The Direct Approach
London Wine Co. has limited shelf space, limited floor space, and almost no parking area at its sole store in Brookline, Mass. Owner Stephen Garber, who took over the family business a little more than a year ago, realized that the kind of growth he was looking for -- a one-year sales increase of 50% in 1985 to $1.5 million -- wasn't going to come from increasing the foot traffic into the store.
So Garber began to experiment with direct mail as a way to attract new customers and to coax established customers into bigger purchases. His first attempt was a monthly newsletter. Although the results were "less than overwhelming," they hinted at the potential that direct mail held for London Wine.
"We were heavily into shotgun-type mailings," recalls Garber. "We were blanketing areas. I had been considering going to a direct-response mailing house and doing some work with them."
Instead, Garbergot some help from Selkirk Associates Inc., a Boston-based software company that had developed The Selkirk Correspondent, a powerful direct-mail management program designed to run on a personal computer. The $1,500 program, intended for business-to-business or big-ticket retail direct mail, allowed London Wine to track each response and tailor its mailings to the tastes and needs of the individual recipients. The computer program vastly increased the efficiency of a notoriously inefficient marketing device, transforming it into a highly responsive, finely tuned instrument. The results have been dramatic.
In December 1983, a month after it began using Correspondent, London Wine's sales jumped 20% above the previous December's. By May 1984, Garber was calling it "almost the heart of our marketing operation." The company was racking up a 28% growth in sales for the year, and Garber hopes it will hit 50% by year's end. "[Correspondent has] changed our company unbelievably," says Garber. "We're barely able to cope with the growth right now. We're all going bananas."
The direct-mail work has kept the company's computer, an IBM PC/XT, so busy that London Wine has had to buy a second one so it could get some other work done. "We were so busy doing Selkirk work that our accounting sometimes lagged behind," says Garber.
The emergence of such programs as Correspondent opens up broad possibilities for small companies that market to other businesses or to substantial retail customers. Such sophisticated software has been available for years to run on larger computers. Butit is only in the last year or so that such complete direct-mail management programs as Selkirk's Correspondent have begun to reach the personal computer market. There is "a lot of junk out there," warns Craig Huey, publisher of the newsletter Direct Response
he Digest of Direct Marketing and president of Infomat Inc., a direct-response advertising agency in Torrance, Calif. "There are about 30 software systems out there right now geared toward marketing, but there are not many that have an overall direct-mail thrust to them. To be professional in today's marketplace, the emphasis needs to be on direct marketing."
In addition, there are plenty of list-management programs and other less powerful types of software related to direct-mail operations. But they cannot have the same sort of impact on an entire marketing plan.
At London Wine, the impact has been sweeping, changing not only the number of customers, but also the character of the customer base. "[Correspondent is] bringing us the kind of buyers that we're looking for. It's bringing us people who want fine wine and are willing to buy it in significant quantity," Garber says. "We find some pretty wonderful wine at pretty wonderful prices. The business is becoming more and more finding the unusually wonderful values in wine. It is becoming more and more involved in selling what we want to sell, rather than what other people want us to sell."
"The idea of the product in terms of business-to-business direct mail is that we give a company the ability to, first of all, create very extensive information records on all their customers," explains Tony Merlo, one of the founders of Selkirk, along with Allan Kennedy, co-author of the book Corporate Cultures. "But, more importantly, the heart of the product is that we give them the ability to select specific customers with specific characteristics, based on all the information that they're keeping. They then can very efficiently be able to create a letter or something for mass communication that can be personalized to everybody in the group."
The first step in that process, as in any direct-mail effort, is the development of a list. Rather than go the route of list brokers and list rentals, Garber decided that it was more effective to develop his own list through what he calls his "crystal ball" method, a system that he is leery of describing in detail. "We took target groups in different areas and measured the response," recalls Garber. "Depending on what kind of response we were getting from the different people or groups, we would saturate or forget them."
After developing a list, London Wine mailed a general letter of introduction to these people and organizations. The letter looked like anything but junk mail. It was typed on expensive stationery and mailed first class in a stamped envelope. "It looks like a personal letter, as if you would have your secretary type it," Garber says.
That first mailing consisted of several thousand letters, each accompanied by a business reply card and a brief overview of the store's offerings. At this point, notes Garber, "we didn't know what very many of their tastes were, so there wasn't a whole lot we could zero in on. The concept that we tried to promote throughout the first mailing was that of being a personal wine merchant."
The zeroing in began after receiving the returned business reply cards on which respondents were asked to check off their interests in various types of wine. The mailing was followed by a telemarketing campaign, both to those who had responded and to those who hadn't. The response to the basic mailing was fairly low, so the telephone follow-up was essential to establish the database of customers, which would serve as the starting point for all further marketing efforts.
After the telephone survey, London Wine developed a system for selecting customers from the database according to their product preferences, and produced a letter for each customer based on his or hertastes.
"We had all different kinds of letters," says Garber. "All of those who responded to us by telephone or whatever got letters based on the preferences they had expressed. There can be two dozen or more versions of the letter."
