While targeting technology is becoming smarter, mailouts seem dumber, so are mailers forgetting the basic rules of selling and can the industry learn lessons from retailers? asks David Benady
Unappetising, over-complex and repetitious are words that readily come to mind when describing so many of the mailshots that land daily on the nation’s doormats.
Without doubt, direct marketers are able to target customers ever more tightly, but questions are being asked about the effectiveness of their communications.
The average campaign volume fell from 176,000 in 2001 to 91,000 in 2004, evidence that targeting has become tighter over the years. But some believe this is clouding the all-important issue of how to improve personalised communication. The industry’s use of targeting technology may be getting smarter, but the marketing strategies and creative treatments underpinning the mailouts seem to be getting dumber.
With so many letters competing for the householder’s attention on the doorstep, it is easy to forget the basic rules of selling in the search for ingenious ways of getting through to customers.
Part of a back-to-basics approach is to borrow from the straightforward techniques employed by retailers. Can DM act like a shop in an envelope? Should mailers copy the BOGOF (buy one get one free) approach of shopkeepers?
Mark Dickens, of retail designer house Astound Retail Design, says DM must learn lessons from retailers or it will lose its way. “The direct marketing industry has been very much constructed out of its own self-fulfilling prophecy, it has been very fashionable to try to make something wonderfully simple sound painfully complicated,” he says.
“Yet people haven’t got more complicated, they are still motivated by the same basic things. We are looking at customers as percentages and proportions, not as real people. Some of the number-crunching has got very clever, but understanding of the customer has gone downhill,” he adds.
He points to mistakes that are made in financial services direct mail. People targeted with mailings offering unsecured loans have to plough through terminology such as APRs and debt consolidation. But he believes these are often precisely the sort of people who do not understand these terms.
“An awful lot of common sense has fallen out of DM. There has to be complex number-crunching, but once you’ve done that, it is easy for the firework to go phut rather than bang,” says Dickens.
Direct marketers respond that rather than getting simpler, the whole process needs to become more sophisticated. Andy Wood, managing director of Total DM, says/ “Remember KISS (keep it simple, stupid) when it comes to execution. Simple strategies nevertheless rely on sophisticated analysis.” He claims that few organisations are taking this analysis seriously, apart from some banks and retailers. But Wood asserts that it is crucial to analyse responses to find out which promotional offers get the greatest reaction from target groups.
Others say direct marketers must think twice before throwing away the increased targeting they have achieved and returning to the old days of indiscriminate, large-volume mass mailings. This would alienate customers and undermine attempts to target prospects more tightly and build closer relationships with them.
Be targeted or die
Relationships promoted through customer acquisition and retention strategies can benefit from insights gleaned from careful data analysis, according to Matthew Kelleher, sales director at information solutions provider Acxiom. He says: “It’s critical that direct marketing becomes more targeted, more accurate and more relevant, otherwise it will die. One of the primary ways of doing this is through being clever with data.
“Fortunately, data analysis into consumer behaviour is going from strength to strength, enabling more organisations to be more confident in using data to influence their direct marketing and business strategy.”
One fear for direct marketers is that if their campaigns do not produce results cost-effectively, their work will be cut in the face of an economic downturn. Replicating the simplicity of retail promotions will not protect them from this.
“Sadly, in this harsh, open world, marketers need to work harder and smarter. They can’t rely purely â¢on simple retail models and as history has shown, at the slightest indication of recession or any kind of profit warning, companies make cuts and look for a better return on investment,” says Bill Burey, managing director of consumer list company NDL International and online research company CCB.
“Usually, this involves the espousal of direct marketing which, although it may seem complex and theory-based, is completely measurable, is scalable – and can therefore be turned up or down as the situation requires – and has fixed overheads which are usually less than those involved in opening more retail outlets.”
Furthermore, the more the sales person knows about the prospective customer, the greater will be their ability to make the pitch relevant. Getting the appropriate message to the right person at the best time applies to all forms of marketing.
According to Hugh Bishop, chairman of DM agency Meteorite/ “This can only be achieved through understanding the behaviour and motivation of our intended customers and this takes hard work and often results in more complex modelling. By finding smaller, like-minded segments, you can reduce contact cost and drive response, and therefore deliver significant changes in return on investment.”
He gives the example of work the agency has undertaken for Brewers Fayre over the past four years. One finding is that it is more motivating for semi-regular customers to be offered a free cappuccino than a free meal. Not only does this induce a greater response, it costs a tenth of the price.
The data industry is keen to defend itself against accusations that it is unnecessarily making its work over-complicated. Some argue that the industry should learn from retail, but say that far from making their work more simple, this means they should follow the retailers’ highly sophisticated approaches to working out customer behaviour. Retailers use advanced research techniques such as videoing their customers as they move through a store to work out how they interact with displays. These techniques can lead to subtle and complex forms of marketing.
Alan Timothy, chief executive at data engineering consultancy Rocket Science, suggests that direct marketing and retail sales techniques are effectively the same thing. “The good old BOGOF may be thought of as a classic retail promotion, but we use the same thing in DM. Retailers use it to tie purchases up-front from their stores, thus giving the customer less opportunity to go and buy the same product elsewhere. We use this technique too, but have the ability to target it and make it even more effective,” he says.
delve into share of wallet
By looking at “share of wallet” – the proportion of their cash a customer spends on a given brand – direct marketers can identify customers who buy a lot of a particular product category, but who give greater share of that spend to competitors. “We then target these people with BOGOF offers to tie their spend into our brand – it is the same thing but delivered differently and with greater accuracy,” he says.
He also points to retailers’ use of key commodities as “loss leaders”, offering them at rock bottom prices to entice people into the store, then making money when they buy other products. “This is no different to offering discount vouchers through DM to initiate trial or credit cards offering zero per cent interest on balance transfers,” says Timothy.
Richard Dunn, planning director at DSJ, believes direct marketers have much to learn from a pure sales approach. Clear product benefits, strong calls to action and relevant offers can drastically improve response rates and deliver better sales.
creative and data do mix
“The secret to grown-up DM is to combine these features with bigger, better, more engaging creative and good data strategy. Good strategy and basic sales principles are not mutually exclusive – they are not even in competition,” says Dunn.
The greatest response comes when recipients enjoy and remember the communications they have been sent, he says. “Factor in brand benefits too and the argument for a more sophisticated approach is compelling. Good data analysis means a more receptive audience, which means more sales. Good insight into this audience and strategies to change behaviour means better response rates plus a greater effect on the brand. As long as we don’t forget our sales message basics too, the value is clear,” he adds.
In truth, the sheer volume of direct mail increases the likelihood that some mailouts will be unappealing, though there are still many examples of powerful creativity coming through the letterbox.
But it always pays to remember the basics. Direct marketing is supposed to be a marriage of data and research. As Peter Worcester, planning director at Presky Maves, says/ “The real power of direct marketing is its ability to make the sales message more personal, timely and relevant by using data about a customer or prospect. Of course, overdoing the data analysis and personalisation can turn people off. It is about balance.” Too many campaigns appear to be getting the balance wrong. â¢