Posts filed under Planning

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 Evaluation Process Differentiates Direct Marketing from Digital Marketing

The evaluation process highlights the primary difference between direct marketing and other strategies such as digital marketing.

Digital marketers as a whole do not evaluate their effectiveness based on financial data as clearly as direct marketers. Note the key digital media evaluators in the graphics below. Digital marketers -- especially content and social media practitioners must evaluate their efforts based on key indicators of results rather than actual sales data.

Let's begin with a sample list of the evaluation indicators used by digital marketers.

 

Notice than none of the evaluators incorporate evidence of incremental sales. These are useful for determining prospect and customer engagement. But no evidence of increasing sales or ROI are clearly evident.

Direct marketing strategists, on the other hand begin and end their planning based on sales data.  

This is not to say that these two approaches to evaluation do not complement each other, but that the approach to solving marketing problems between digital and direct marketers compliment each other.

I should mention that digital marketing is not a marketing strategy in the same sense as direct marketing. Digital marketing is actually a media strategy because it focuses on the digital channel.

In fact, the complete direct marketing strategy always incorporates the digital channel in the planning process. Social media, landing pages, email and web page support all contribute to the effectiveness of direct marketing.

Digital media marketing is no more a marketing strategy than broadcast marketing. That's why the wise marketer should use the direct marketing strategy to drive all marketing campaigns as a way to measure program effectiveness.

Posted on December 1, 2015 and filed under Planning, Database Marketing.

Without These Three Strategies, You're Faking Direct Marketing

  Three Critical Elements of Direct Marketing 

Three Critical Elements of Direct Marketing 

It's astounding how many large advertisers generate leads or sales directly from consumers or businesses and think they are using acceptable direct marketing practices.

Some of these clients and prospects spend millions and waste 50% or more of their budgets. In private, direct marketers often say among themselves: "They don't know what they don't know."

That's often true.

But many simply can't practice best of breed direct marketing because of conflicting business goals or preconceived ideas about the effective direct marketing strategy.

Here are the three primary direct marketing strategies regardless of channel. They apply to email, direct response TV, direct mail and e-commerce. If you are not using these, then you may be walking blind or simply wasting your marketing potential.

1. Run your marketing by the numbers.

When evaluating any and all of your marketing budget, look at what your average sale or customer lifetime values. Then run these by finance to come up with an allowable acquisition cost that reveals how much you can spend for a new customer or sale. We call this the Cost Per Sale (CPS) and Cost Per Customer (CPC).

These sacrosanct numbers gives you and the whole management team a clear view of your marketing effectiveness.

Evaluate each channel and omnichannel effort based on these allowables.

If you can spend $100 per sale, then a $1,000,000 budget must yield 10,000 new customers. 

With a cost per customer number, you can now set up your annual marketing budget based on a simple calculation.

Look at your customer attrition rate to come up with the number of customers you need and when you need them to drive the corporate financial objectives.

This budgeting approach puts reason back into the insanity that pervades many budget setting processes in some companies. The financials should grow or decrease based on the final marketing budget. It certainly should not rely on wishful thinking!

2. Track your budget with a customer relationship database.

A relationship database tracks all customer promotions, inquiries and sales by customer. Without it, the marketer cannot track sales by promotion, segment the database for enhanced sales effectiveness or evaluate marketing programs for long term impact.

For example, leads will come in over a given period and sales trickle in over several months or even years. Evaluating sales conversion rates vary significantly from one database segment to another and one offer to the next.

Strong businesses today know the importance of customer data and the future of the company. Yet marketers sometimes do not drive this trend because they do not realize how important it is to their future.

3. Test your offers, creative executions and channels for cost effectiveness

Now that you have your CPS and CPC allowables along with the ability to track customer behavior with your relational database, you've got what you need to implement the underpinning of successful direct marketing.

Test, test and test again. Continually attempt to beat your best creative work and omnichannel approaches. You have the means, you now need belief.

Believe that testing will startle you with it's impact on your sales. One offer sent to the same market on the same day as a test offer on an A/B split basis can vary by 400% to 600%. So don't think you're finished because you achieved your goals this year. Things change.

Without continual improvement, your program has nowhere to go except down.

If you are not tracking sales results for all of your marketing efforts and not testing. Then you are not in direct marketing.

Posted on June 16, 2015 and filed under Planning.