Spurning volumes

There really is no need to send out millions of untargeted mailshots these days – data is widely available, and database technology is powerful enough to tailor direct marketing campaigns to any market. Why would any company fail to use it? asks Gary Eastwood.

In the film Sea of Love, Al Pacino plays Frank Keller, a New York detective on the trail of a female serial killer. The femme fatale places romantic personal ads and respondents are found murdered in their apartments, with the Fifties song Sea of Love playing on the turntable.

In an attempt to catch the killer, Keller places a similarly poetic ad in the same paper offering a date and a meal at a local restaurant, based on the hunch that only a certain type of woman will respond. Sure enough, respondents turn up to meet him. Their fingerprints, one set of which hopefully belongs to the murderer, are then taken from the women’s wine glasses.

The ruse is a good example of the power of a targeted communication to achieve the desired response. But although direct marketing (DM) has been dragged kicking and screaming from the days of high-volume, untargeted junk mail – the “throw enough mud and some will stick” approach – many companies are still failing to target communications effectively. Indeed, many still do not know who their target customers actually are.

Lee Waite, client services director at business-to-business list provider Conduit, says: “Historically, DM was all about volume – ‘junk mail’. People received literature that was not relevant to them and it would go straight in the bin. A lot of companies still take the volume approach. It’s unsustainable and very expensive.”

Flailing in the dark

Some argue that those companies which do not know who their customers are or what motivates them to buy are the same ones that push high-margin products through high-volume, untargeted DM campaigns. The relationship is not necessarily one of cause and effect, but there are concerns that this approach is prolonging the bad name of an industry that has been trying for a long time to clean up its image.

Neil Fox, planning director of DM agency TDA, says: “Sometimes, companies seem to push products for profit rather than to fulfil the needs of customers. But rather than going for volume, you can target in a way that is more cost-effective. It seems obvious, but it is still not done that much – there’s a lot of laziness around. If you’re not talking to the right customers, it doesn’t matter how loud you shout at them.”

While volume is not necessarily a bad thing, it is the “cheap and cheerful” approach – whereby no effort is made by the vendor or the agency to understand or target their customers – which many people object to.

Institute of Direct Marketing managing director Professor Derek Holder says: “A lot of direct mail is patronising, unimaginative and dull. It has improved a little, but a lot of people are still putting out irrelevant, untargeted communications. DM has to be personal, relevant and timely.”

Carolyn Stebbings, client services director of DM agency DP&A, agrees: “Cheap and cheerful is not the right policy – it doesn’t attract customers and it gives the industry a bad name. Cheap and cheerful is perpetuating the opinion that DM is junk mail. There’s nothing wrong with volume – it’s cost-effective and we’ll never see a total move away from it – but we need to understand that there is a more sophisticated way.”

How can it go wrong?

With so much data to hand, and with consumers willing to share information more readily, there is no excuse for poorly defined DM campaigns. DM works best when an organisation is trying to build a long-term relationship with customers, rather than taking a “sales today, tomorrow will look after itself” attitude. Martin Troughton, founder and managing partner of Harrison Troughton & Wunderman, says: “You need pretty high margins to get a good profit from one-off campaigns. But very few DM campaigns are one-off – it’s always the start of a dialogue.

“It’s not a numbers game anymore – it’s not about volume, it’s about value. You have to have a balance between volume at low cost and being finely targeted – you may send less but more value is invested in, and gained from, each.”

Ian McClean, managing director of advertising agency MSDK, highlights a recent campaign for DisneyWorld as a case in point. He says: “At the beginning of the campaign, we asked a broad control group 26 questions about whether they would visit DisneyWorld on their holidays. We followed that up a year later and identified four questions that were fantastic predictors of who went. We segmented the control group and found that the most valuable subset of respondents were six times as valuable as the least.

“We focused on a top group of about 97,000 people, and rather than send out cheap mailshots, we asked Disney to invest in substantial packs and send something nicer – something people would expect to receive from Disney. We achieved a 24 per cent conversion rate and a return on investment of 1,024 per cent.”

A good DM campaign allows companies to do things that other advertising media cannot. McClean points out a recent campaign for Martell. Martell’s market was in decline, with its traditional customers – women in their fifties – literally fading fast.

MSDK launched two DM campaigns for Martell. One was aimed at existing customers and the other at men in their thirties. McClean says: “We created entirely different brand personalities for each segment. For the ladies, the campaign promoted Martell’s tradition and reliability; for the men, it was bold and iconoclastic. DM is the only way we could have done that, because it is a stealth medium.” The result of this dual approach was that, in a year when the cognac market declined by two per cent, Martell’s sales rose 19 per cent.

Nor does a good DM campaign have to be expensive. On the contrary, it is more likely to provide greater response rates, profits and cost efficiencies. Troughton says: “Databases are now more sophisticated and consumers give information more freely, so there is no need any more to do high volume. I would prefer to look at return on investment – how much do you need to spend to inspire change? It doesn’t have to cost much.”

Troughton highlights a recent campaign for Vodafone, designed to increase subscribers to its messaging service, which comprised a Tesco till-receipt for a long list of alcoholic drinks. On the receipt is a scrawled message, along the lines of: “Sorry you missed a great party, but I couldn’t reach you as your messaging service was off”.

“The campaign stopped people in their tracks and made them smile. Yet it was the cheapest brochure we’ve ever done – each receipt cost us pennies,” says Troughton.

More than a one-buy stand

More importantly, tailored communications can help to build a long-term relationship with customers. And that is significantly more valuable than any one-off campaign.

Stebbings says: “There is still a place for cheap and cheerful, but ultimately there is more profit in building a relationship, because cost-effectiveness increases. If you know your customer, you know what they are likely to buy.”

Waite agrees: “Selling higher-margin products is a short-term strategy. You may get some quick wins but you’ll lose out in the long run. All your competitors will be looking much more closely at their databases, and matching their communications and products much better. If you keep up an untargeted approach, you can be sure that your competitors will steal your clients.”

The industry is catching on to the value of targeted DM. But some believe merely targeting marketing material is not enough, arguing that the improved customer profiles and relationships gained should be used to tailor products to customers.

Fox says: “DM is well-known for its recruitment ability and high response rates, but that information should drive product acquisition and development.” He admits that rewriting the way a company sells a product is a brave thing to do, but Fox points out the dramatic success that can be achieved when it is done correctly.

He says: “You need to be brave to rewrite the way you sell products, but it can be done. Take First Direct – it blew the market out of the water with its new model for banking. But there was a customer demand – banking over the telephone is better than waiting 30 minutes to see the bank manager.”

But perhaps Fox is jumping the gun. The industry still needs to get the message that targeted communications can build customer relationships, and profit, which far outlive the quick-hit sale. The message for DM is clear: give the people what they want. Or, perhaps more accurately, find out what they want and then give it to them profitably.

The DM Show

Marketing Week and Precision Marketing have once again joined forces to create the DM Show – a leading central London direct marketing event – at London’s Earls Court One, from October 21 to 23.

The show offers visitors the chance to get advice from experts, look at case studies and find out about the latest services and products in the industry. At the heart of the show will be the DM Meeting Point, where exhibitors can hold pre-arranged meetings with buyers who traditionally do not cruise the aisles of exhibitions.

The IDM and CIM support this initiative, which aims to raise the profile of accountable, response-driven marketing.

To exhibit, call 020 7970 6237.

To receive regular DM Show updates, visit www.dmshow.co.uk

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