Increasing Return on Marketing Dollars

A Newsletter Published by
Lee Marc Stein, Ltd.
Issue #55

CONTENTS

• Let’s Shout about the DMA’s Opt-Out
• How to Be Gertrude Ederle
• 21 Keys to Effective Retention Marketing

Let’s Shout about the DMA’s Opt-Out Recommendations

If you haven’t heard the news, the Direct Marketing Association
(DMA) just launched its “Commitment to Consumer Choice”
(CCC) guidelines.  The CCC applies to all DMA members
who use direct mail to communicate with customers and prospects. These self regulation require marketers to comply with the following best practices:

• Effectively Honor Consumer Requests to Modify or Eliminate Mail: The CCC program requires DMA members to provide existing and prospective customers and donors with notice of an opportunity to modify the receipt of future mail solicitations from their organization in every commercial solicitation. The notice may offer various modification options and should contain or refer directly to an option to eliminate future commercial mailings.

• Disclose the Source of the Consumer’s Name: Upon request by a consumer, direct marketers will disclose the source from which it obtained personally identifiable data about that consumer.

• Use of the Mail Preference Service (MPS): Consumer marketers will also be required to use DMA’s Mail Preference Service (MPS) name-removal file every month (instead of quarterly, the present requirement). To achieve that commitment, a consumer’s request for in-house suppression should be honored within 30 days and for a period of at least three years from the date of receipt of request. 

It is the first provision that will change the way we do business forever.  The question is, of course, HOW?

Some 27 years ago, when I was at Business Week, all McGraw-Hill direct mail managers were upset about a mandate to put Opt-Out notices into customer (renewal and cross-sell) communications ONCE A YEAR.  The fear was that an overwhelming majority of customers would respond that they wanted DO NOT PROMOTE status, and that the very inclusion of the notification would kill response to the communications.  Neither fear was ever realized, and the opt-out opportunity was essentially run in the magazines rather than in the direct mail.

Now we have this new mandate with a promise of strong policing by and penalties from the DMA.  Let’s look at some of the implications.

For prospect mailings, let’s say the mailer is IMP and the offer is one of their recipe card products.  IMP rents the Cooking Light subscription list, among others, and mails 25,000 pieces to that list.  Because of the opt-out notice, 500 people tell IMP never to mail to them again, and response (because the notice is there) drops from a normal 4% to let’s say 3.6%. 

What happens the next time the same names on this list are mailed?  Presumably, because the 500 objectors are not on the list any longer, response rates will actually rise, and IMP will get the same orders for less money spent.  What’s more, the 500 objectors will undoubtedly turn up in other files used by IMP and can be suppressed, meaning response for the other files may rise as well.

As Rick Witsell, VP Marketing for Alliant Cooperative Data Solutions, pointed out to me at the DMA Conference, this mandate can be a boon for copywriters.  The opt-out message can be crafted in a way that enhances rather than detracts from response.  Falling under the genre of “Exclusionary Audience Targeting,” here’s a first whack at one:

A Word about This Outstanding Free Offer from IMP

"This offer of up to 48 free recipe cards was especially designed to appeal to those for whom cooking is next in importance to breathing.

If we made a mistake in sending this offer to you, please accept our apologies.  To assure that you no longer receive unwanted mail from IMP Recipe Collections, simply..."

A million or so execution questions arise, mostly centered around vehicles for opting out.  Web is easiest of course, but you’d have to do matchbacks to find the name and the list.  If you decide on return mail, do you provide a BRE for the purpose?  And so on.

The bigger question, however, is what is the consumer opting out of?  Is it only cooking-related mailings from IMP?  Is it all continuity offers from IMP?  Or is it all cooking-related offers as a category? 

On the customer communications side, if IMP mails to actives on its house file, is the customer given the opportunity to opt-out of mailings promoting a particular product line?  Is there a Do Not Promote option which allows actives to say “No” to rentals of their name?  Do we ask something like “How many mailings a year would you like to receive?” which is in reality “How much mail would you consider an annoyance?”

The wrinkles can make you scream, but on the broad face of it, I would urge you to shout “Hallelujah!”  We’re going to see increases in response rates, as well as new respect on the part of the consumer.  Mail lacking the opt-out notice will be looked upon like email pleas from Nigeria.

How to Be Like Gertrude Ederle

“Who is Gertrude Ederle?” you may ask, particularly if you’re in your 20s or 30s.  She was the first woman to swim the English Channel.

You have dangerous channels to conquer, too.  If you hail from Mail, the currents caused by rising costs, undertowing response rates, and the threat of waves of “Do Not Mail” legislation make it rough. 

When you go cross-channel and dive online, you may think you’ll have an easy swim in still waters, but sharks lurk below the surface.  In this channel, orders from new customers come easily and inexpensively, but watch out for the bad pays.  You could easily see bad debt from first-timers increase from under 10% through direct mail to 40% on Internet-generated orders.

