Now in their seventh year, this year’s IDM Business Performance Awards recognise the ability of direct marketing to make a measurable contribution to a business’s profitability. When selecting winners, the judges look at all the facets of a campaign, including strategy, product development, creative approach, media and targeting. The winners have proved that their campaigns have delivered not just increased sales, but have also helped to create and build long-lasting relationships with customers.
Since being acquired by Centrica in 1999, the Automobile Association (AA) has achieved a 430 per cent increase in its personal loan business. With &£941m of outstanding balances in 2003, it has acquired a 1.38 per cent market share in five years, up from 0.4 per cent. A “test-and-measure” approach to new marketing channels has been central to this expansion.
The judges awarded this campaign the top prize for “the fantastically integrated business development” that it demonstrated. Recognising the enormous pressure the company was under to perform after its demutualisation, they noted the effective use made of direct marketing. They also applauded the AA for being willing to make a short-term sacrifice to build for the long term.
Since 1984, the AA had operated a joint venture with Capital Bank, now part of Halifax Bank of Scotland, which had built a &£161m loans business by 1999. This was drawn entirely from internal marketing to the existing customer base of 4.4 million AA members.
Research showed that there was strong support for the AA to offer financial services. It also revealed that nearly half of all personal loans were used to fund car purchases. With the strength of the AA as a motorist’s brand, this created an opportunity for more aggressive expansion.
To be true to the brand, the new loan proposition emphasised quality of service, with a 24-hour cheque delivery promise, and the critical incentive of a free AA car inspection. With 7.4 million used-car buyers in the UK, the potential market was significant.
Organic growth comes naturally
An organic strategy was adopted to roll out the new loans campaign. Initially, the emphasis was on identifying the most cost-efficient channels that could deliver the acceptable cost per deal of &£250. Press ads were tested and space taken in both the motoring press and national newspapers. This DM activity contributed 34 per cent of the loans business achieved during 2000.
The next step was to test television with the first direct-response television (DRTV) ad running in regional daytime and satellite slots during 2001. “Bank Manager” highlighted the AA’s credentials in car loans compared to those of high street banks. The campaign was highly successfully, creating 24 per cent spontaneous awareness from zero and producing &£5.7m of loans. An online channel was introduced, which rapidly established itself as an important sales generator.
Making money from clowning about
With the relaunch of the AA brand under the “Just AAsk” umbrella during 2002, the decision was taken that every product had to contribute to broader awareness of the company. This saw a new DRTV execution, “Clown”, being used, which generated &£23 million in loans and saw uplift in sales of other products.
A major shift in emphasis came from the decision to pursue a brand response strategy for long-term business value. This saw increased media spending and spots running in prime time. Despite the potential loss of short-term revenue, it was recognised that only a small number of customers are in the market at any one moment. As well as creating new loans worth &£6.7m, the approach drove awareness of AA Car Loans to 60 per cent.
The final step was to introduce a new advertisement, “Seeing Double”, highlighting low interest rates. As well as increasing the return on investment (ROI) on ad spend to 4.03:1, the halo effect increased business achieved through all other channels. The AA has managed to become the second most spontaneously considered car loan provider in five years as a result of its progressive marketing strategy. With the brand in decline, Drambuie recognised the need to re-engage its core consumers and attract younger drinkers. Following a successful direct mail test in 2000, a segmented programme of mail-shots has been deployed. To date, 91 per cent of consumers contacted have responded at least twice and consumption of Drambuie is estimated to have risen incrementally by five per cent.
The judges recommended this programme for “rising to the challenge of shifting alcohol using direct mail”. They were especially impressed by the level of member-get-member recommendations achieved, which averages about 40 per cent from mailed consumers.
The problem for the brand was a steep decline in its customer base and an ageing consumer group – 54 per cent of sales came from over-55s. It needed to build and maintain frequency of consumption as well as getting Drambuie into the repertoire of younger drinkers.
A test mail-shot to names from lifestyle lists during 2000 achieved a 22 per cent response and a 60 per cent referral rate. Coupon redemption beat target at 15 per cent and brand salience was positively affected.
Consumers were segmented by age and consumption into three groups – “core” drinkers, older, affluent and consuming four bottles a year; “target” consumers, in their 40s and drinking 1.5 bottles and therefore growable; and the “maintain” group of older, less affluent two bottle drinkers who needed to be retained.
The brand essence was defined through research around “making the best part of an evening with friends last longer”. Hard and soft measurement has been applied at every stage of the four-year activity to date.
Drambuie has built a database of 72,000 drinkers who have been mailed between one and three times each year, depending on their segment. Creative executions have ranged from books of anecdotes to ice-cube trays, samples and even a corkscrew.
Response rates have consistently been 30 to 40 per cent, even outside of the winter selling season. Voucher redemption has ranged from ten to 19 per cent. The programme has increased consumption among mailed consumers compared to control groups.
The Winter Campaign has historically been the focus for the charity’s fundraising and donor recruitment. A five-year process of testing and development has resulted in a pre-Christmas mailing that yielded a return on investment of 48:1 and cold recruitment activity that payed back at 3:1 overall.
The judges noted that the charity’s direct marketing had been progressive and that the campaign was “supercharged by creative”. This was the result of a significant shift in the key message, showing grittier images of the Salvation Army at work.
The pinnacle of this development process was the 2002/03 Winter Campaign. As well as mailings to the supporter database, a &£2.6m recruitment campaign was run across seven media, including DRTV, radio, direct mail, door drops, inserts, press ads and the Web. This was a 36 per cent rise in budget compared to the previous year and involved 720 separate creative elements.
The pre-Christmas mailing to existing supporters pulled in more than &£9m at a cost of &£187,000. The cold recruitment campaign pulled in &£7.56 m in donations as well as recruiting 223,338 new cash donors and 34,166 committed givers.
These results dramatically exceeded campaigns prior to 1998, which generally achieved break-even, and also average results for the charity sector, where ROI for new donors is usually only 0.39:1.
Important benefits for the charity also resulted from the donor mailing, with existing regular givers also sending an average additional gift of &£33.12, while active donors gave an average of &£26.31. Every medium and creative treatment in the recruitment campaign broke even or better, with the best performing mail pack pulling a 7.1 per cent response rate and a ROI of more than 10:1. Continual tracking over time and constant refining of messages caught the judges’ attention. They particularly noted that in the middle of the programme, it took half the time to achieve target sales than the previous year. Through constant evolution, Vauxhall was able to increase response rates while continually outperforming control groups by larger increments each year.
Increased competition and reduced saliency was eroding the GM Card’s competitive edge. Active accounts and redemptions were in decline until a new model was applied that ranked cardholders by likelihood to redeem. New incentives and creative messages steadily drove up incremental income and car sales. Anew, customer-centric approach to communicating with the SME market in 2003 resulted in O2’s market share for mobile services overtake all its competitors for the first time. The judges commended its different approach to the market, typified by business development rather than advertising, with imaginative use of media central to its success.
Lack of product differentiation and cynicism among SMEs was causing problems in penetrating this market. By challenging the convention of advertising price or product, O2’s jargon free marketing – using direct mail, TV, press, outdoor, ambient and online – invited response to a website or call centre with retrained agents. This emphasised finding the right mobile solution for each responder within two minutes.