Posts filed under Direct Marketing Strategy

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.

The 3 Most Successful Direct Mail Formats

Self-mailer, jumbo postcard or window envelope direct mail package? How do you pick one? What package should you use to generate leads or sell your product?

Assuming you have determined your offer and selected your mailing lists, then you must choose your direct mail format.

Do not pick your format based on cost alone. The proper format will pay for itself and improve profitability. The trick is to make your decision based on what works most of the time. Do not try to reinvent the wheel until you have tested your direct mail many times.

Your first package format choice

  The Classic Package

The Classic Package

Your first direct mail tests should use the proven envelope direct mail format. It's used most often because it works. The package contains three elements inserted into an outer envelope.

  1. A #10 outer envelope with single window 
  2. A personalized one or two-page letter with the address showing through the window
  3. A personalized response device produced with the letter
  4. A #9 Business Reply envelope for the response device
  5. An 81/2 X 11 flyer as needed to lift response

More often than not, added package elements will improve response rates.

Your second most successful format choice

  The Snap Pac

The Snap Pac

The most effective format of all time is the official looking Snap Pac. It contains the same elements as the Classic Package. It usually beats existing direct mail controls using the same content. This rarely happens based on format alone except for the Snap Pac.

My favorite size is the 6 X 9 personalized Snap Pac containing a letter, the reply form, lift note and reply envelope.  

Some heavy mailers such as banks, insurance companies, and large associations use this format. Some companies use the Snap Pac as their super control. This means that they have been unable to beat it with repeated tests after many years.

Your third format choice

  The Self Mailer Front Side

The Self Mailer Front Side

  The Self Mailer Back Side

The Self Mailer Back Side

Only after you have tested one or both of the above should you go to my last format choice, the self-mailer. This mailer is self-contained using no outer envelope.

It consists of a  folded brochure with an included coupon or response piece. Postcards of all sizes fall into this category. 

Rarely containing letters, these formats work best with existing customers who know your product. Postcards do not create the emotional pull of the letter. Some self-mailers incorporate a personalized letter to create a hybrid package.

Simple postcards work best for couponing and discount offers that need little copy support.

The other options

There are other choices beyond these three formats that meet specific needs.

For example, new perfume introductions may use scratch and sniff to use another sense. A manufacturer of a new flooring material may insert a product sample in a box to flooring retailers. The applications for 3-dimensional formats are endless.

A hybrid Classic Package that contains a solid object the recipients feel through the envelope prompts them to open the package out of curiosity will increase response.

The key point when selecting formats: your first choice is the Classic package first. If that doesn't work, then another less expensive format will not likely make your mailing successful. It's better to concentrate on your offer and list testing rather than cheapen the format. 

 

Posted on August 15, 2016 and filed under Direct Mail, Direct Marketing Strategy, Planning.

Direct Marketing Consultant Reveals Top 3 Response Killers

Photo by Imilian/iStock / Getty Images

Direct marketing (or any marketing effort) suffers from these barriers in client companies. Most of them fall within the realm of common human weaknesses. They may hurt the whole business enterprise and not just the direct marketing program.

1. Worshiping at the idol of the status quo

Clients often fixate on the status quo despite evidence that shows the need for a new direction.

This management flaw remains the biggest response killer for almost all marketing programs. But the idea that "if it ain't broke, don't fix it" serves to restrain growth.

Successful direct marketing programs need a lot of work to remain successful. No matter how successful, direct response rates will drop over time. Direct marketers understand that their job entails ongoing program replacement. 

This means frequent testing designed to beat existing controls. 

Managing effective direct marketing programs over the long term requires controlled risk taking. 

2. Working in the haze of routine

Human nature has a way of lulling managers into a dangerous comfort zone.

Here's what I hear from clients who face clear evidence that they need to upgrade their processes.

- "We've worked with this vendor for over twenty years. We're not going to consider other vendors."

- "Our internal database procedures cost us new sales and opportunities. But we don't want to outsource the work. That move makes us uncomfortable."

- "Taking production outside will cost much less and deliver superior print quality. Outsourcing the work would help our customer image. But we don't want to reallocate internal jobs."

- "We don't think our prospects want to read a letter. All we've ever done is send postcards because they are less expensive than other formats. So we don't want to test other options."

3. Not challenging the company's direct marketing efforts

Clients should never assume that their vendors or staff observe best direct mail practices. Yet many clients rarely challenge the marketing work so long as it is profitable. 

Perform these evaluations at least once every one or two years.

- Audit the database and direct mail deliverability levels.

- Audit all direct mail production to assure quality and competitive pricing.

- Check internal procedures for accurate database input processes.

