Increasing Return on Marketing Dollars

A Newsletter Published by
Lee Marc Stein, LTD.
March 2006 Issue

Contents

• Anatomy of an Underwhelming Control
• Harvesting Word of Mouth Marketing
• Never Look A Gift Horse in the Mouth

Anatomy of an Underwhelming Control
(Wonder What the Unsuccessful Test Packages Looked Like!)

In 2005, I wrote a book on business-to-business direct marketing, comprised of an analysis of 11 control packages, for the American Writers & Artists Institute. The analysis of this package from Great Western Business Services was one of the chapters in that book. For information on the AWAI Course "Secrets of Writing for the Business to Business Market, call Barb or Scott at 866-879-2924. The PDFs shown were purchased from the Direct Mail Archive.

To view this package as you read the analysis, click here for the PDFs.

Of the 11 packages reviewed for this book, this lead generation package from Great Western Business Services seems least likely to be a control. In fact, in thousands of control packages studied over 40 years in direct marketing, this one seems most surprising. Let's explore the bad and the ugly, and mine for the good.

Outer Envelope
Well, the corner card works for me. It uses the old-fashioned "From the Offices of" and then an individual's name. It does seem strange that a P.O. Box is used in conjunction with "From the Offices of" but most recipients may not notice that. Standard rate postage is metered and that's also good.

The teaser copy is simply "Personal & Confidential," which, as that astute critic of direct mail Andy Rooney said, means it's neither personal nor confidential. As most small business owners open their own mail, I would probably take the teaser off. As an alternate, think about a twist like "In confidence" or "Confidential Information."

Letter
I would hate to see this mailer's failed tests. Look at the top of the letter. Again, we see B.B. Denton's name, this time with a real street address, city (different from the one on the envelope), and phone number. But no company name.

Next is that word "Private". That does not gibe with a generic letter, but it is a way to grab the reader's attention and say "what follows is important."

The four lines under the word "Private" (it's not really a Johnson box) are the lynchpin of the package and undoubtedly responsible for driving in most of the leads. Even this copy is not really very good.

IF you're thinking about selling your business but aren't sure what it's worth, return the confidential reply card in the postage-free envelope or call 1-800-999 SALE (7253) today. A personal evaluation is yours for the asking. No cost. No obligation.

That first sentence is a whopper for a lead-in. It might have been shortened this way –

Thinking about selling your business? Want to know what it's really worth? Get our objective, professional evaluation. Return the confidential request in the postage-free envelope or call 1-800-999 SALE (7253) today. There's no cost, no obligation.

Either way, what this lead-in does is audience target, raise one of the chief questions in a small business owners mind, and make a very strong offer.

Let's look at the body of the letter. Here sentences are kept short, and many paragraphs have only one sentence. Most of the time, this is good, but it is, at the beginning, carried to an extreme:

Dear Business Owner,

Let's face it.

It's hard to know just how much a business is worth in today's fast-changing market.

We don't want the reader to stop after "Let's face it." A comma would have worked better than a period and certainly better than a second paragraph.

The creative strategy works, however – use the initial paragraphs to set up the problem (putting a price on a business), then offer a solution. The solution begins with the subhead "Let us help you determine the 'right' price. The next line of the subhead re-phrases the no cost offer.

What follows, strangely, is the only mention of the company's name in the letter, and only one of two attempts to say to prospects "You can trust us with your business."

We're Great Western Business Services – a "go-between" service, not a Realtor or brokerage firm.

Not exactly a paragon of positioning, is it? What is a "go-between" service? How does it work? What's wrong with being a Business Broker?

The next sentence is a gem, though it comes without a bridge from the evaluation to the next step:

Think what it could mean to you to find a buyer privately – without anyone even knowing you are thinking about selling.

Here's the sentence that probably should have preceded it:

If, after we evaluate your business, you decide to use our services, our Confidential National Computer Network will go to work for you.

Well, these days "Confidential" and "Computer" used together are an oxymoron. Wouldn't the business owner just assume that the computer is involved? The lead line talked about a "personal evaluation," but the work is being done by computer?

