There are three key elements to every direct marketing campaign: the list, the offer, and the creative. Experts seem to agree that the single most important element is the list. In fact, many direct marketing professionals claim that the relative ratio of importance is: 70% list, 20% offer, and 10% creative. It is ironic, because this is also the element that is least well understood by small business owners and most often over-looked.
Before you start it is important to understand the intent of your campaign and develop a direct mail marketing campaign. Two common goals for small businesses are to either (a) convince existing customers to buy more (loyalty programs), or (b) convince new customers to purchase for the first time (sales prospecting).
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Loyalty Programs:
The value to your business of any particular customer is known as Lifetime Customer Value - this represents the sum of all purchases that customer will make from your business over the lifetime of the customer. It almost always easier to convince an existing customer to buy more of your products or services, assuming satisfied customers, then to sell to new customers. In fact, repeat sales are essential ingredient for realizing lifetime customer value (LCV).
Loyalty programs seek to maximize LCV by building an ongoing rapport with existing customers. Imagine the local realtor who sends a monthly newsletter, the neighborhood garage that sends out a note when it's time for a regularly scheduled oil change, or a local retailer who sends out invitations several times a year for private sales events for "preferred" customers only. These are all examples of loyalty programs.
To do a successful program of this nature it is essential to know who your customers are. Most businesses keep a list of current customers - this is called a house list. The most basic list will include a name and contact information (e.g. address, phone number, email address, etc.). However, the more detailed information that is available the more useful the list will be. For example, it is simple to see how purchase history, income level, gender, and personal data can all lead to more targeted marketing. The more targeted a program the better the chance of success.
Given the importance of repeat purchases, and the role that loyalty programs can play in driving those sales, it is important to gather information on your existing customers. Some businesses routinely gather this information (e.g. auto mechanics, plumbers, and appliance repair people require a completed work-order for every customer). For other types of businesses, a little more creativity may be required (e.g. the "club card" that Safeway offers, or a weekly lunch give-away by a local restaurant for those customers willing to put their card in a fishbowl).
When building this type of list be sure that it is "opt-in". This means to tell your customers that you will be sending them information periodically and get their permission. Most customers will give you permission willingly if they know you will periodically send them offers or information that are valuable to them (e.g. coupons, special offers, the weekly menu, etc.).
No matter what type of business you are in, building an accurate and detailed house list is essential for maximizing lifetime customer value. As we will see, it is also an important first step in driving new sales.
Sales Prospecting:
Even with the most loyal customers there is a natural attrition among existing customers. In fact, this attrition may not be the fault of your product or service - customers move, customers die, lifestyles change, and so do personal preferences. The bottom line is that sales' prospecting is an essential part of maintaining business growth.
One of the most effective tools available for sales prospecting is direct mail. According to the Direct Marketing Association, on average, direct mail returns ten dollars for every dollar invested. However, as noted earlier, the most pivotal element to direct marketing success is having the right list. What does it look like? Where does it come from? Where do you start?
If you are prospecting for new customers you will probably not have their names. But, names of qualified prospects are available through list brokers - or directly from Zairmail. However, to buy mailing lists it is essential to know what your best prospective customers look like. That's where your house list comes in handy. Scanning through your house list you can identify the traits that are common among your best customers. For example, you may find that your best customers live within five miles of your business and have incomes less than ,000. This demographic information will help you purchase a list of customers that will buy.
There are two main types of lists that can be purchased: compiled lists and response lists.
Compiled mailing lists are comprised of information from public records and sources such as the phone book, courthouse records, bankruptcy filings, mortgage deed records and more. On the other hand, response mailing lists consist of individuals who have responded to an offer either through the mail, phone, television, or through other means of mass communication (e.g. a magazine subscription list, a catalog mailing list, etc.).
These types of lists must be understood - each has a set of unique characteristics that enables it to achieve specific and distinct objectives. The key to success is to understand when it is most appropriate to use each kind.
Compiled list are ideal for those businesses that need special demographic selectivity to target a well-defined market, for instance targeting auditing companies specializing in bookkeeping, manufacturers with 50 or more employees, or families with household incomes of ,000 who live within 10 miles of your store. All of these examples are likely to do better with a compiled list than a response list. This is good news if you understand the demographic profile of your customers since compiled lists are generally less expensive than response lists - costing between and per thousand versus to 5 per thousand for response lists.
