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.