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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.
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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?
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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 %
