Defending Direct: Answers

Recap: When building out Summit Industries’ marketing plan for the year, CMO Miranda Bell decided to push the envelope with the company’s direct mail—always a solid performer in terms of lead gen. Bell’s team created a series of pieces, each of which had digital integration elements and built on the previous to nurture prospects and build repeat business from customers. The pieces ranged from post cards to magalogs to boxes with themed promotional items—much of which was printed in advance as a cost-saving measure. Bell wasn’t too concerned about the then-looming USPS exigent increase when doing her planning, because much of the initiative would be complete before the pricing would have an impact. But new CEO Dasha Atwala was concerned; he asked Bell to kill or cut the program. She knew it would pay off. She just needed the right data to prove it.

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June Winner: Karen Allen, VP, Advance Printing & Mailing Inc.

The bottom line is and always should be the return on investment, not the cost. If direct mail costs increase because of postage increases and the ROI is still a profit, then you should never stop it. The ROI being a profit is the driving factor. If your direct mail is being read, and results in something other than “in the red,” then just do it.Top of Form

Other Responses:

?Don Peppers, founding partner, Peppers & Rogers Group

Bell can easily and conclusively prove her economic case simply by testing it against alternatives, as should be done regularly with all direct marketing campaigns anyway. 

I would suggest testing the current mailing program against (1) a higher-impact, more expensive program and (2) a lower-impact, less expensive program (perhaps even an email campaign).   Always test up and down around the control case, to quantify the actual benefit of higher and lower spending.

More sophisticated statistical principles could tell Bell how many recipients in a test cell will give her what level of confidence in her test results, but one direct marketing rule of thumb is that if her test cell generates at least 100 responses, then she can be pretty confident the test results are valid.

With an expected 25% response rate on mailings, the mailing test cells would not have to be very large (only about 400 recipients would be required for her to have high confidence in the response rate).

However, to properly evaluate the differences between, say, postal mail and email, it would be necessary first to estimate the likely email response rate. If, say, she expects a mere 5% response rate from email, then the test cell for email should be at least 2,000 recipients.

Rather than trying to use such traditional direct marketing rules of thumb to persuade her boss, however, I would urge Bell to do a full statistical analysis to provide the new CEO with a quantified result at the 95% confidence level.

?James Zawicki, marketing communications manager, Sartomer Americas

The concern expressed by the new CEO should become a discussion about ROI. Summit Industries has a history of excellent response rates and conversions. CMO Bell’s team has only enhanced the quality of the mailers and likelihood that past response rates would be met or exceeded. This should more than offset the concern of the increased postage rates. The cost of doing business, including postage hikes, is typically going to increase. The new CEO should not be scared off by this and needs to have confidence that Bell has it covered.   
?Linda Neumann, marketing and client services director, Brilliant Marketing Ideas Inc.

Since the new CEO asked to kill or cut the program, Bell should cut, not kill the program and run it on a smaller scale. Then take the results back to the CEO and show how running the rest of the program will pay off in results. It’s hard to argue with results in hand.

?David Saef, EVP, Strategy & MarketWorks

CMO Bell needs to present data that will sync with CEO Atwala’s mind-set. Dasha is most concerned with hitting financial projections, especially profitability. To address Dasha’s concerns, Bell should:

  1. Develop a spreadsheet that shows a list of customers’ and prospects’ percentage likelihood of purchase.
  2. Show records validating that the expected value calculation is a reasonable assumption given prior purchasing behavior.
  3. For prospects, Bell should show an engagement score that correlates to recently converted customers based on open and click-through rates to email and direct campaigns, website engagement, and participation and engagement at face-to-face meetings and conferences with the sales staff.
  4. Develop a pro forma P&L to show the flow-through of the campaign to the bottom line.
  5. Prepare a “Plan B” that scaled back the campaign to the most attractive prospects. This shows that Bell is willing to provide options in the event her pro forma is not compelling to Atwala.

?Jack LaRue, vice president, special projects, Thomson Reuters

Bell needs to shift the conversation from one about marketing expenses to one about revenue generation and ROI. She needs to pull historical information on revenue generated from previous campaigns and use that information to project revenue for the upcoming campaign. Of course, that means that Bell will “own” the revenue projection and will be held accountable for it. At the same time, Bell should look for some areas of potential cost savings, as a goodwill gesture to her new CEO and a means to increase ROI even further.

?Michael Smith, marketing designer, Tri-Win Direct

Postal increases are frustrating for all direct mail marketers, but as always the question isn’t about cost, it’s about revenue. Bell needs to collect the data showing how much of Summit’s annual revenue can be attributed exclusively to direct mail.

Get a list of all annual sales. Remove any sales that could be realistically credited to a different marketing channel and then ask the CEO if Summit is comfortable with sacrificing the revenue attributable to direct mail in the coming year. I bet the answer would be a resounding no.

?Tim Bates, VP marketing & communications, enterprise solutions, Pitney Bowes

This is an excellent opportunity for Bell. She has the opportunity to educate her new boss on the power of physical mail, which is made even more powerful when combined with digital assets.

Bell first needs to present data that supports her approach. For example, according to InfoTrends response rates increase 27% when direct mail is combined with a Web landing page or email address, and increase 37% when combined with both. And, 79% of consumers act on direct mail immediately, according to the CMO Council.

Next, Bell must ensure—and be able to convince her boss—that the operational end of her marketing campaign is functioning at maximum efficiency. Partnering with her operations colleagues, she must demonstrate that Summit Industries is doing everything it can to optimize its postage spend and reduce operational costs. Optimizing the size of the mailing list through effective use of data to target the most likely individuals to buy will minimize the costs of postage, materials, and labor. Personalizing the messages and making the most relevant offers across both physical and digital communications will further improve ROI in terms of response rates, leads, and, ultimately, sales.

Finally, Bell must address her CEO’s concern about the costs associated with the postage rate increase. There is no denying the impact of any postal rate increase on the cost of a multichannel direct marketing campaign, but there is also no denying the impact that direct marketing can have on a company’s bottom line when physical and digital assets are combined. Bell must show that the potential ROI of her campaign will mitigate the impact of anticipated postage increases. No marketing campaign should be judged on upfront costs alone.

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