Refining your list will pay off

The following column looks at new and emerging trends in direct response marketing....

The following column looks at new and emerging trends in direct response marketing.

A study from Pitney Bowes, released earlier this year, points out that some 80% of direct mail offerings are irrelevant to the recipient – a fact that can be interpreted two ways.

First, one could argue that – as with any other medium – direct mail has a built-in non-audience and an associated cost. It is widely accepted as fact that a print ad, radio commercial or television spot is not going to be read, heard or seen by 100% of the audience that the advertiser has bought. Extend this logic to today’s direct mail efforts and 8,000 out of 10,000 pieces are, simply, waste.

A little further thinking along this line reveals that a 1% response rate is, in effect, a 5% response rate since 80% of the audience had no intention of responding in the first place. I can see the seminar now: ‘How to quintuple your direct mail response overnight!’ If only it was that simple.

The second interpretation is that direct marketers need to do more to refine their lists – to obtain more information about the individuals who are the intended recipients of the mailing, and to trim the list accordingly. By laying the proper groundwork, clients stand to reduce their costs and increase their profits. Three examples:

(1) A big-box pet food retailer tracked the buying habits of its dog-owning customers for six months, a process that produced a list of customers who did not purchase premium dog food at any time – at least from that store – in the six-month window. The retailer then mailed a premium dog food trial offer to these non-premium dog food buyers, achieved a 2% response and, according to my estimates, could reasonably expect to add $600,000 to its bottom-line over five years.

Had this retailer not developed this list as it did, the mailing would have been significantly less profitable. If premium dog food buyers had been included in the list (by accident or design), the mailing would have cost more to drop and the financial impact would have been reduced by cannibalization from current premium brand buyers.

(2) A highly specialized seminar virtually doubled its registrations by obtaining a small list of highly rated prospects and by hand-delivering a special message to them. The cost to purchase and promote to the more targeted list was very high – outrageous, in fact, compared to the unit cost of the initial mailing of several thousand pieces. However, in terms of productivity, the second list was much, much better.

(3) A national charity built a predictive model to score prospects in a particular community and mailed the top three deciles of the scored list an announcement on the opening of a new facility in that community and solicited their support.

The timing of this mailing could not have been worse – the charity’s name was in the news seemingly every day, and not in a positive way; as well, the summer drop probably cut into response, since many people in the community would have been away on holidays. However, the mailing date was non-negotiable; it was predicated by the opening of the new facility.

In addition, the mailing could offer no incentive whatsoever – other than the promise of that good feeling that one associates with giving – and the budget was just a tad greater than the cost of postage. Were it not for the segmentation benefit offered by the model, this mailing would have been a disaster! But it wasn’t.

These days, we have the technical ability to produce customized messages, at specific points in time and based on a variety of criteria – survey responses, for example – that can determine who gets what message, when and how. A few organizations do this, but most do not, and the big question is why?

The most common explanation is ‘We simply do not have the time.’ I believe, however, it is more that we do not take the time to think through strategy and process, and the result is huge waste of time, money and effort.

My friend and colleague Michael Brown illustrates this in recounting a telephone call he received from AT&T, the long distance telephone supplier for his business.

It seems that a pleasant young man called up and said, ‘We can save you money on your long distance,’ to which Michael replied, ‘That would be wonderful. When you analyzed my outbound usage and my 800 inbound over the last two fiscal quarters, what trends did you discover and how much might I save?’

After four seconds of silence, the AT&T guy said sheepishly: ‘I didn’t look at your account. I’m just calling to introduce a new plan.’

Sound familiar? Too familiar, in fact.

David Foley is a marketing consultant and an instructor in database marketing at York University in Toronto. He may be reached at (416) 253-1224; by fax at (416) 253-4637 or via e-mail at dfoley@idirect.com