Two words sum up the appeal of direct marketing (DM) compared with other marketing disciplines: targeting and accountability. Ever since the last recession put pressure on marketing departments to show a return on investment, DM has benefited from its undoubted ability to be more efficient and measurable than broadcast advertising.
But, as all users of DM know, what you end up measuring might be the failure of a campaign to deliver a response or meet sales targets. For every success, there will be occasional under-performance. There is a gap between what DM is able to show it has done – principally through response rate and conversion-to-sale figures – and revealing other benefits if goals have not been met.
Ian Smith, managing director of MSB+K, says: “People forget what the available audience for a campaign is. It could be that their purchase is seasonal, or cyclical. If you miss the moment, do you instead have the opportunity to influence opinion of the brand to the extent that when they do come back into the market it will be with a high intention to purchase?”
Arguing that DM can have an influence on brands has been a periodic obsession of agencies, and sometimes clients. That such shifts in attitude are possible is evident from campaigns such as the Cable & Wireless Communications customer acquisition programme by Joshua last year. It was set some hard targets. The campaign had to achieve a 90 per cent increase in enquiries and 60 per cent sales rise – on half the budget.
Detailed planning was carried out to define the creative proposition. The results were impressive: 3.5 million calls were generated (115 per cent of the target), with sales reaching 104 per cent of the target, and a return on investment ratio of 7.7 to one.
Significantly, from a starting point of 88 per cent brand awareness, the campaign increased this to 93 per cent.
The DM industry is familiar with the C&WC work because it has won awards. Rapier’s direct response television (DRTV) branding campaign achieved gold in last year’s Direct Marketing Association/Royal Mail Awards. Perhaps encouraged by its success, the organisers have this year decided to change the judging criteria. Sending a strong signal to the DM industry, the effectiveness dimension on which entrants are judged will now cover broader measures than response rates and sales.
The move is timely because of a change in the way DM is being used. In the past, it has almost exclusively been a sales tool. But DM is increasingly part of the armoury used in building and sustaining relationships. Keeping customers loyal when they are not in their buying cycle can be critical, although this does not show up in response rates or sales. If you still want to lever DM’s efficiency and targeting, how do you justify the investment?
According to Smith, one answer is to bring in measurement techniques that have previously been applied to ads. “We worked with Seagram for three years and it was the first client we did this with. We treated Seagram’s DM as it did the ads – measuring communications effectiveness in changing brand attributes, awareness and saliency. It was not just judging the effectiveness of a campaign on its response rate.”
Qualitative research was carried out among target groups, including control groups (non-recipients of direct mail) and recipients who did not redeem a coupon.
In a Glenlivet whisky campaign, key brand attributes rose from 31 per cent to 42 per cent. What was revealed was an impact from the campaign which classic measures would not have picked up. “With the classic coupon, if you put one in a mailing, you track redemption. So your measure of ad effectiveness is how many people used it. But it does not show how many people are influenced by seeing the value proposition, rather which people, when they buy the product, do not use the coupon. You can track that with research,” he says.
It revealed that the mailing’s impact on purchase in that group, compared to non-recipients, was 25 to 40 per cent higher.
Adrian Jarvis, head of data strategy at insight@TMW, the database and planning arm of direct marketing agency TMW, agrees that DM can have an impact on the brand. But he advises caution when evaluating a campaign by moving beyond the empirical measures of response rate and conversion to sale. This hard data can be “ploughed back” into the planning cycle to improve results in the next campaign.
“However, if you go beyond these measures, the learning starts to get fuzzy. Looking at attitudes and unprompted awareness is interesting, but it does not help you to change a campaign. Learning whether someone likes your brand does not tell you who is going to buy it. Most people love the Porsche brand, for example, but obviously not everyone is going to be able to go out and buy a Porsche,” Jarvis says.
He believes measuring brand perceptions is often an imperfect science.
The activities of competitors can have a major impact, but this is rarely picked up in attitudinal research. Personal experience may also change consumers’ views. While one customer has a bad experience and hates the brand, another with identical demographics and in the same life stage may love it.
The main issue regarding what to measure is whether it allows you to improve your marketing and if your existing activity is having an effect other than the one you intend. Brand owners have only recently begun to wonder what influence DM might have on that most precious commodity: brand value.
According to Ian Taylor, director of Lowe Direct, this is precisely why broader measures have to be employed. “At worst, DM can undermine brand values and begin to erode them. A brand represents a fund of benevolence between the company and customer, which is why companies can make mistakes without damaging the relationship, but only so many times,” he says.
Everyone in the industry will have been involved in a discussion with a brand owner about what consumers think of “junk mail”, and whether using direct mail can trigger negative reactions. Taylor says: “Ill-targeted, inappropriate or confusing DM – in any media – can make debits to this fund. Imagine a DM campaign as a game: you mail 100 people and get three responses – you’ve won the game three-nil. But then you realise that six people were less than impressed with the communication. Have you lost the game six-three?”
The debate about whether brand perceptions influence loyalty is a long-running one. A more recent issue is what measure of loyalty is appropriate.
Does customer satisfaction influence intention to purchase, for example? NatWest Card Services, for one, is involved in a major shift towards being customer rather than product-focused.
Its marketing is now oriented around customer segments and the goal of building a share of their spending on financial services, rather than overall market share. Tony Davis, head of customer marketing, says a major project has been undertaken to develop new measures of success: “We look at customer value in the immediate term, because embedded value is difficult to put together in a robust way, and at customer satisfaction, because that is the measure of long-term likely profitability. The first is a business-driven measure, the second customer-driven.”
Balancing the impact of marketing on both “is a tight-rope walk”. But the company has built an in-house model that has identified clearly the relationship between profitability and satisfaction. “It differs by segment, but we now understand the relationship between them, so we can model what happens if you milk profit in the short-term, and what that might do to long-term satisfaction,” he says.
Just as many clients are looking beyond technique and media-based definitions of their marketing towards a more holistic concept – especially around customer relationships – so the key measures are changing. A critical dimension is customer profitability, because there is little point in gaining sales from people who cost you money to sell to.
“We see that as the future,” Keith Johnson, managing director of Manifesto, an agency whose offer is based solely on customer value management, says. “We measure perceived and received value. It is up to the organisation to define value. Typically it is profit per customer – therefore sales revenue less the cost of sale. But it need not be just that.”
For a company such as Yellow Pages, value might be the number of people who call a particular business classification, since it is that traffic against which they sell directory listings. Perceived value is the opposite measure, since it looks at what the customer thinks in terms of the cost of a product or service compared with its quality. Conventional usage and awareness research can be used to measure this.
Customers’ views need to be understood in the competitive context. “What matters is if customers are more satisfied with your brand compared with the competition. That is why loyalty and loyalty cards are misleading. They are a red herring,” says Johnson. Each customer is effectively won away from, or despite, the competition, rather than from within a perfect and closed market.
Just as many forms of marketing are beginning to converge, so too are the measures used to define their effectiveness. DM can learn from advertising’s tracking studies of attitudes, while advertising can benefit from DM’s more behavioural measures. Many new, credible measurement techniques are available. All that limits their use is the budget, which is why Jarvis says the key analyses are those which “provide information that can be directly used to improve the campaign”. In the end, this is the real measure of accountability.