More for Your Money
By carefully orchestrating mailings, telemarketing, advertising, and more, you can vastly increase the effectiveness of your direct-marketing campaign
In today's business environment, whether you're a giant corporation or a small, private company, the marketing challenge is the same. You must do more with less. You must generate more business with fewer marketing dollars. And you must increase customer satisfaction. To compete successfully for new customers -- and to keep the ones you have -- you have to go beyond traditional marketing and sales efforts. You need to convince the marketplace that your promotions and products have quality and integrity. And you have to convince people that once they develop a relationship with you, you will support them over time.
That's a tall order. But not an impossible one. And your marketing can help you accomplish those business goals. The marketing this article will describe, integrated direct marketing, is geared to meet those demands. It is customer driven. And it costs no more -- often less -- per sale than conventional techniques.* * *
Increase Number of Responses
To step back a minute, let's describe direct marketing as it is traditionally thought of. Most simply put, it is the use of various media to stimulate a response. That response may be a direct sale, or a request for more information, or a request to be contacted by a salesperson. The media run the gamut from matchbook covers and bus placards to television and radio advertising, letters, catalogs, and telemarketing.
Integrated direct marketing has evolved from traditional direct marketing. Instead of treating each medium separately, integrated direct marketing seeks to achieve precise, synchronized use of the right medium at the right time, with a measurable return on dollars spent. The result: a higher response rate and a higher-quality response at current or even reduced budgets.
Here's an example. Say you do a direct-mail campaign, which generates a 2% response, long viewed as a good or average return. If you include a toll-free 800 number in your mailing as another option to the standard mail-in reply -- with well-trained, knowledgeable, tightly scripted individuals handling those incoming calls -- you will achieve a lift in response of 50% to 100% over and above the base return of 2%. You'll go to a 3% or 4% response rate.
If you follow up your mailing with a phone call -- within 24 to 72 hours after your prospect receives the mailing -- you can generate a response 100% to 700% higher than the base rate. So, by adding your 800 number, you bring the rate from a 2% response to 3% or 4%. By following up with phone calls, you add another 2% to 14%, bringing your response rate as high as 5% to 18%. That's integrating only two marketing channels, direct mail and telemarketing.
The lesson is this: to get the response you want, you have to view the marketing mix as made up of multiple-media, not just single-medium, efforts. And you have to learn how to manage the interrelationships among those media. Traditionally, companies that do direct mail and follow up by telemarketing let their mail response drop off and then begin calling. Why? They don't want to cannibalize their less expensive vehicle, direct mail, with a more expensive phone call. But it's shortsighted to treat each medium in such an isolated manner. The important issue is the aggregate response. Does it make sense to let 98 people get stone cold while you're waiting for two responses to come in?
The principle behind integration is that not all people respond the same way to direct mail. One person may sit there and very carefully fill out the order form. Someone else may immediately reach for the phone to call the 800 number. Most people, though, if you've grabbed them at all, think to themselves, Looks interesting, but I'm not sure it's for me. Let me put it in my pending pile. That pile grows and grows -- and then goes into the garbage at the end of the month. What if, instead, a follow-up call is received a day or two after the letter lands in the pending file? "Mr./Ms. Jones, we recently sent you information about our product X. I'm calling to follow up on our offer and to answer any questions you may have." Suddenly that large group of fence sitters have a chance to have questions answered and to voice some of their concerns, and if the phone call is thoughtful and professional, they may be swayed to say yes. Our experience, based on consumer and business-to-business efforts, indicates that an additional 10% to 12% of those who say no on the phone eventually will send in the business reply card or call the 800 number.
Wait a minute, you say, that may be fine for big companies, but what about me? We don't have the resources for all this. I can't hire telemarketers. I can't hire a copywriter.
Let me say, first of all, that in one major way it's easier for you to do integrated direct marketing than it is for big companies to do it. You don't have to go through all the politics of the marketing department's being at odds with the advertising department, which is at odds with folks at corporate headquarters, who, the field sales force feels, never understand what's going on anyway. Chances are, you're wearing some or all of those hats yourself. Since your effort has to take into account marketing goals, sales goals, and your overall corporate goals, your advantage is in having fewer divisions among those different interests.
Beyond that, we know from our own experience that integrated direct marketing can work for a very small business. Back when we were getting our company off the ground, we used this technique ourselves. It doesn't take all that long for you to craft a letter, which is what we did. Then we sent out very small, highly targeted mailings, followed up with a call by the senior partners. It allowed us to prequalify our target market -- to figure out quickly who seemed to be a meaningful prospect, who should go on the mailing list to be followed up over time, and who was so hot that we should go out and do a presentation. The trick is to send out only the number of letters that you're sure you can follow up within 72 hours. You've got to send out small, controlled waves of mail so that you can get through all those calls on time, which is critical. We ended up doing 50 to 100 letters a week.
