Reacting to the New Economic Challenges

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In the aftermath of Sept. 11, the economy was shocked, reflecting the trauma that we all incurred. The economic effects in the month that followed were severe. Then anthrax threatened to greatly diminish the effectiveness of mailings that were historically reliable and predictable.


Under these changes to market conditions, you can choose to alter your efforts or you can continue as you had planned, ignoring the changing environment. But, before deciding, consider your alternatives.


Planning. You may think that you have no choice. You need to sell product. You need to replace inactive customers with new ones. You need to minimize the rate at which customers become inactive. You need to cross-sell and upsell your current customers. But there is not just one promotional strategy. How you allocate your budget among the three activities of acquisition, cross-sell and retention determines your strategy.


Promotional efforts have a lag time. Depending on the channel, the lag may be long or short. Promotions going into the mail have to be printed and mailed. Electronic promotions on your Web site or e-mail are quicker to modify.


Marketers who have customer-centric customer relationship management and a multichannel marketing infrastructure clearly have a competitive advantage in these times. If you have e-mail addresses for your promotion, you might use them as a replacement for a mailing. Alternatively, you could use e-mail as a supplement by heralding your mailing with a preceding e-mail about the offer. For the offer that can justify it, you might switch to telemarketing for your most responsive segments.


Business intelligence is obtaining the information you need to make sound business and marketing decisions. You will need to gather information on current and foreseeable economic conditions and the detailed results of your own marketing efforts.


Monitoring the results of marketing efforts is the foundation upon which agile marketing adjustments are based. While we all monitor our mailing results, the timeliness and sophistication varies. Some marketers will total the orders at the end of six months and that is all they have ever needed. Others will track each test, segment and demographic daily and then, using past response patterns, will have confidence in where the results will finish and where there are weaknesses. They also have the time to change what they do next. In current circumstances, the latter option, detailed statistical analysis, proves prudent and well worth the effort.


Amid economic uncertainty, it is natural to hunker down somewhat. When the outcome of a mailing is less certain, it certainly makes sense to minimize your risk. Like any other investment activity, diminished predictability is always associated with increased risk.


The past three months have been dismal for most markets. However, the resiliency of the U.S. economy is amazing. Sales after Thanksgiving are higher than many anticipated. Same-store sales are up 2.4 percent, though foot traffic is down. Web shopping rose significantly, which accounts for some of the foot traffic decrease. Treasury Secretary Paul O'Neill expressed "cautious optimism."


In view of the official declaration that we are in a recession that began in March, O'Neill also says that we are "poised for recovery." And that may be true, for if this recession spans the average of 11 months, then the recovery may well begin early next year.


The anthrax threat. The five anthrax deaths, while tragic for the families involved, are small compared with, for example, holiday death tolls. It is the uncertainty of what may be next that scares people.


People react with their emotional as well as their rational selves. Some direct marketers have reported that they have not seen any effect in their mailings and are confident that they have sophisticated reports that would detect any such effects. Others are seeing a negative effect.


Considering the cautions listed in the U.S. Postal Service's warning, the following steps in formatting your envelope are warranted:


· A clear identification of your organization in the return address.


· No humorous threats on the envelope.


· No white powder (or any other color) in the envelope.


· An indication on the envelope of the purpose of the letter.


· No bulky objects inside.


· A single stamp or postage meter.


These are times that challenge marketers to be aware of more than marketing. We need to be part marketer, part economist, part political scientist, part psychologist, and part statistician. Going forward as if circumstances are the same as always is not prudent, for they are different.


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