- Review inbound telephone scripts, inquiry response procedures and  accurate response tracking.

These three response killers do not go away. These are not tactical issues but strategic management issues. If left alone, they will kill long term marketing success.

Experienced consultant may attempt to correct these issues. But it is a waste of talent and energy without CEO support.

Have you found ways to overcome these barriers in your company? If so, how did you do it?

Posted on June 10, 2016 and filed under Planning, Direct Marketing Strategy, Consulting.

The Arrogance of the Digital Only Crowd

Digital marketers arrogantly believe that the Internet has taken over the marketing world by replacing proven marketing principles and traditional media. They lead their companies to loose market share by neglecting moneymaking opportunities offered with direct mail, print advertising and Direct Response broadcast.

Digital marketing is not a strategy. It is nothing more than an emphasis on the Internet channel. Such a belief overlooks a large body of proven marketing knowledge that has earned it's standing through rigorous and ongoing testing.

I think another reason for this narrow minded reasoning exists because younger marketers in particular know little if anything about how traditional media works.

It's not that the Internet does not play a major role in the marketing mix. But ROI alone does not achieve top line sales objectives.

I receive regular requests from companies that use digital media alone. They ask for help in reaching their sales volume goals. They are usually making money. But they cannot penetrate their target markets deeply enough to crowd out competitors using digital marketing alone.

Here's the telling question.

Would you rather get a 40% margin on $1,000,000 in sales using the Internet alone or earn 20% on $10,000,000 using all available channels? Almost without exception, the Internet alone cannot meet the top line sales goals of most organizations. 

Digital media alone does not replace traditional media and never will. Digital marketers simply specialize in a single medium ignoring profitable channels that grew out of proven advertising strategies.

And here's the larger issue! It's not just about digital marketing versus traditional marketing or even omnichannel marketing anymore. It's about what I call omnistrategy marketing.

Positioning and direct marketing strategies present the principal two marketing approaches for achieving company sales goals. They can work independently of each other. But I have always believed they work better together than alone.

The rationale for this perspective looks something like the flow chart below. Notice how both traditional and digital marketing flow beneath the overarching positioning and direct marketing strategies.

Omnistrategy Marketing.jpg

Notice how the two overarching strategies use all channels to achieve your sales and profit goals. Positioners (often referred to as awareness advertisers) and direct marketers wield all channels to leverage their campaigns. 

Positioners often use only traditional media or only new media (digital). They also combine traditional with new media. Direct marketers have the same options.

Response rates climb with omnichannel support. Response also climbs when general advertisers build product demand through skillful positioning.

What is missing is a clear understanding about how these two principal strategies differ and how they can work well together.

The telling characteristics of positioning only advertising include the following.

•    No database

•    No analytics of customer data since there is no database that relates response to individual records

•    Reliance on primary research rather than response or behavior data

•    Creates demand by often ineffective mass marketing rather than accurate targeting 

•    Tests the market for product design, but it is not based on projectable sampling

•    Awareness advertising positions the product creating product demand

General advertisers sometimes integrate direct response marketing. But they usually do it poorly. The points listed below show how general advertisers practice direct marketing.

•    Direct marketing considered a tactical, “under the line” activity

•    General advertisers do not see direct marketing as a multichannel strategy or overarching advertising approach

•    Little attention given, if any to the offer

•    Awareness advertisers wrongly consider asking for the order as counter productive to product positioning and branding

•    General advertisers do not want to make their activities directly accountable for sales and fear the accountability for sales

Sometimes, companies use the direct marketing strategy without awareness advertising support. They count on the direct response advertising to create demand and sales simultaneously. In most cases, all channels promote the company's services and products. It is not uncommon for the Internet or even direct mail to emerge as the core medium when substantiated by appropriate testing.

These are the characteristics of direct marketing when used as the primary marketing strategy.

•    Positioning often poorly defined

•    Look and feel takes a lower priority than response

•    Customer data analyzed for targeting by demographics, lifestyle and behavior characteristics

•    Primary research not considered helpful except for unveiling new creative concepts or product design

•    A/B split testing key part of the direct marketing discipline that continually strives to exceed past results (testing uses controls to make the response analysis scientifically reliable and scalable)

•    Direct marketing goes well beyond direct mail to include any channel that improves both top line and bottom line sales results

•    Direct marketing is the only marketing strategy that allows true accountability for sales results

Modern direct marketers understand how positioning and awareness improve response rates. 

The bottom line -- improve your results through omnistrategy marketing that merges the best of positioning and direct marketing strategies. And yes, you do want to incorporate new media in your mix.

Posted on August 25, 2015 and filed under Direct Marketing Strategy.