The second side of the letter has some copy gems. It talks about how "someone somewhere is wanting to buy a business like yours." It repeats the no cost, no obligation offer a few times. It says that the prospect comes out ahead even if he/she just finds out the right price for the business.

Here's the other bit of credibility-building (except it doesn't because the grammar is incorrect):

In fact, over twenty years we have assisted thousands of small to mid-sized business owners market their businesses.

Look at the name and title. When you have two initials like that, it says "I don't want you to know anything about me, not even my first name." And what kind of title is "client service"? If I'm a small business owner, I want to deal with a vice president, at the very least.

The first P.S. is off-strategy. Go back to talking about the offer, the evaluation, not the actual sale of the business. The second P.S., for those interested in buying a business, also distracts. This should have been a separate buck slip.

Reply Form
Other than lacking dignity – a key to making prospects feel their request is important – the form has the basics. These include a repeat of the no cost/no obligation offer, a call to action, and multiple ways to respond. Using the headline "How much is my business worth in today's marketplace?" is smart. However, on top of that, instead of just saying "Confidential," I would have labeled the form "Confidential Evaluation Request."

Call what you're offering as a next step the same thing throughout the package. Here it's called a "Computerized Business Analysis." In other places, "evaluation" is substituted for "analysis" and "personal" replaces "computer."

Harvesting Word of Mouth Marketing

Every year, my wife and I spend two weeks at our timeshare resort in St. Maarten. The big topic on the beach and in the water is invariably the island's restaurants.

Two years ago, we were out to dinner with another couple and they told us about a favorite small restaurant on the French side in Marigot. We went once that year and liked it. Last year, we returned twice within the two weeks and told two other couples who visited once. And this month, we returned twice again; the two couples we told last year each visited again; and we told three more couples this year who then visited and loved the place.

So the couple who made the original recommendation two years ago has been responsible for a minimum of 14 new converts to Le Petite Auberge and 24 meals served thus far. And now, of course, the people we told about the restaurant have told countless others. This is Word of Mouth Marketing at its very best.

Only it isn't really marketing and that's what makes it work so well. My wife and I aren't shills for this restaurant; we don't get free drinks or desserts for telling people about it. And if we weren't absolutely sure that the casual acquaintances we make at the resort would like it, we wouldn't say anything.

How can this Word of Mouth Marketing power be harvested in a direct marketing context?

That question has not been answered very well over the years. Historically, we've had various MGM (member-get-a-member) efforts.

The record clubs had a strong pass-along offer, but it was a joke. Most members would just take out another membership using different initials. One of our kids had merchandise delivered in our dog's name.

More sophisticated were campaigns that solicited names from members, then sent out a letter to the referrals that started…

Dear Mr. Jones,

We're writing to you at the recommendation of our valued customer, Samuel S. Smith. Mr. Smith thought that you, too, could profit from…

You would give away a token gift to the customer for taking the time to submit the names. Results to this kind of effort were fairly strong from an ROI point of view, but volume was fairly limited. And the problem is that even though you could use the customer's name, it was not the customer speaking directly to his friend, neighbor, or relative.

Until recently, resorts gave you free postcards and stationery. It was the best way to get guests to tell friends where they stayed.

A version of this was launched a few years ago. It was a deck of postage-paid postcards sent to customers/subscribers with a pre-printed message to send out to friends. The USPS had a way of tracking the reply card postage to the marketer. This concept showed some interesting results, but the Post Office never rolled out from the initial test.

As we moved online, get-a-friend direct mail turned into viral email marketing. That worked really well for a number of marketers, but I haven't seen it work for traditional direct marketers. Those using it currently employ games, contests, sweepstakes and strong offers, and that's really contrary to the spirit of Word of Mouth Marketing – passing the word because you're a true believer in the quality of the product or service.

Think about this for a minute. You're selling some relatively inexpensive business software. You want your current users to recommend it to others. If you take a game or sweeps approach, you'll get great open rates from users and high pass-alongs. The questions become "How many new buyers will you get?" and "Will those new buyers take even one update?" The same is true with a strong introductory offer approach.

Suppose you took a more personal approach, one designed to appeal to the true Apostles in your user base. It would read something like this –

Dear Mr. Smith,

Are you passionate about your XYZ Software? Has it exceeded your expectations?

