Increasing Return on Marketing Dollars

A Newsletter Published by
Lee Marc Stein, Ltd.
Issue #56

CONTENTS

• 21 Keys to Effective Retention Marketing(Part II)
• When Hysterical Trumps Historical
• What Works (and Doesn’t) for Membership Renewals
• Media Musings

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.  The first 11 keys can be found in Issue #55.  Here are the final 10:

12. Give instruction on how to get the most use from products and services.
    Obviously, this is most important with brand new customers, but also has retention value when an existing customer renews, buys a more expensive model, or accepts a new release of the product.
     
13. Do not turn all communications into sales pitches. 
    Don't train the customer to believe that anything with your logo is trying to sell him something.  Communications that are thank you's, welcomes, usage tips, anniversary messages, case studies, etc. make the customer feel that he is more than just a target for additional sales, and pave the way for opening the envelope when you are selling.
    
    
14. Assume that all new customers are created equal. 
    When somebody first buys your product, you may not 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.   However, you can reduce or increase the investment in a customer as you see what kind of customer he is.
    
    
15. Don’t try to start the relationship in the middle.  
    This is the corollary to #1 (realize that your retention program starts on Day One).   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.
    
    
16. Understand that unexpected “perks” do more than expected ones. 
    Think carefully about how you position extras.  Let’s say, for instance, that you’re marketing software to an installed base.  If the upgrade mailing says "and you'll get 30 days free support" it might get some extra sales, but it may also decrease response because the customer thinks support will be necessary. It also raises expectations and may lead to disappointment.  However, if you tell users AFTER they upgrade "to thank you for your purchase, we're giving you 30 days FREE support" it can't have a negative affect.  It lets me know you're thinking about their welfare, since there is no (obvious) profit in it for you.  In addition, because it was a "surprise" and not an incentive, users’ expectations for it are lower: whatever they get is a bonus.
    
    
17. Determine the effects of any retention or relationship program only in the long term. 
    By definition, any relationship program must be viewed as a long-term investment with the potential for a sizable, but deferred, return on that investment.  Do not look to see results this quarter or even this fiscal year.  Your customer will reward you for good products, service and treatment only after a long enough period of time that establishes this as your company's way of doing business.
     
    
18. Make customers feel that the relationship is worth something. 
    Here's a real relationship killer.  I get a mailing with a special "customer price," then see a lower price in a store (or store circular) where anyone can walk in off the street.   Treat me as an "insider," eligible for things that a non-customer can't get.  Otherwise, what's in it for me?
    
    
19. Keep a Control Group long-term. 
    To accurately measure the affect--and ROI--of a relationship program, you must retain a control group that has absolutely no contact with any component of the relationship program.  Just as important, every action of this control group must be compared to the test group for a long period of time.
    
    
20. Define your goals and be sure they can be accomplished.
    Direct marketing is not a branding or image medium.  Even mailing monthly, the frequency just isn't there to create a brand.  Direct marketing can reinforce what I already think about the company, but not change it.  That's why it's so important to start with new customers; that's when they feel best about us, so it's the best time to build on that. 
    
    
21. Do not even think about a relationship program without reciting this mantra: "LIFETIME CUSTOMER VALUE IS EVERYTHING." 
    All marketing should have lifetime customer value in mind, but it's the whole point of relationship marketing.  Three, five, 10 years from now, how much more business have you done with Customer A (in whom you invested in a relationship program) vs. Customer B (in whom you made no additional investment).  If you don't plan to look at the program this way, there's really no reason to do it in the first place.

When Hysterical Trumps Historical

Most successful direct marketing programs are built through a process that relies on historical, empirical results.  It’s TEST, READ, REACT.  In the beginning of a program, everything is a test.

Or is it?  In a direct mail launch, we assign the term “control” to the cell we feel is most likely to win.  And that cell is determined by history in the category.

Once initial testing has been completed, and we have established control lists, offers, creative approaches and package formats, we then test against these controls.  Unless these controls are producing results that are severely under what is financially acceptable, no more than 20% of the direct marketing budget (and perhaps less) should be spent on testing.