For a more ambitious effort, here's what you typically might expect to pay. A high-quality, direct-mail package consisting of a personalized envelope, personalized letter, colorful brochure, and personalized reply card will average about $3.50 apiece. That includes the cost of creation, production, and first-class postage. If you hire and train three temporary telemarketers to follow up on your mailings, the labor cost for administration, telephone-line charges, and salaries will run about $30 an hour per person. That may sound high, but consider the return on that investment. You can expect each telemarketer to dial an average of 30 phone numbers per hour and connect with about five potential executive buyers per hour. Assuming the telemarketer has a seven-hour workday, that's 525 key contacts per week, 2,275 per month, 27,300 completed calls over the course of a year. That averages out to about $6 per completed call. The qualified sales leads the process generates will make the efforts of your (more expensive) field sales reps much more productive and cost efficient.* * *
Build Ongoing Relationships
Based on our work with our Fortune 500 clients and our observation of small companies, the integrated approach is the most powerful technique for maximizing the return on marketing investment, because it generates more sales per 1,000 names. Critical to the process, however, is the strategy of ongoing communication. You want multiple follow-ups, each getting more and more personalized, because with each communication, you have the opportunity to learn more about the prospects. Why weren't some of them interested? What are their needs, and how does your product or service satisfy them? Each subsequent mailing to a specific company or market segment becomes more targeted and more personal, and hence generates a higher response.
You can focus your second mailing on building a customer relationship by saying something like: "We spoke with you recently. You told us your interest was in thus-and-such aspect of manufacturing. We can help you with that. The enclosed case history describes how we helped another company with a similar need."
With desktop publishing and laser printers, preparing the materials is getting cheaper by the day. You might take some of the dollars you would put into some of your fancy four-color promotions and substitute more frequent, personalized communication. Think about and capture the specific interest categories of your prospects and customers. Personalizing the process is not as overwhelming as it sounds at first. If you really think about it, are there more than 10 main categories of interest or needs that you find in your selling? Probably not.
Building relationships with existing customers will result in loyalty and repeat business. And remember this piece of marketing wisdom from AT&T: it is five times more expensive to sell to a prospect than to sell to an existing customer. You also need to change your marketing for prospects, moving from "knock-knock-I-want-to-pitch-something" to "I've understood your needs. I've probed. I've invested in sending you pertinent information. Haven't I earned the right to at least talk to you?"
Database management is essential to the kind of precision marketing we're describing. (According to the Direct Marketing Association, 60% of the success of direct marketing is based on the quality of the database.) The databases most companies have do not qualify. They are primarily billing tools and don't contain the essential marketing information -- the decision makers' names and titles, phone numbers, buying cycle data, interest areas, and other demographic data crucial to marketing success. You can easily get that data through your direct-mail and telemarketing efforts. Also, there are plenty of good, affordable (less than $1,000), off-the-shelf software packages that can help you organize and make the best use of the data you gather. Once your database is up and running, you can use it to shape a continual communication process with your prospects and customers, alternating very personalized direct mail with telemarketing and field sales.
Next, based on your estimate of the total revenue potential of each customer or prospect over time, determine how much money you should spend on this ongoing communication. Can you afford to spend 50¢ to get a dollar? Perhaps you can if sale number one is a precursor to 10 or 20 sales in the future.* * *
Be Budget Wise
By now you may well be wondering how much bigger a budget you need for integrated direct marketing. The answer is, you don't need a bigger budget, just a better allocation of what you're currently spending.
Let's consider an all-out, full-fledged campaign in which a company plans to use advertising, direct mail, and telemarketing, with salespeople then following up the qualified leads. Traditionally, 70% of the budget would be allocated to print advertising that included an 800 number to call, and 30% would go to mail. The advertising would generate about 35% of the response, and mail about 65%. The result would be about 50 leads per 1,000 names, or 5%.
With integrated direct marketing, advertising gets only 10% of the budget. (An aside on advertising: its traditional role is awareness. But don't get caught in the trap that says you should do image ads. The only way to measure awareness is to ask: Are they buying? And the way to quantify the productivity and the cost-effectiveness of advertising is to make it "sing for its supper." Put in a direct-response vehicle -- an 800 number and a coupon.) The remaining 90% of the integrated-direct-marketing budget goes to direct mail (25%) and telemarketing (65%), with direct mail generating 20% of leads, and telemarketing 70%. This campaign will produce 300% more leads than the traditional method would, or a 15% response.
But that's just half the story. The proof of the campaign is in lead conversion. It's scary, but our research with large companies, at least, consistently indicates that only 30% to 34% of leads are actually followed up by the sales force, and only about 10% of those convert to sales. Given that a typical campaign produces 50 leads per 1,000 names, that leaves a yield of about 1.6 sales per 1,000 names. The way to get around that is to totally integrate your salespeople into the marketing process throughout the year. Ask for their help in creating strategies and offers, defining lead criteria, and analyzing results. Companies that have done this have doubled the sales-rep follow-up rate and have increased conversions by 250%. The bottom line is a 1,400% improvement in sales per 1,000 names.
Again -- and we can't stress this enough -- it isn't the size of the company or the size of the budget that generates the results. It's how the budget is distributed and how the marketing effort is orchestrated. It doesn't matter if you have $250,000 or $25,000 in your budget or whether your product costs $10,000, $1,000, or $100.
Hewlett-Packard, AT&T, Citibank, and IBM have all used integrated direct marketing to improve their response rates dramatically. In this economy, with markets shrinking because of competition, and marketing budgets flat or shrinking, what better time than now for you, too, to leave tradition behind -- especially when you can economically achieve significantly higher response rates and better serve your customers at the same time?* * *
Ernan Roman is president of Ernan Roman Direct Marketing, based in New York City. He is an international consultant and speaker, and is the pioneer of the integrated-direct-marketing methodology. He is the author of Integrated Direct Marketing, Techniques and Strategies for Success (McGraw-Hill, 1988).
THE NEW DIRECT MARKETING
Typical Response Rate
Direct mail 2 %
Add 800 number to package +1 % to 2 %
Add carefully timed follow-up phone call +2 % to 14 %
Total response rate 5 % to 18 %