Increasing Return on Marketing Dollars

A Newsletter Published by
Lee Marc Stein, Ltd.
December 2006 Issue

CONTENTS

• Tale Spins and How to Fix Them
• B2B E-Mail Redux
• What's Up for 2007? (Part I)

Tail Spins and How to Fix Them

You look at the numbers - payment percentage down and/or conversions (first year renewals) plummeting, leads that are not turning into sales, terrible attrition at the critical stages of your continuity series. Images emerge: a plane in a tail spin; a car fishtailing down an icy road. Your whole business is churning, nothing is settled or predictable.

What do you do? If you've been in direct marketing for decades, as I have, that old Lucky Strike cigarette slogan forces its way into your brain. Indeed, when it's critical that you prevent tail spins, that you stabilize your direct marketing program's back end, "It's what's up front that counts."

So look up front. Your engines are being flooded. You have too many of the wrong kind of responses coming in. What's causing this?

Let's examine the Usual Suspects --

THE LIST. If lists are responsible for 40-60% of the results of a mailing, they will have a similar effect on the back end as well. Obviously, if you change lists to drive up front response, you can count on experiencing fall-off in payments, renewals, etc.

But what would account for decreased back end performance using the same lists you've been mailing all along? The question becomes "Is it really the same list?" Maybe the list owner isn't getting the front end response he/she needs and has shifted to a sweeps mode or heavy premium offer. That would bring you a different kind of responder. So someone else's offer affects your numbers.

THE OFFER. Your back spin is more likely caused by "The Godfather" curse in your acquisition mailings: making prospects "an offer they can't refuse." Those kinds of offers, while obviously generating great up front response, are normally extremely dangerous for the long-term health of a business. Acquisition offers that are too sweet lead to a big let-down and out-of-control back end - unless you perpetuate the sweetness and sour the lifetime value of your customers.

When I came into Standard & Poor's 25 years ago, the control package for The Outlook offered a 500+ page Stock Market Encyclopedia as a free bonus with a 6-week $15 trial to the publication. To convert these trials to full year, my predecessor offered a steep discount on the annual subscription price AND another premium, an expensive pen and pencil set. Too many of these converted subscribers never made it to the next year because the offer was full price and no premium. To make matters worse, there was no restriction on how many trials an investor could have within a two year period.

I told management I didn't think they wanted to be in the Trial Junkie business. First step was to double the trial commitment and price - from 6 weeks to 12 weeks and from $15 to $29.95. Obviously, this cut up front response drastically, particularly in the initial mailings. But it gave us more time to convert the more qualified trials and we were able to dispense with the pen and pencil premium. We still discounted the first year rate, but the business became much healthier.

Seventeen years later, I was brought back in as a consultant. I suggested the whole model be changed. We retained the lesser-value premiums they were using, went out with a 3-month $39 trial, and offered the full year on a continuous service basis (at a higher price) after the trial period. It worked.

Premiums in acquisition efforts don't always hurt the back end. Think about how many years the Hartford AARP Auto Insurance Program has been using a premium in its lead-generation activities. They would not continue mailing it if they were merely churning leads. Similarly, a high tech company offering services to Fortune 2000 IT directors did not suffer on the back end when it offered premiums in its lead-generation direct mail and emails. For this company, there was little difference if the offer was a white paper or T-shirt.

On the other hand, in the nonprofit arena, if your donor acquisition efforts depend upon freemiums or premiums, your mailings to new donors will suffer if you strip away the goodies. There's a big difference between getting attention and offering a bribe.

Strengthening your guarantee will normally make no difference on the back end. Hair Max Laser Comb went from a 30-day guarantee of satisfaction to a 120-day guarantee without it affecting returns of the product. Obviously, front end response increased. Similarly, full refund guarantees on magazines and books - e.g., "We'll give you every cent of your money back up to 12 months from your date of purchase" - have never increased returns dramatically IF the product is sound.

CREATIVE. On the creative front, copy that over promises, that offers benefits the product or service simply cannot support, will rock your back end unmercifully. I was involved in mailing two of the immortal Bill Jayme's packages when I was at BusinessWeek. The second one's theme was "JOB OFFER: If you haven't had one lately, here's help." This package beat the then-current control by a 3:1 margin in gross response, but only 20% of respondents to the Jayme package wound up paying for their subscriptions. Why? Because when they started receiving their issues of BusinessWeek, there was nothing they found in the magazine to help them get a better job or even a job offer.

The first Jayme package had a far better gross-to-net ratio. This was the infamous "DAMN!" package. The idea was "You go into a meeting. You think you have the latest information on your industry. Then, DAMN! someone proves you wrong." So here, BusinessWeek is positioned as a tool to keep you briefed on news and trends.

Unless you represent a product's value faithfully, you're going to have back end problems. The closest your copy gets to the product's differential advantage - benefit that prospects want and other products can't duplicate - the higher your gross-to-net ratio (or conversion rate in lead gen situations) and the better your back end.

My first lesson was when I was in my twenties, working for a publisher in the life insurance/estate planning arena. We published a book on selling by a superstar life insurance salesman. The book wasn't very good and I over-promised. Over 1/3 of what we shipped came back on the 30-day guarantee.

