How to make every marketing dollar count
"Half of all the money I spend on advertising is wasted. The problem is, I don't know which half."
Most marketers fall back on department-store magnate John Wanamaker's quip when asked to justify their ad budgets. But it has always seemed that marketers should forget clever aphorisms and instead come up with better strategies. Sure, if you throw enough money at a problem, odds are, eventually you'll solve it. But in a recession, who has money to waste? When sales start sliding, what you really need to do is to market more efficiently. If you want to see exactly how to do it, spend some time with Liza Price, president of American List Counsel.
ALC, which sells lists of prospects to companies planning to do direct-mail and telemarketing campaigns, has appeared on the Inc. 500 three times. But don't look for it there in 1991. The $34-million company located on 11 acres, complete with horse farm, just outside Princeton, N.J., is facing projections that sales could shrink by 13% in fiscal 1991 as its clients cut down on their mailings to save money.
For a healthy survival, Price must reduce her expenses. One way, of course, would be to spend less. She could cut her own marketing budget. ALC mails 10,000 catalogs a month -- at a cost, including postage, of more than $1 a catalog -- to potential clients (insurance agents, real estate brokers, marketing specialists, and the like). If Price mailed less, she'd save money.
But there's another way to cut costs, and that's to get more out of each marketing dollar you spend. That's what Price has set out to do.
"About a year ago we started calling our old customers who hadn't ordered for a while," she says. "Traditionally, 44% of our sales come from repeat customers, who buy from us a second time because they liked doing business with us. And we found that just by calling them, we got the repeat business up to 48%. We started looking for similar simple things we could do elsewhere." She began by studying the way ALC handles incoming calls. Nine times out of 10, calls the company receives are information requests. Someone wants to know more about ALC -- what kinds of mailing lists it has, how much they cost, how long it takes to get a customized one, and that sort of thing.
Before Price started looking for ways to increase sales, the operator who handled the call would find out what the customer wanted and promise to send out the information within a week. "We'd wait until we had 200 catalogs that had to go out, before we'd do a mailing," says Price, "That way we could send them all third-class mail." That seemed like the right decision. At the time it was 71¢ cheaper (34¢, compared with $1.05) to send the catalog out third-class instead of first-class.
But that, Ernan Roman convinced Price, was a costly way of saving money. Roman, who runs his own direct-marketing consulting firm in Douglas Manor, N.Y., has found, through working with clients such as AT&T, Citibank, and Hewlett-Packard, that the faster you respond to requests, the more likely it is your prospects will buy. You want to close a sale when the customer is most interested in what you have to sell, not several weeks later. Roman said everything should go out first-class. True, it meant that those 200 catalogs would cost Price an additional $142 to mail (the extra 71¢, times the 200 pieces), but the potential return made it worthwhile. ALC processed 30,200 orders last year to produce its $34 million in income. That means the average order was for $1,126. Even if sending out the catalogs first-class boosted the response rate by just one in 1,000, or 0.001%, the decision would more than pay for itself.
But Price went further. She dressed up those first-class envelopes. First they were done in the same blues and reds as her catalog, to show potential customers that ALC sweats the details. Each has a sticker placed on the outside saying, "Here's the information you've been looking for," to differentiate it from junk mail. And the address label is typed, not generated by computer, to give it a personal touch. Only then does the catalog go into the mail. "Our goal is to have it in the caller's hands within five working days," says Price. "The catalogs are mailed within 24 hours, and then it's up to the post office."
When the catalog arrives, the recipient finds a note from one of the company's five account reps, thanking him for calling. Then the salesperson who made the pitch follows up. Every person who requests a catalog gets a phone call. "Our account reps were supposed to be doing that anyway," says Price, "but it wasn't always happening. It's far easier to call people you know than those you don't. Now the first 30 to 60 minutes of the reps' day is spent following up on catalog requests."
The reps start calling the prospect about a week after the catalog has been mailed. "We want to time it as close to the arrival of the catalog as we can," says Price. At the very least, those calls reinforce ALC's name and show that the company is taking the information request seriously.
"In about 10% of the cases, the people we call are ready to order," says Price. But those other calls aren't wasted. "They allow us to find out just how serious the prospects are," she says. "The account rep asks when they are planning to do their mailing and how many pieces they plan to send out. We then create a tickler file. If the people said they're thinking about putting a campaign together September 1, we will be sure to call them back August 15." That follow-up continues until the sale is made or the salesperson determines the person who asked for the catalog is no longer a prospect.
Price says it is still too early to quantify the results of her highly integrated marketing program, but she does know this: "Since we started doing this we are confident that we have control over our future." In any environment -- especially this one -- that's a victory.
TO THE SWIFT AND SLEEK
How to respond to customers the right way
To make your marketing efforts work, you want to respond to a potential customer as quickly and as professionally as possible. Liza Price, president of American List Counsel (ALC), keeps the following in mind:
* Call everyone, but prioritize the calls. Follow up with every single person who asks for information. But phone the most likely prospects first. People who have called in for information are usually better prospects than those who write. People who give a business return address are better prospects than those who give just their name and home address.
* Make it easy to order. Every piece of mail Price sends out contains ALC's 800 number. Consultant Ernan Roman says adding a phone number can double your response rate, since it allows people to act immediately on your offer.
* Go first-class. Don't scrimp. Use quality stationery, a good phone system, and laser printers. You don't want to look like a small-time operation.
For ideas about how to market more efficiently, American List Counsel's president, Liza Price, followed the advice of consultant Ernan Roman. It's easy for you to do the same. Roman's book Integrated Direct Marketing: Techniques and Strategies for Success (McGraw-Hill, 1988) gives clear guidelines on how to set up a marketing plan that's cost effective and brings results.