A marketing expert explains how to better allocate marketing and advertising dollars.
With paper prices skyrocketing over the past year, direct marketers of all sizes must examine the logic of their campaigns: To whom should they mail? How often? And why?
At Athletic Supply, in Dallas, Craig Rosen has made smart mailing his mission. Rosen heads up marketing for the award-winning sports-team-apparel catalog. Last year he analyzed the lifetime value of his various customer groups. His conclusions challenged his preconceived notions and helped him better allocate his marketing dollars:
List rental isn't always worth its price. In 1994 Rosen's house list (buyers in his database) yielded three times the net profit per order earned from the average rented list. So Rosen rents fewer lists today, and he's choosier about what he'll pay for.
Big spenders are overrated. In the past, when Rosen rented lists, he'd pay extra to select people who had histories of spending $50 or more on purchases from a single catalog. "One of the study's big surprises was that 'monetary select' wasn't so important," he reveals. For Athletic Supply, selecting the $50-plus buyer wasn't more profitable in the long run than a random selection. Rosen stopped paying the premium -- and saved $20,000 a year.
Print advertisements are no panacea. Classified ads are a time-proven way to generate sales and inquiries. But for Athletic Supply, print-ad respondents were lousy long-term customers. "Someone orders an advertised jersey and never buys again," Rosen says. "Meanwhile, I'm mailing to that person 12 times over the next two years." Not anymore. Rosen has dropped his space ads.
Alternative media can be very profitable. Encompassing almost anything other than the standard strategies of space ads and list rental, alternative media are often less expensive. Rosen has found that co-op mailings can be particularly profitable. He's tried ad inserts in credit-card bills and a special offer with Procter & Gamble. He gave space in his own catalog to GTE's NFL-theme calling card in exchange for the names of buyers GTE obtains from its Super Bowl ads and other venues. He also collects customers' addresses from manufacturers at trade shows. His 1995 goal: to add 100,000 names to his house list at little cost. As of July, he had collected 75,000 free.
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Athletic Supply studied the profitability of mail-order customers six months to a year after their initial purchase. FDC Donnelley Marketing (612-541-6500), in Minneapolis, conducted the analysis for a $15,000 fee, which, says Craig Rosen, "quickly paid for itself."