Small is beautiful

It is rare to find a direct-mail service provider who does not claim to provide some form of demographic profiling or targeting service. After all, what better way to combat the stigma of being in the 'junk mail' business than to say: 'We're using the latest data and state-of-the-art technology to maximize the probability that your highly targeted direct-mail piece will reach its intended audience.'

It is rare to find a direct-mail service provider who does not claim to provide some form of demographic profiling or targeting service. After all, what better way to combat the stigma of being in the ‘junk mail’ business than to say: ‘We’re using the latest data and state-of-the-art technology to maximize the probability that your highly targeted direct-mail piece will reach its intended audience.’

But state-of-the-art technology aside, performance is increasingly linked to one overriding factor: ROI. And in order to maximize your campaign’s ROI, you must increase your response rates or decrease your costs.

While many service providers claim to do the former, the job of cutting costs is something more commonly dealt with on the client side, rather than the supplier side. Why? Because lower costs usually translate into lower profits – for the supplier, that is.

With this in mind, should the people who analyze your markets and tell you where – and how many pieces – to drop also be responsible for printing and delivering your direct mail?

Accountability

While accountability is – or should be – the name of the game for direct marketers, a surprising number of companies fail to conduct a proper analysis of campaign results.

Establishing a direct cause-and-effect relationship between one’s mailing campaign and resulting responses is often complicated by the presence of other media such as TV, radio and billboards. But careful preparation and tracking can provide a clearer picture than a simple ‘sales were up 10%.’

A potential problem arises when an in-depth analysis of post-mailing results reveals that the same performance could have been achieved with 20% fewer pieces. What supplier wants to break the news to its clients that they can cut their printing and delivery budget?

Expertise

There are a great many companies ranging from consultants to lettershops who claim to have demographic profiling and targeting expertise. Some of these shops started out as creative agencies or lettershops that have added the profiling and targeting functions in order to provide their clients with one-stop shopping convenience. Others originated in the data consulting industry and provide specialized skills related to data modeling and analysis.

Regardless of a supplier’s background, you may want to ask the following questions to help determine if they are right for the job:

* Can they explain to me how their profiling or targeting service works and how, specifically, it will benefit my campaign?

* Who are the people that will be producing reports and performing the analysis? What is their level of knowledge or experience in my industry?

* Can they evaluate my existing program to identify cost saving opportunities as well as ways to increase response rates?

* Will reports be accompanied by an executive summary and a clear set of recommendations?

Before making a decision, consider your supplier’s core competencies and ask yourself: Are these the best-qualified people for the job?

Convenience

Many clients like the simplicity of dealing with one supplier for all their direct marketing needs. There is no question that well-organized shops with efficient, service-oriented account people make life a lot easier for the busy marketing executive.

On the other hand, having separate suppliers for profiling/targeting and printing/fulfillment does not necessarily result in more work or a less convenient arrangement. The same level of convenience and efficiency can be achieved provided that each supplier’s role is clearly defined, resulting in the seamless transfer of required information between parties.

What you don’t want is a profiling/targeting report that you have to translate or perform some sort of conversion on before you can pass it on to your lettershop. Before deciding to use a single supplier for profiling/targeting and printing/fulfillment needs, ask yourself: Does the convenience of having one supplier outweigh the potential conflicts?

Price

On the surface, it might appear that an ‘integrated’ supplier could offer some cost advantage by discounting the cost of profiling/targeting services in order to pick up the rest of the business.

Keep in mind though that there is a cost attached to any service, and that anyone providing a ‘free’ service has to make up for it another way. Once again, this raises the issue of a potential conflict-of-interest, particularly when the ‘free’ service has the potential to diminish the value of the revenue-generating one.

In conclusion, it is important to understand the implications of using the same service provider for your DM profiling/targeting and printing/fulfillment needs. Using a single supplier increases the potential for a conflict of interest, and being aware of the issues can greatly assist in weighing the costs and benefits involved.

Lee Feliciano (lvfa@lvfa.com) is a principal at Toronto-based L.V. Feliciano & Associates. He compiled this article with the help of colleagues Paul Di Rezze and Amanda Casha. L.V. Feliciano & Associates is in the business of applying geodemographic data and analytical techniques to direct marketing solutions.