There's always a trade-off in presenting benefits. Let's take software, for example, that 1) saves the prospective company money (not only on the initial offer, but in transaction processing) and 2) saves on processing time, and cuts down on double entries and errors. The second benefit may indeed be the longer-term advantage, but it is not as sexy as the first benefit. So you go with the first benefit in order to have a back end to worry about. In doing upgrade (renewal) mailings, though, I would emphasize the second benefit.

Often, less copy translates to higher pay-ups. That's why the voucher package has been favored by publishers for so long. Now some are realizing it doesn't bring them the gross response they need and they're willing to suffer a lower gross-to-net on their mailings if they can move up front response significantly with heavier-copy packages.

TIMING. Now you wouldn't think that timing would affect back end performance, but it does in some circumstances. We're not talking about the time of month or year that a package is mailed, but economic cycle timing.

Back to Standard & Poor's and The Outlook. Here's what would happen with this investment advisory newsletter when the market was down over a prolonged period. First, trial responses would drop severely. This is counter-intuitive: you would think more people would need the advice in a declining market. Second, conversion percentages of those trials would shoot up dramatically (double, in fact, from up market periods). Why? Because those fewer trials coming in were obviously much more serious in their need for advice.

In the health insurance field, if Blue Cross/Blue Shield raises its rates in a particular metro area,
competitors mailing into the area will get a better response than normal. However, the new policyholders acquired at this time will be more flighty, more price-sensitive, more likely to jump back with the next BC/BS rate adjustment.

So how do you prevent Tail Spins? You make sure your next acquisition mailing is grounded in proven direct marketing principles: list selection that clones your current subscriber profile as closely as possible; an offer that entices the right respondents; creative that links your product or service with its natural prospects in the most permanent way possible; and an awareness of how timing can affect what happens to new customers a year from now.

B2B E-Mail Redux

By Danny Flamberg
Expecting disaster, I was surprised by the performance of rented e-mail lists in a recent outbound B2B campaign. Though written off for dead by the pundits, e-mail continues to show vibrancy as a lead generation and acquisition medium if used smartly.

The secret seems to be real addresses in the "from" line coupled with subject lines that cue the reader and short, directive copy and clear illustrations inside. From a test matrix of 8 cells consisting of 55,000 rented names, we got an average open rate of 13% and a high of 18 percent; figures that resemble house list responsiveness.

A second secret is careful targeting and copywriting, pre-testing for the impact of SPAM filters, pre-testing for different domains and browser settings, low weight on graphics and using verifiable senders. The simple deal proposition "Take the Survey, Get a Gift" subject line drove 4 times as many opens as the others which included "Share Your Opinion." The campaign was a simple survey offer (take the survey and get the aggregated results) enhanced with a personal gift bribe.

On average 86% of those who opened the e-mail took the survey. Eighty percent of those who took the survey redeemed their points for a gift in the same session suggesting that the flow of the actions required was well-marked, easy and intuitive. And it hints that the personal gift (a modest value where each respondent could choose from 10,000 choices) combined with the professional data gift is a motivating one-two punch.

Less clear was the impact of Box Pilot, a voice mail service delivered to targeted e-mail recipients ahead of the e-mail blast designed to cue them to look for the e-mail. This audio preview theoretically sets expectations and is designed to drive better response rates. In phase one of the campaign the differential was only an increased response rate of 1 percent. Maybe that's the result because only 56% of the Box Pilot messages got through. Though 7% more of the Box Pilot recipients visited the website in addition to taking the survey, so perhaps it had a different impact than the intended one.

So take heart. The bloom may be off the e-mail rose but it continues to be a tool that B2B marketers can use effectively.

Danny Flamberg has been building brands and building businesses for more than 25 years. In the US, Europe and South America, he has helped start-ups become important players in their markets and helped leading global brands extend their reach, market share and relationships with customers. He earned an A.B, an M.A. and a Ph.D. in politics and economics at Columbia University. He lives with his trophy wife, talented daughter and lovelorn dog on Manhattan's Upper West Side. This article was posted on his "Manhattan Marketing Maven" Blog on November 27th.

What's Up for 2007? (Part I)

In a recent article in Chief Marketer, Robert Passikoff, Ph.D., discussed seven trends in brand marketing for 2007.

His first prediction was for ongoing emphasis on "engagement" (his quote marks). He says "Continuing to insert itself between traditional marketing activities and an increasing demand for return-on-investment assessment, engagement will occupy a good deal of marketers' and advertisers' attentions."

He picks up the ARF and AAAA definition of engagement: "turning on a prospect to a brand idea enhanced by the surrounding context."

Question: how do we know when prospects are engaged? You don't unless they raise their hands and can be counted individually. We call that DIRECT MARKETING and it wholly satisfies the increasing demand for ROI assessments.

Dr. Passikoff's second prediction is that there will be more reliance on consumer-generated content. So we'll have yet more bulletin boards, user forums, and customer-designed ads... but all of course under the marketers' watchful eyes.

In direct marketing terms, that very simply translates to continued and innovative uses of testimonials and case histories. But, more deeply, it highlights the need for more customer research (something most direct marketers don't do enough). In particular, we should know what it is that leads to customer advocacy, and what the best "pick up lines" (to begin the engagement) might work for particular types of prospects.

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