Don’t Count Out Direct Mail: Five Ways to Boost ROI
By Michael W. Maynard, 89 Degrees
As the economy gradually turns around, more retail marketing departments are increasing their marketing budgets. And while much attention is being directed to burgeoning world of digital communications, don’t be too quick count out direct mail. The Direct Marketing Association expects direct mail to see year over year growth of up to 6% in the next several years, for some very good reasons. To capitalize on these strengths, retail marketers need to re-assess their direct marketing campaigns and take another look at some techniques that will boost the ROI these campaigns generate.
The balance of messages has shifted – hugely. Many people are sent hundreds of emails a day while only a handful of direct mail pieces are delivered to households. This gives retailers who do direct mail a competitive edge. Despite this advantage, many retailers avoid direct mail, citing several reasons: they say it is too costly, they don’t have a customer data base to target the right people, they lack the expertise in direct mail creative, and they don’t how to measure the return-on-investment. But there is a proven method that addresses all of these concerns and assures you are maximizing your DM ROI – CTCOA (Cost, Targeting, Creative, Offer, Analysis). Here is an overview of how these five steps work together:
The very first challenge is the cost of the direct mail piece. What many people do not know is that the greatest cost that goes into any direct mail piece is postage. Postage typically costs anywhere from 60%-80% of the total cost. The format (postcard, tri-fold, catalog, etc.) is also another varying factor in the total cost. The key to a strong ROI is to keep the cost of the piece low. One avenue is a “Route Re-mix” process, which lowers the profit bar per person. Route Remix examines millions of carrier route combinations to figure out how to achieve maximum revenue and ROI as cheaply as possible. This process takes advantage of high density postal rates which in turn reduces postage costs by 15-25%. See the example below which shows how saving $.04 in cost makes achieving a positive ROI $0.20 closer.
|Cost per Piece||Margin Rate||Incremental Sales per piece to Break Even|
With over 100 million households in the United States, it can be overwhelming for marketing departments to pick the best households for mailing. When selecting people to mail, the RFM (recency, frequency, monetary) approach works well for a very broad product selection. But most retailers have a niche market and should consider using customer purchase models to determine who is most likely to shop again. And in order to keep sales growing year over year, it is a very good idea to target high value prospects using a prospect model as well.
Consumers have a short attention span. Using phrases such as “exclusive deals,” “offer’s inside,” and “buy one, get one free” work well. The creative format can also make a difference when considering your ROI. Low cost formats limit how much content (typically less surface area) you can put on a piece and limit the ability to upsell items. A medium cost, medium surface area piece works best for your investment.
The best and most critical direct mail ingredient is the offer. All direct mail should include an offer that provides the consumer with something tangible. Give people something they can use to recoup the dollars spent on the DM piece. The offer should be well placed on the piece, unique for the DM channel and better than the competition with limited restrictions. A dollar or percent-off work best due to the limited restrictions. The best part about offers is that they typically can be tracked by a code at POS or by item, which helps to measure the impact of the DM.
All direct mail campaigns should be measured in a standard time window and include a control group. In addition, you should test small groups of people with different creative and offers to see which gets better response then use that information for future offers/campaigns. The results should also be validated to ensure they are statistically valid.
CTCOA has proven its ability to maximize direct mail ROI. Here are actual results from one business that used this five step approach and experienced a drastic increase in ROI in three months.
|Event||Cost||Targeting||Creative||Offer||Analysis/ROI||Change in ROI Points from Month 1|
|Month 2||High||Models||Better||Better||Second Best||31%|
In business the phrase you have to spend money to make money usually holds true. Using the CTCOA approach, direct mail is an alternative way to spend less money (than you would have without these methods) to make more money. It’s a proven technique that is giving marketers a competitive edge with effective DM campaigns. So next time you are reviewing your marketing strategy, take another look at direct mail. It’s an advantage you don’t want to count out.
Michael Maynard is a marketing analyst & developer at 89 Degrees, a customer engagement agency leveraging data and analytically driven strategy, technology integration and creative that connect consumers with brands for maximum engagement and ROI.
Former RadioShack exec appointed CMO at Sports Authority
ENGLEWOOD, Colo. — Sports Authority has appointed Paul M. Okimoto as the company’s new CMO.
In his new role, Okimoto will be responsible for leading the strategic development and oversight of the company’s overall marketing plans to drive traffic and sales at stores nationwide and through the e-commerce platform. He is a 20-year marketing and general management executive with demonstrated success in retail, high-technology, mobile telecommunications, advertising and the consumer packaged goods industries.
“Paul has a proven track record of leading innovative marketing strategies for a variety of national retailers and brands,” said Darrell Webb, chairman and CEO of Sports Authority. “His expertise in acquiring and retaining profitable customers and identifying new market opportunities and strategic partnerships will be extremely valuable to Sports Authority as we focus on continued growth over the long term. We are thrilled to have Paul on board as we drive our marketing efforts forward.”
Prior to joining Sports Authority, Okimoto served as VP of marketing at RadioShack. Previously, Okimoto also held positions with the Nielsen Company as VP of corporate marketing and AT&T Wireless as head of integrated marketing communications. He began his professional career at Procter & Gamble.
The Sports Authority operates more than 475 locations across 43 states. It offers a broad range of sporting goods from leading brands, including footwear, apparel, fitness, team sports and outdoor recreation.
Digital coupon provider hires eBay exec
AUSTIN, Texas — Digital coupon site RetailMeNot has appointed Giulio Montemagno as the company’s first SVP of international. He will report to COO Kelli Beougher.
In this role, Montemagno will drive the strategy of RetailMeNot outside of North America and oversee operations for the company’s portfolio of brands in international markets, including VoucherCodes.co.uk, the leading digital coupon site in the United Kingdom; www.Deals.com in Germany; www.ActiePagina.nl, a leading digital coupon site in the Netherlands; and Bons-de-Reduction.com and www.Poulpeo.com, leading digital coupon and cash back sites in France.
Montemagno joins RetailMeNot after spending 12 years at eBay and its PayPal subsidiary, serving in various senior management roles within its business development, product management and corporate strategy teams. Most recently Montemagno was GM of Western Europe for PayPal.
"We are incredibly happy to bring an e-commerce and digital payments veteran like Giulio to RetailMeNot during a significant period in our company’s history as we expand our operations internationally," said Beougher. "As we improve our service to consumers and our retail partners and integrate our brands under the RetailMeNot banner in markets outside of North America, I look forward to working with Giulio as we strive to make our name synonymous with value globally."
Montemagno received his master’s in business administration from Columbia University in New York, and the London Business School, and he received his bachelor of science from IULM University in Milan.