At first, Garber was disappointed with the response to his mailings. "I wanted to grow 50% overnight in terms of sales," says Garber, recalling his initial optimism. "I had to stop and constantly keep asking myself what I was doing wrong. Why wasn't I getting the instant response? As I look back on it now, I did absolutely nothing wrong -- I was just a little bit impatient. It all happened. It just took a little bit longer. It's like trying to get a locomotive started. There's a period where it has to work pretty hard to start getting any momentum, but once it has a little momentum, it kind of goes on by itself. And that's what's happened now." Garber now claims that by using Correspondent to target an audience, he can, for example, market a $5 bottle of white Bordeaux to 300 prospects using direct mail, and sell 60 cases to individual or organizational buyers.
What's more, Correspondent has helped Garber refine his marketing goals and skills. "The software isn't a management tool in the sense that it's a decision maker," cautions Merlo. "You don't have a situation where it tells you that if this happens you should do this. It's an information builder, which allows a manager to go in and think about what to do with the information that is at his or her disposal." Merlo attributes Garber's success to two factors: "There's the part of actually using the software, and there's the part of changing his business habits to take advantage of the software. The software doesn't make things happen," he insists. "You have to have a marketing structure, a marketing scheme in mind before the product becomes useful. It's our job as part of selling the software to go in there and force that kind of thinking."
The Correspondent program is essentially an integrated database and word processor. The database consists of three different files, or types of capabilities. The first is a people file that allows users to profile in some detail who or what it is they are tracking. In the case of London Wine, Garber can profile a customer's name, whether it is an organization or a person, the address, and the customer's buying patterns and preferences.
The second part of the database is an activity file that keeps a log of all the transactions that occur with each customer. So whenever London Wine sends a piece of direct mail, gets a phone order, or places a telephone call, the transaction is recorded.
An event file is the third part of the database. This serves as a scheduling device for things that should happen in the future. If London Wine gets a phone call today placing an order for two weeks from now, it can not only record the order in the activity file, but also schedule in the event file that in two weeks it will have to make the delivery. The event file can be called up for a given week, and all the events that should take place during that week will be displayed, resulting in an effective "tickler" file.
The word processing of Correspondent allows the user to compose documents from scratch or to store documents that can be retrieved at a later date. Because Correspondent's word-processing and database systems are integrated, it is relatively easy to call up and print out desired labels of names with specific characteristics from the database, as well as create a direct-mail campaign complete with a series of follow-up letters that can be stored in the system. The preferences of individual customers can be called up and used to personalize letters that are composed on the word processing portion of the software. And reports on how a particular mailing performed are easily produced.
Correspondent operates on the IBM PC, IBM PC/XT, or any IBM-compatible hardware with 256 kilobytes of randomaccess memory, a 10-megabyte hard disk, a display monitor, and a letter-quality printer. It sells for $1,500 for the bare-bones diskette with instruction manual, or $4,000 for customized software with some applications consultation, plus $400 a day for additional Selkirk consultation.
The information-building and organizational capabilities of Correspondent have been a godsend for Garber in managing the increase in his business. "There's about 80 things going on at the same time," says Garber. "We try to do prospecting every month, say a few hundred letters . . . followed up by telephone calls within a couple of weeks after the letters go out. There's also a certain amount of direct telemarketing, even without letters, with positive response stuck in the database. Then there are mailings to the entire list of people who are active in the program. We try to get a piece out every four to six weeks. A good deal of our time is being drained in filling all the orders coming in."
So far, London Wine has limited the use of Correspondent to its retail store, which had 1983 sales of almost $1 million. While Correspondent was not commercially available until January 1984, the company has been using it since November 1983 as a part of Selkirk's test program. London Wine plans to use the software in early 1985 for its wholesale arm, Eastern Wine Cellars Inc., which Garber estimates will do more than $1.5 million in sales in 1985, its first full year of operation. "It will allow our wholesale salespeople to track business and not lose sight of that business," says Garber.
Correspondent is not the only software on the market that is capable of doing a complete business-to-business direct-mail campaign, however. Binary Systems Inc. of Newton, Mass., has developed a software package called Market Master, which is similar to Correspondent in some capabilities. Until recently, however, the software, called Executive List Management, was available for use only on the Canon computers for which Binary is the New England manufacturer's representative. An IBM version of Binary's Market Master is now being marketed through N-Sure Systems Inc., in Monroe, La., which markets IBM PCs with specially tailored software to insurance brokers, agents, and companies. To date, N-Sure has sold about 15 Market Master packages at $895 a shot, but, to N-Sure's knowledge, none of the purchasers has the system up and running yet.
While Selkirk is still in the early stages of marketing its package as well, its customers seem pleased with the program. Softbridge Microsystems Corp., for example, a software development company in Cambridge, Mass., that is developing software for financial planners, purchased Correspondent software not only for its direct-mail capabilities but also to use in prospecting for customers and conducting market research. Cathy Cassia, who works in Softbridge's marketing department, has been using Correspondent for two months. She describes it as an "unbelievably easy system."
"I don't even want to discuss the other marketing software I used," says Cassia. "It was here when I got here and was probably much less expensive, but it was deadly. . . . Correspondent just spells it all out."