Speaking Directly: Approaching business from a DM perspective

The following column, which appears each issue, looks at new and emerging trends in direct marketing. Alternating columnists are Barbara Canning Brown, a leading figure in the Canadian direct marketing industry, and David Foley, a specialist in database marketing programs.Last month,...

The following column, which appears each issue, looks at new and emerging trends in direct marketing. Alternating columnists are Barbara Canning Brown, a leading figure in the Canadian direct marketing industry, and David Foley, a specialist in database marketing programs.

Last month, we heard some of the things retailers have been known to say about how they think and approach doing business.

Let’s listen to the direct marketer’s response:

Retailer: ‘We’re mass marketers.’

Direct marketer: ‘Mass marketing is too expensive. We’re database marketers.’

This is not to say that mass marketing did not have its day.

In fact, without the mass marketers of past decades, we would not likely have the level of high quality products and services and reasonable prices that volume manufacturing produces in a highly competitive environment.

Contact has been lost

But, in the process, consumers have been treated as unknown masses, and contact has been lost with people as individuals.

At the same time, mass marketing has increased the level of sophistication and education of consumers. And, the more educated consumers become, the more they demand more and better information.

Here’s where direct marketing comes in.

Detail

The use of direct response media such as infomercials, catalogues, direct mail and outbound telemarketing are built on the basic principle of offering all the information, detail and specifications necessary to making a buying decision.

Not only that, the best ones focus on the customer benefits – what’s in it for you.

And, further, through the use of database marketing, consumers can be treated as individuals, with communications tailored specifically to each particular customer’s communications lifecycle.

Retailer: ‘We’re merchandisers.’

Direct marketer: ‘Retailers who call themselves merchandisers, sell what they buy. Direct marketers buy only what they sell.’

Certainly, retailers do know what they’re selling. They just don’t know exactly who is buying it.

The difference is in understanding, through analysis of the direct marketing database, plus various research techniques, what each customer has been buying, is buying, and wants to buy more of in the future.

Forecasting models

Add to that, the capability to build response curves and product forecasting models, and a merchandise-driven organization is well on the way to becoming a customer-driven one.

This does not mean, either, that merchandise is not important to direct marketers. It’s just not the only thing that’s important.

Right offer at right time

There’s an old direct marketing adage that says 40% of your success will come from having the right product with the right offer at the right price at that right time.

Meanwhile, the other 60% comes from targetting the right audience by selecting appropriate media or segments of lists, properly executing the right creative approach and delivering impeccably on the whole proposition.

Retailer: ‘Direct marketing doesn’t work.’

Direct marketer: ‘It’s amazing how often that happens when the techniques and disciplines are not used properly.’

One-shot wonders do not a successful direct marketing business make. What many fail to realize is that it takes much more than a single catalogue, one direct mail program or a postcard mailed with a discount offer to build a profitable, effective direct business.

Long-term commitment

It takes long-term commitment and investment, patience, and lots of testing to reach pay-off time. And, many retailers whose culture is focussed on pushing product out through the ‘real estate channel’ are seduced by the short-term ease of simply opening another store.

Retailer: ‘I can’t afford to address and mail my catalogues.’

Direct marketer: ‘On a profit and loss basis, I can’t afford not to mail my catalogues.’

Starting up a direct response business from ground zero without a customer base, it may make economic sense to embark on unaddressed prospecting geared to an audience defined only by demographics.

Profit and loss basis

But, eventually, it’s time to look beyond the income statement and balance sheet to measure a profitable business to measurement on a profit and loss basis.

Not to mention the savings that could be realized by segmenting the database of customer names and doing things as simplistic as mailing more often to those who are most profitable to mail to.

Retailer: ‘Direct marketing is so expensive.’

Direct marketer: ‘My costs are all in merchandise and customer marketing. Not unmeasurable advertising, real estate, or bricks and mortar.’

The dynamics of measurement, tracking and analysis in direct marketing mean there is no place to hide when the results come in.

Ask the hard questions

It takes good planning, experience and ongoing courage to ask the hard questions and find alternatives to the unpalatable answers.

Add to this the understanding of the lifetime value of a customer, and, before long, even die-hard retailers may find direct marketing is not so expensive after all.

Barbara Canning Brown, a 20-year veteran of the direct marketing industry, is a direct marketing consultant specializing in catalogues.