Then I have a favor to ask of you, a favor which will reward colleagues and friends. Would you email them and tell them what you like about our software and how it has helped you?

We wouldn't presume to put words in your mouth with a pre-canned message. Instead, you'll find a checklist of benefit our users most frequently cite below.

What do you get out of this? Our thanks, of course… but more important, the satisfaction of knowing that you could be helping colleagues.

If your web site is packed with valuable non-promotional information, your user might want to tout the site.

There's an additional way for direct marketers to convert Word of Mouth to Word of Web – create "community". Let users dialog in online forums and allow those forums to be accessed by registered guests. This isn't nearly as powerful as a one-to-one recommendation, but if you have a strong product or service, forums can be an effective, "under the radar" way to convey users' passion about your product.

Never Look A Gift Horse in the Mouth

Do your mailings need more horsepower? Using a gift incentive, a premium, can easily give you that power.

According to a survey conducted by Inside Direct Mail, the use of premiums has increased significantly over the past two years, particular in B2B mailings. This trend flies in the face of the movement to cut marketing costs. The reason – premiums increase response rates enough to overcome additional costs.

Look at the math. Without any premium, you get a 2% response. With in-mail costs (including lists) at say $400/M (at a quantity of 500M) your gross order cost is $20.00. You test a premium that costs you $2.00 each to fulfill. To lower your cost per order by 10% and justify the premium, you'd need a 2.5% response or 25%+ increase.

If you spend $4.00 per net order on the premium, under the same circumstances, you'd have to increase response to 2.86% to make it worthwhile. However, if your costs for the package were $500/M instead of $400/M, use of the $4.00 premium would only have to increase response to the 2.7% level. So the more expensive your original package, the more you can probably afford to spend on the premium.

Editorial-related premiums are, of course, normally much cheaper to fulfill than $4.00 or $2.00. If you deliver the premium online, your costs become miniscule. The question is whether the edit premium is sexy enough to boost response significantly. In a lead generation test for a health insurance provider, an editorial premium pulled the same response at a calculator.

Using premiums as a reward for fast response

Normally, faster response means more response. You get people who would put your mail aside (and later reject it) to act on impulse. There are two ways to couch the offer:

1. Give the premium to everyone responding by a specific date (and even to those whose responses arrive within two weeks of that date); or

2. Give the people to the first X people responding. This ploy is known as the "Fast 50" but if you mail large quantities seriously consider expanding the quantity beyond 50. For a nationally-known product or service, people think "First 50? I have no chance." It's like sending a time-limited offer and giving prospects just a week to respond.

On #2, say your giveaway costs you $100 and you offer 100 on a mailing of 500,000. That increases your costs by $10,000 or $20/M. Here, to decrease gross order cost by 10%, you'd only have to increase response to 2.333%. The larger the quantity, the more #2 works in your favor. Aside from magazines, the "Fast X" offer should be tested for consumer catalogs and financial offers like home loans. It may backfire on mailings to the mature adult market and for luxury goods and services.

Premiums used to boost average order
Of course this is prevalent in the catalog sector - and is used by both consumer and business marketers. But newsletter publishers have added a premium for subscribers taking a longer term (usually two years vs. one), and some magazine publishers do the same thing.

Say you now get a 2% response and $40 average order. If you can boost that average by 10% or $4.00, that means an increase in revenue of $80/M mailed. For orders above $40, you can afford a $3.00 premium because the number of people qualifying will be a fraction of your 2% response rate.

Premiums used to increase net orders
In most cases, premiums should be delivered upon payment. This increases payment with order (which is the rule for catalogs and TV direct response) and also puts some teeth into the billing notice for those who don't prepay. In publishing, you can afford extra issues for those who prepay. While that's not particularly compelling, the economics work out quite well.

Premiums for personal visits/demonstrations
If you're selling high-ticket equipment or services, cost per lead is not really not a consideration in your choice of premiums. Getting prospects to take time to attend a demonstration or listen to a formal presentation could be worth a $25, $50, or even $100. The question becomes ethical rather than economic - is the premium incentive a "thank you" or a bribe?

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