're not validating or grading the leads they're getting.

Lead generation websites and other direct marketing techniques can bring lots of inquiries, but many of those inquiries are not actual sales leads. They're things like customer service requests, incomplete form submissions or even wrong numbers. However, too many direct marketers lump all inquiries under the same category and think they're generating far more useful leads than they really are. Ultimately, they're putting their resources into the wrong places.

The greater the lead quality, the more likely the sales or closure rate. 

The following presentation illustrates just how crucial lead validation can be for Internet marketing campaigns -- or any other type of direct marketing effort. Without the complete picture of who your true sales leads are and where they're coming from, you won't be able to make the most of your campaign or optimize it to drive greater improvements. Follow this advice and you won't fall into the trap of spending your winnings before you know whether or not you've actually won.

The following slides from Aaron Wittersheim, Chief Operating Officer at Internet marketing agency Straight North, focuses on Internet marketing and improving sales results with an effective Internet response validation system. He also reveals some interesting statistics that will prove useful to all marketers.

 I think that the above slide review misses a critical strategy in the lead validation process. To be a true sales lead that survives the validation process, those leads should prove a predisposition to buying the product or service.

Cost per sale and not the cost per lead should drive your lead generation strategy.

Sales lead validation must go beyond the described validation process. It's not enough to know that the lead represents true interest in your offering. The cost per qualified lead is defined as a lead that will likely convert to a sale. 

For example, if a  validated lead cost $10 each in a given channel or mix of channels, then a sales conversion rate of 10% equals a cost of $100 per sale.  Simply put, if one in 10 leads turns up a sale, then the cost per sale is $100.

Don't drive your program based on the $10 cost per lead. Expand or reduce your lead generation budget based on the cost per sale to $100 – assuming that CPS achieves your ROI requirements.

One client was generating over 700 B2B leads to month while converting less than one contract per month. This was unacceptable. All it did was frustrate the sales team.

Let me know your thoughts on the lead validation process and how you would modify it.

Posted on March 27, 2017 and filed under Lead Generation, Online Marketing.

The State of Advertising as Seen Through the Eyes of a Direct Marketer

For years, I've seen direct response TV advertisements that sell everything from vacuum cleaners and kitchen utensils to jewelry. Direct marketing newspaper, magazine and direct mail advertising now typically omit response coupons in favor of the toll-free phone numbers and landing pages. Even the Internet has strongly embraced the direct marketing strategy.

But this type of direct response advertising pales in comparison to the volume of advertising that creates awareness or positioning advertising in all channels (except perhaps the Internet).

I've always wondered why that was.

Perhaps it is the budget accountability required with the practice of direct response that does not appeal to agencies or some CMOs. Even today's social media craze requires little in the way of accountability for the effort and budget spent to maintain it. Awareness and positioning advertising strategies make sense as does social media. But how much of your budget should you allocate to these approaches if you do not connect them to sales?

I think those budgets get easily out of control.

On the other hand, direct marketing strategies are nowhere near their zenith in the marketplace. That may be because most advertisers do not understand database marketing and direct marketing to leverage their incredible moneymaking power. 

Here's what I see as a direct marketing strategist when I look at the whole of advertising.  

  1. Poorly understood direct response strategies.  
  2. An unhealthy attraction to anything that appears new. 
  3. A lack of respect for the importance of the company's customer and inquiry databases.
  4. A predilection to approve ever larger marketing budgets without requiring quantifiable proof that they achieve corporate sales goals. 

The fundamental principle underlying all advertising is its ability to acquire new customers and retain existing ones at an acceptable cost.

Here are a few examples of how direct marketing campaigns require accountability for results to survive.

Direct Response TV (or DRTV) advertisements must meet an allowable cost per sale. Successful DRTV advertisers test many spots against each other. They also check the CPS (Cost Per Sale) results by the local station on a minute to minute and day to day basis. DRTV schedules expand or shorten based on actual sales results.

Besides DRTV, you’ve seen hundreds of direct mail pieces in your mailbox. There are direct response postcards that offer a free phone if you sign up now for a 2-year mobile contract. Others push Internet subscription services with 90 days free for a one-year subscription. These postcards usually contain big headlines and a couple of paragraphs of copy.

Other mailers come in the form of the classic #10 envelope package with long letter copy, a brochure and a personalized response form. A/B split test results should determine the control format used by an advertiser.

Again, these results are evaluated based on an allowable cost per sale or cost per lead.  Yet many small and large advertisers cannot answer “Yes” to most, if any of these questions.

  1. Are you testing offers, mailing lists, and other media to establish winners?
  2. Are you tracking response by customer, by offer and by medium?
  3. Are you using broadcast and print as awareness builders? If so, have you considered converting some of your brand or positioning advertising to direct response?
  4. Are you giving proper results attribution to all channels in making a given sale? For example, did SEO or your direct mail piece take the prospect to your e-commerce website to buy your product? Are you tracking all leads and sales based on an offer? Does your DRTV offer differ from the one made in your direct mail piece when they are run concurrently? 
  5. Do you have an allowable CPS or CPL (Cost Per Lead)? Many large advertisers cannot answer this basic question.
  6. Are you testing and evaluating costs per sale for all available channels such as online, direct mail, DRTV, DRradio, print and so on regularly?

Advertisers sell through many channels and make various offers. But does this qualify them as direct marketing? No, it doesn't. They could dramatically increase their ROI by applying all direct marketing strategies.

One of the most important strategies is A/B split testing, regardless of channel. It is also the most underused direct response tool. Why is that so?

I think many advertisers do not test because they have not developed an allowable CPS or some similarly quantified evaluation tool. Either that or they do not understand the critical importance of incremental improvement that drives successful marketing programs. 

Once your evaluation tool is firmly established, then take every opportunity to test the following items across all channels. This represents a partial list.

  • new offers
  • new channels
  • new mailing lists and target markets
  • a variety of direct mail package formats
  • different creative approaches
  • DRTV spot lengths

Over time, your best channel and creative execution will weaken. Don't get caught dead in the water with marketing approaches that no longer work. Aggressively test to stay on top of your game.

Posted on January 3, 2017 and filed under Social Media.

How to Increase Your Direct Mail Response with pURLs

For decades, marketers believed that combining messages through many channels increased response rates. During my career, several tests proved that this strategy works most of the time.

These same tests looked at the cost of combining several channels to support each other. I tested these combinations on an A/B split basis against single channel approaches. 

For this reason, I think all companies should leverage the Internet when promoting with traditional media like direct mail. Personalized URLS leverage your direct mailing with a landing page to lift response.

Most responses today come through an Internet based application or ecommerce website. This gives the respondent 24-hour access to a user-friendly format to buy your product. 

 Notice the personalized URL in this direct mail letter.

A pURL enabled mailer merges the domain name with the recipient's name. When typing or clicking the pURL, the displayed landing page contains the recipient's name. You can also insert other relevant information that is available in your database within any landing page.

Here's an example of a pURL landing page.

According to a Boingnet study (a company that provides advanced pURL support and reporting), pURLs can increase response by 3x for B2B campaigns. This higher response assumes you follow up each pURL with a phone call, email. and other appropriate channels. pURLs that are not supported with detailed reporting and response follow-up do not work as well. Here's an instance where automation makes a significant difference.

The following flow chart shows how to set up an effective pURL system that will increase response rates and reduce your Cost per Sale.

With proper support, adding pURLS to your direct mail program does not have to keep you up at nights. Please contact me if you want to test such a campaign for your company. My email is tedgrigg@dmcgresults.com.

 

Posted on October 4, 2016 and filed under Direct Mail, Database Marketing.