If you’re a one-shot marketer, you may be able to dispense with “Bill Me’s” and move to credit-card-only purchases.  Despite mass thefts of card numbers, on an individual basis, consumers are more comfortable with the security of entering card information online. 

Credit-card-only offers become more problematic for continuity marketers.  Traditionally, customers have been able to sample the first shipment without pre-payment.  Making prospects give credit card info before they get that first shipment may have a major impact on response rates.

One solution to the “bill me” dilemma is to Order Score online-generated new customers as they come in.  Obviously, you will want to do that with data that reflects the new customer’s payment history with other online marketers.

At one time, major mailers did not want to be channel swimmers.  Direct mail managers were afraid they would lose credit for orders (and even qualified leads) if they so much as put a URL in their mailings.  Fortunately, that has changed and enterprise commitments to tracking allow proper allocation of both revenue and budgets.

21 Keys to Improving Customer Retention through Relationship Marketing Programs

In preparation for an annual offsite meeting with a major client, we developed this checklist with copywriter Mark Hallen.  Here are the first 11 keys.  The final 10 will be in the next issue of the newsletter.
           

1. Realize that your Retention Program starts on Day One. 
If your business model involves lead generation, Day One begins with your handling of the lead.  You not only affect conversion, but the tone of the entire relationship.

If you’re generating most of your new customers at retail, Day One is what happens when customers open the box after they’ve left the store.  Are you doing enough to get them to register with you?  How can you help them use the product more easily? 

2. Assume that all new customers are created equal. 
As a general rule that worked in the past, a new customer generated through direct mail always had a longer lifetime value than a customer coming through direct response TV, inserts, or retail.  Now, because of the Internet and because consumers are using all their channel options, we don't know how good a customer they're likely to be.  Only performance can dictate that. Therefore you won't be able to pick and choose which customers to invest in with a relationship program. As the relationship unfolds, we can reduce or increase the investment.

3. Don’t try to start the relationship in the middle.  
While an action-based loyalty program can be augmented at anytime, a true relationship program will get the biggest return by beginning at the beginning.  There will be less effect with older customers.

4. Make it easy to be a customer.
Remove some of the necessary barriers you set up for suspects and prospects (e.g. automated email and voice response, long login forms).   Think about a dedicated phone line for repeat customers.  Some companies have different (easy re-order) web sites for customers than for prospects.

5. Reward and recognize longevity. 
You can afford to give long-time customers discounts, special services, and red carpet treatment.  Don’t think so?  Do the math.  In many cases, it’s not even necessary to invest in a formal “loyalty” program.  Recognition can go as far in exceeding customers’ expectations as rewards.  Stage and invite best customers to “inner circle” events, even if the customer has to pay for the trip.  Example: For its Select Banking customers, Chase arranges for a week-long golfing trip to Scotland.  Even having a dedicated phone line for long-term customers can help them understand how much they’re appreciated.

6. Divide and conquer. 
Score your customers as you would prospects and leads.  You can do this in many ways – everything from the old standard RFM (recency, frequency, monetary value) to share-of-wallet and potential based on relationships with other direct marketers.  Once your customer files are scored, break customers up into distinct groups and build mini-marketing plans based on the segments’ unique needs, previous behaviors, established predispositions and potential to grow.  Be sure to establish control groups within each segment so you can see the incremental value of your new marketing efforts.

7. Personalize and customize. 
Think about how good it feels when the waiter at your favorite restaurant greets you by name and knows exactly where you want to sit.  You return again and again and always tip more than usual.  The same thing works even with hardened enterprise IT buyers.  Give them advice, counsel and content specific to their needs.  There’s no question that direct marketers have the technology to do this.

8. Market to the life cycle stage and to the customer’s schedule.
New customers have different needs and expectations than those you’ve had for years.  What’s even trickier is that new customers acquired today will probably have different needs than the new customers you acquired three, five or ten years ago did.  Do the research to understand and respond to these differences.  

Track triggers to certain behaviors and use those triggers to time your messages.  When is a customer most likely to buy again?  Immediately?  A month later?  A year later?

9. Ask them what they want.   
Most people want their opinions heard.  And they’ll like being asked for them.  The act of surveying your customers makes them think you care.   When you report the results of the survey back to them, that’s a double confirmation of your concern.   While you don’t want to do format surveys too often, you can get feedback after particular transactions.

10. Turn customers into stakeholders.  
Build a customer panel and/or an advisory board and invite customers to join.  You’ll be surprised by how many will join, share, refer and buy more as a result of their participation.   If you listen and act on what they have to say, that not only builds their loyalty but makes them more willing to reach out to prospects.

11. Use the power of referral programs.
No customer is going to make referrals and then defect. Most customers will feel even better about the value of your product or service when they refer you to people like themselves who have stronger retention value. 

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