With sharp advances in database marketing, the proliferation of data mining and the widespread adherence to principles associated with precision marketing, the logical expectation is that customer acquisition and retention rates would rise as direct marketers shift from mass marketing toward one-to-one marketing.
Not quite.
Though the illusion of effectiveness has been enhanced under the veil of advanced profiling, sophisticated analytics and targeted messaging, the reality for DM managers is declining response rates amid increasing industry mail volumes. The volume of household direct mail has more than doubled in the past five years while response rates have been halved.
Most direct marketers resort to batch-and-blast tactics to drive the required mail volume to make their paltry 0.4 percent response rate result in an acceptable number of responders, driving up their costs. This negates the ROI behind the weighty technology and resource investment they used to propel their principled DM strategy. There is a better way.
What better target market is there than those who actively demonstrated in-market characteristics or took action toward purchasing? Event-based triggering accomplishes just that: identifying in-market consumers based on credit events that statistically posit a near-term (90-day window) propensity to buy.
The concept of triggering based on credit inquiry, loan maturation and/or trade-line events is not necessarily new. But the idea is reaching its stride because of near real-time credit event processing and the ability of direct marketers to execute mail campaigns faster and incorporate outbound telemarketing into their strategies.
To illustrate, a major financial institution looking to bolster its retail auto finance portfolio is seeking customers who will respond to its new 48-month, $30,000 auto loan at 5.75 percent – with a six-month teaser rate of 3 percent. The demographic and lifestyle profile for its marketing message is the affluent asset accumulator segment, while its risk criterion is characterized by a Beacon score of 660-plus.
Pull the trigger? Not yet. Only 3.17 percent of that population will open a new auto finance loan in the next 90 days. With competition coming from credit unions, captive auto finance companies and home equity loans, expect a 0.5 percent response rate. With those types of numbers, this program will draw 500 responders and fewer than 100 activators out of a 100,000-piece mail campaign. But with an event trigger compiling weekly lists of consumers with an auto lease trade line set to expire within six months, a direct marketer can get an in-market population with a whopping 26.28 percent propensity to obtain a new auto finance loan in the next 90 days.
This population is nearly nine times more likely to activate a new loan than the traditional prescreened list, letting a DMer realize a response rate upward of 2 percent. The result: 2,000-plus responders and activation exceeding 400 consumers from a 100,000-piece mail campaign. Thatís a 300 percent increase in campaign effectiveness, all from timing the communication to the profiled target.
Doubling your response rate is more than possible; itís statistically probable. Marketers using event triggers for their bank card, home equity, auto finance, personal finance, retail finance, mortgage and student loan direct mail campaigns are realizing an average 300 percent increase in campaign effectiveness. Some DMers realize even greater response improvements, employing alternative distribution strategies that seize the value of time-sensitive, event-based lead qualification criteria.
For example, a regional bank in the Midwest with aggressive growth targets in its retail mortgage group created a shrewd strategy: using a consumer credit event trigger of mortgage inquiry in the past 30 days. These triggered consumer prospects, who initiated having their credit file pulled for the purpose of evaluating terms for a mortgage loan, have demonstrated in-market behavior with a 19.69 percent propensity to open a new mortgage within 90 days. Compare this with the typical prescreened population that opens a mortgage 1.76 percent of the time in the next 90 days, and the anticipated value of this consumer population is clear.
The strategy deployed by this bank involves bypassing direct mail, instead appending phone number data to its prospect list using its outbound telemarketing capability to quickly and efficiently seize the opportunity with these active credit shoppers. Using its custom credit profile to target only those triggered prospects who met its risk parameters, this bank identified more than 4,000 unique in-market mortgage consumers a day in a single state. With intelligently timed and efficiently delivered direct marketing as a result of adopting event triggers, weekly response rates for this regional bank have peaked at 9 percent, with a typical weekly response rate exceeding 4 percent.
This success prompted the bank to re-evaluate its go-to-market strategy. With sustained response rates eight times the level of its traditional custom prescreen plus direct mail strategy, the bank abandoned its traditional direct marketing model. It instead will rely mainly on event-triggered consumer prospects combined with rapidly executed direct mail and outbound telemarketing.
Credit, behavioral and transaction-based triggers are emerging as the weapon of choice for direct marketers with the moxie to take on declining industry response rates. With 5 billion-plus pieces of direct mail blanketing U.S. consumers yearly, getting disciplined about reaching the right customer at the right time through the right channel with the right offer is a must for those required to justify direct marketing expenditures. Research indicates that marketers will increasingly emphasize event triggering over the next five years. For those who integrate event-based trigger technology into their strategy, the reward is improved response rates.