Response lists are the best choice if you need to cover an entire market of prospects with similar characteristics. For example, if you are selling a specialized software engineering tool, or to every Certified Public Accountant in the State, there are lists available from publications that serve these markets. Often information is even available on how frequently these prospects typically respond to offers they receive. Response lists, especially among those who are shown to respond, can produce higher response rates - thus justifying the higher price.
Both types of lists are not always available for all audiences. So a little research may be required to determine what is available for your target market.
Once the correct type of list is determined the next step is to decide how many names are required. This comes back to your direct mail marketing plan. First, decide how many customers you are trying to acquire.
The answer is not as simple as "as many as possible". Consider how many responses you can handle. If the goal is to have customers call you, and you only have one person to answer the phones, then you probably don't want 10,000 prospects calling you at once. It is a simple rule of marketing that the further you get from the initial point of contact with your prospects the less likely they are to buy. Thus, you only want as many prospects as you can service at any given moment in time.
Similarly, if you have a restaurant that only has seats for 100; it doesn't make sense to attract 1,000 new customers to your doorstep on any given day. If you have the chance to acquire a new customer you may only have one chance. Another simple rule of marketing is that it is ten times easier to get a new customer to try your business the first time, then it is to get them to try it again if they have a bad experience; plan to acquire only as many customers as you can service - and serve them well. In the long-run this is a far more powerful plan.
With your target in mind just work backwards. For example, if you are trying to attract 100 new customers, and you believe that 2% will respond to the promotion, of those 50% will buy, then you will need 10,000 names (10,000 * 2% * 50% = 100). Response rates will vary depending upon the accuracy of the list and attractiveness of the offer. Direct mail professionals often use a 2% response rate as the benchmark for a successful campaign. However, much higher response rates are possible with a targeted and attractive offer.
When using a response list the vendor can often provide you with target counts. These may or may not be enough to meet your goals. You may need to combine several response lists to get the list counts that are required.
With compiled lists the trick is to configure the demographic selects appropriately to produce the size list required. For example, if you need 10,000 names, and you request all females within ten miles of your business, and the initial list count is 100,000 names, then you may have to tighten your search criteria - possibly by adding another select (e.g. income level). In a similar fashion, the demographic criteria can be relaxed slightly if the name count is not high enough.
In addition, this is not a strictly compiled or response list decision. If both are available, and the counts are sufficient, then it may be appropriate to do some small test mailings to determine which produces the best results for your business, whatever type of list you choose. It is always best to do test mailings to a particular list, hone your message, and then mail to the larger list.
Summary:
There are two types of mailings that should be used to drive any successful marketing effort: loyalty programs and prospect mailing. The best results are achieved for loyalty programs when a detailed house list is available. For prospect mailings, lists must usually be purchased - a detailed house list can also be incredibly valuable for purchasing the correct list.
There are two primary types of lists available for prospect mailings: compiled lists and response lists. The correct choice revolves around the type of customer you are targeting, geographic and market reach, and total list counts that are available. The best choice is based on a well thought out direct mail marketing plan and realistic targets.
Direct mail is the most powerful advertising medium available - bar none. Put the right offer in front of the right customer and they will buy. If you need assistance we are here to help. Zairmail can help you purchase the right list for your needs. It is our mission to put all the tools in your hands to leverage direct mail and make your business an overwhelming success.
Basic Principles For Direct Mailing Lists
Wilson Zehr is a Partner in Cube Management (http://www.cubemanagement.com), a Portland, Oregon based company that helps organizations accelerate their sales. Mr. Zehr is also the founder of Cendix (http://www.cendix.com) the leading provider of channel marketing tools distributed enterprises. Mr. Zehr has over two decades of experience designing and delivering marketing and software solutions for business. He also has extensive experience driving sales, marketing, and strategic alliances with many of the largest technology companies in the world including: Oracle, Intel, Microsoft, Sun, HP, IBM, Xerox, and many others. Wilson Zehr can be reached at Cube Management, wilson@cubemanagement.com, 503.789.2676.
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