It is jarring then to encounter two marketers in the past few weeks who are hysterically turning that 80/20 formula on its ear.  They’ve abandoned both history and reason.

#1 This is a subscription marketer serving a special interest consumer market.  It is true that the control, a Statement of Benefits package, is fatiguing.  Certainly testing should be done.  However, a mailing matrix looking like this is crazy:

1. 10,000 current control
   
   
2.  40,000 control with premium
   
   
3. 40,000 new package with premium emphasis, premium free with payment
   
   
4. 10,000 new package with premium emphasis, premium free with order

Now you would think adding a premium to the current control would help response, but you never know.  It happens to be a book premium and the book appeals to a younger audience than the newspaper does. 

The crazier test is sending out 50,000 of a brand new package, particularly one with an untested premium.  That’s half the mail quantity!  The sane thing here (okay, semi-sane) is mailing only 10,000 of the premium with order cell.  It is very rare that any publisher makes the economics of a free-with-order offer work.

This case is even nuttier because the deciders are decidedly good judges of copy, known their math, and have grown the publication substantially over the past couple of years.

#2 This is a software marketer besieged by internal strife.  The Product side complained that results were off 50% from the previous year and wanted to completely throw out the control packages, which evolved over a few years.  They did not take into account that the slippage was due to the offer being dramatically changed – all price incentives removed.  The Marketing people are good direct marketing managers and fought the Product people about dumping the control tooth and nail.  The biting and scratching got the control package back into the matrix – at 20% of the total.  The other 80% was to be totally different (pretty, branded) creative and a totally different offer.  Through the Marketing side, we issued a warning to the Product people that their revenues for the year were severely at risk if they did this.

Please control yourself!

What Works (and Doesn’t) for Membership Renewals

Here are results from recent testing for a client with a huge membership base:

1. Leveraging a special event (silver anniversary of the organization) with an insert in the renewal notice increased response by 70%!  Unfortunately, you can’t replicate this every year.

2. Among long-term members who had lapsed, inserting a benefits flyer did not increase response.  Nor did including a letter from the popular VP of the organization.

3. Lapsed members responded extremely well to emails.  Response was more than double that achieved through the mail.

4. Premiums are critical in renewal success and need constant testing. 

5. Involvement of members determines renewal rates.  If you cannot get them involved in events and physical activities, get them involved online.

Media Musings

As you plan out your campaigns and look at your results against budget over the next 12 months, keep these things in mind:

• Search Engine Marketing.  Clients in a number of different industries tell me that results from both natural and paid search are flat.  It’s still extremely profitable, but they are not generating a sufficient number of qualified leads to sustain their businesses.  One client will be exploring direct mail for acquisition for the first time; another client is slating a major test of insert media.
  
  
• Newspapers.  Readership and circulation continues to fall rapidly.  That’s an opportunity for rate negotiation and for capitalizing on remnant space for lead generation – particularly if you want to generate leads or sales from the age 55+ segments.  And give FSIs another test.  With low rates and the ability to target by neighborhood, this can be a profitable medium.
  
  
• Television.  Air time will become increasingly expensive as we head toward the Presidential elections in November.  But you might test, for rolling out in 2009, support of direct mail and FSI.  And ‘30s or ‘60s that drive prospects to your web site are another possibility, particularly if you have a strong offer.
  
  
• Email.  It is continuing to work well with customers and qualified prospects, but not for lead generation.  As with television above, this will become a clogged channel as 2008 progresses.
  
  
• Direct Mail.  As marketers give consumers “Choice” there will be fewer people to mail to and higher response rates.  In B2B mail, we’re going to see more “events in an envelope (or box)”.  Because the world will be awash in White Papers, old fashioned premiums will come back into play pretty quickly.  Recently, in high ticket software a clock premium outpulled both a White Paper and Webinar offer by 3:1 without any apparent loss in quality of leads.
  
  
• Social Media.  Great for branding, but I wouldn’t bet that they will produce anything near acceptable costs per lead.  Think how you can use social media for support.

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